(Bloomberg) -- European luxury stocks slid further as Bank of America analysts became the latest to sound the alarm on the beleaguered sector, cutting their rating on industry bellwether LVMH to neutral and downgrading others.
“We now factor in a more prolonged slowdown in luxury sector revenue growth, which will likely translate into further margin pressure,” Bank of America analysts led by Ashley Wallace wrote in a note, adding that this is likely to continue into the second half of this year and 2025.
Alongside LVMH, the analyst cut Kering SA to neutral and Hugo Boss AG to underperform and lowered price targets across the sector, sending shares in all three tumbling on Monday. A drop of as much as 1.7% in LVMH shares and a 1.8% decline in Hermes International SCA saw France’s CAC 40 Index underperform European benchmarks on Monday.
A slowdown in China, a key market for makers of high-end goods, has been a growing concern for investors. Recent data showed that the country’s economy lost momentum in August, raising worries that the government could miss its annual growth target without additional stimulus.
Bank of America’s cuts follow recent warnings from analysts at Goldman Sachs Group Inc. and Jefferies International Ltd. of further earnings pain to come as demand from Chinese shoppers remains muted. A gauge tracking the industry has fallen 13% this year, compared with a gain of over 7% for the MSCI Europe Index.
Luxury goods firms need to refocus on creativity, fashion content and newness in order to boost volumes, Bank of America’s Wallace said, noting that brands introducing fashion novelty have regained momentum this year.
--With assistance from Michael Msika and Joe Easton.
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