Bank of America forecasts -13.2% in the year (not too bad, after all)

Bank of America forecasts -13.2% in the year (not too bad, after all)

Covid-19 outbreak has been deeply hitting luxury, in terms of economic effects, as much as all the other industries. Looking at several forecast about economic repercussions, throughout 2020, a report carried out by Bank of America stands out now. They drafted it after analysing global demand in April and May.

US financial analysts estimate, for 2020, a remarkable downturn in revenues, -13.2%, yet they are confident in a possible recovery in 2021/22 two-year period. “We believe that basic demand for luxury items will still prove strong. Besides that, in our opinion, 2020 weak earnings – they pointed out in the report, subsequently examined by MFF – do not mirror the structural appeal of the industry in the medium term”.

More optimistic forecast

Indeed, such forecast are slightly more optimistic, compared to what other analysts feared in the last few months. Nevertheless, they keep spotlighting the luxury market, while staying alert on its prospective trends. Bain estimated, in May, a downturn in global revenues, throughout 2020, for the luxury industry, ranging from 25% to 30%. Besides that, they also believed that shopping, despite luxury peculiar qualities, would not possibly enjoy a swift and prompt recovery following such a heavy and rather unexpected slowdown.

One more research, carried out by Boston Consulting Group and Bernstein, had already predicted, in April, revenues down 30%. RBC Europe considered tourism and travelling stop to be one of the factors most affecting luxury goods sales all around Europe and, consequently, luxury goods shopping, which traditionally accounts for 50% of the industry earnings. Cerved, instead, in the last few months, got close to percentage figures predicted by BofA: they had focused their survey, though, on the overall turnover of luxury Italian companies only. In the worst case, anyway, their earnings might possibly decrease, throughout 2020, by 13.9%.

Bank of America’s point of view

Moving back to BofA global luxury demand indicator, it is worth emphasizing its decline, in April, down to 59%, the lowest level ever. As regards luxury revenues, in geographical terms, how are things going in the most recent period, however affected by Covid-19 outbreak? In May, sales picked up in mainland China. According to the analysis provided by BofA, Swatch and Burberry brands are most exposed to the Chinese market, whereas Brunello Cucinelli and Hugo Boss are the least exposed ones.

A few comforting messages come from Europe, where selling stores are reopening. Yet, on the other hand, in Europe luxury earnings decreased by 60% in the second quarter of the year: according to financial analysts, “the reopening of European markets is one of the most important catalysts for stock prices in the industry, looking ahead at next reference season”. Conversely, in the United States, in May luxury revenues dropped by 58% (in April they were slumping by 75%). Owing to heavy social protests and riots, currently underway, lots of selling stores are still closed.

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