Bank of America warns luxury sector faces a tough quarter

what happened

Demand for luxury goods likely weakened during the latest quarter, potentially reducing investor interest in a sector already under pressure. According to Dow Jones Newswires, Bank of America analysts said luxury demand has continued to deteriorate worldwide, weighing on companies’ share prices.

LVMH, France’s largest luxury group, will release third-quarter results on Monday, opening the sector’s earnings season. Bank of America said luxury stocks are now trading at relatively low earnings multiples, but investors do not appear particularly willing to buy the dip.

“We think results will likely still be a negative catalyst for the sector overall,” the bank said. It added that, although valuations were interesting, the sector needed faster revenue growth to support a re-rating.

why it matters

LVMH’s report will provide an early indication of the health of global luxury demand. Weak results or cautious commentary could add to pressure on industry shares even though their valuations have become relatively low.

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