It’s not tariffs that luxury-goods makers need to worry about, but the hit to client wealth from the ensuing stock market carnage, analysts warn.
Deutsche Bank AG analyst Adam Cochrane sees the turmoil pushing out a recovery for a sector which had already been grappling with slower demand from key market China. He downgraded top-performer Richemont to hold, as well as Gucci-owner Kering SA. Shares in both fell around 3% on Wednesday.
“Looking into 2025 we were more bullish than most investors with regards the scale and speed of recovery in luxury demand. We were right for about 3 months,” Cochrane wrote in a note, lowering his forecast for the sector growth’s to 2% for 2025.
Markets globally nursed heavy losses once more on Wednesday as U.S. President Donald Trump’s reciprocal tariffs took effect. Trump’s latest salvo saw levies on China reach as high as 104%, with import taxes on around 60 trading partners that run trade surpluses with the US.
Morgan Stanley analysts also say that any impact from the tariffs themselves on luxury-goods companies will not be material, given they can pass any levies on to customers via price hikes. The greater risk comes from an ensuing recession and any hit to consumer sentiment from tumbling equity markets.
Volatility in demand from U.S. consumers has been greater than expected during the first quarter, Deutsche Bank’s Cochrane added, and will remain so for at least the rest of the year. Europe, Asia and the Middle East likely won’t be able to make up for any slack caused by a slowdown in the US or China due to the trade war.
However, the turbulence could create opportunities. Cochrane upgraded Birkin bag maker Hermes International SCA to buy, which he said should be a winner thanks to the strength of its brand.
“The valuation has long been our main concern but, like a quality handbag, you get what you pay for,” Cochrane said.
--With assistance from Lisa Pham.
©2025 Bloomberg L.P.
