Luxury 2020: -20% states Goldman Sachs, but some luxury brands will grow stronger

Luxury 2020: -20% states Goldman Sachs, but some luxury brands will grow stronger

Louis Vuitton, Dior, Gucci, Hermès and Cartier. These brands, says Goldman Sachs, will be the ones performing above average within the luxury segment. The consequence: some luxury brands will become stronger and consolidate their dominant position. Positive future prospects for Kering, LVMH, Moncler and Richemont, as they all received a “buy” rating. Promotion for Salvatore Ferragamo (from “neutral” to “buy”), Prada (from “sell” to “neutral”). All within a period that could be less negative than expected in a few months.

Negative trend, but less than expected

According to a recent report by Goldman Sachs, 2020 will be less negative than expected. The decrease of sales’ performances will be of about -20%, improved from the -30% estimate from a few weeks ago. This increase comes as consumers, mostly in China and USA are putting part of their savings towards the purchase of luxury accessories, as they didn’t incur in travel expenses and can’t buy “experiences” for themselves. While in 2019 the amount spent by tourists for shopping accounted for 30% of sales in the fashion system, the amount for 2020 will be of just 4%. Moreover, all the main brands will double their online sales before the end of the year, for an amount accounting for 22% of their total revenue at global level. Goldman Sachs doesn’t stop here, and confirms the forecast: +15% in 2021 and an average growth of 8% for the period 2021 – 2025.

Some luxury brands will grow stronger

With regards to individual brands, Louis Vuitton, Dior, Gucci, Hermès and Cartier are destined to go above forecasts and close 2020 in a positive area as well, thus dominating the market. We prefer dominant brands that showcase the financial flexibility to sustain investments when the market will normalize”, say the bank’s strategists (source investiremag.it).With regards to the “buy” rating (indicating a stock is to be bought as it will gain value in the future), the bank attributed it to Kering, LVMH, Moncler, Richemont and Richemont, while Prada is no longer to be sold as it has been upgraded to “hold”.

In photo from Shutterstock, the boutique Longchamp in Tokyo (May 2020)

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