Barclays Plc has downgraded its rating on French conglomerate LVMH and the wider luxury-goods industry due to concerns of disappointing sales growth in China. Analysts at Barclays highlighted that the luxury goods sector has experienced a decline in value over the past month, largely driven by worsening macro indicators from China and a return to more normalized growth. LVMH’s stock price fell by 0.3% to €727.20 in Paris following the downgrade, and is currently down 20% from its record high in April.
Carole Madjo, the lead analyst at Barclays, has reduced her recommendation on LVMH from overweight to equal-weight and also lowered her price target on the stock. The analysts cite a risk of disappointment in the second half of the year, as LVMH has failed to meet margin estimates in the past. Barclays also revised its industry view on luxury goods to neutral from positive, with LVMH seen as a proxy for the sector.
Luxury stocks had a strong first half of the year in the European market but have since lost momentum. LVMH shares have gained 7.0% year-to-date, whereas France’s CAC 40 index has increased by 11%. Other luxury brands such as Hermes International and Richemont SA, the owner of Cartier, have seen mixed results. Hermes shares rose by 0.6% while Richemont shares remained stable.
Useful links:
1. LVMH
2. Barclays Plc
