Barclays prefers defensive luxury names as polarisation continues, ups LVMH

Mar 26, 202420:28 GMT+11

MC−0.45%RMS−0.67%1913+0.32%MONC−0.23%

** Barclays says that it thinks the luxury sector is going to remain polarised with defensive names as the winners

** On the back of its two-week trip to China and Hong Kong, the broker says it noted "clearly diverging trends by brand as polarisation continues"

** Still, Barclays notes that while consumer sentiment remains conservative, it seems slightly better than last year

** "We came back from China with a slightly more positive view as both sentiment and top-line growth expectations are better than we thought," Barclays says

** It adds it received particularly positive feedback on Louis Vuitton and Loro Piana in LVMH's MC portfolio, while noting good momentum at other brands such as Hermes RMS, Miu Miu, Prada 1913 and Moncler MONC

** The broker expects Chinese offshore spending to rise by around 50% in 2024, representing 40% of Chinese luxury sales (versus 30% in 2023)

** Citing polarisation, it says it prefers defensive names with higher exposure to high-end consumers, higher level of pricing power or strong brand momentum and upgrades LVMH to "overweight" from "equal weight"

** Even as Q1 and Q2 sales could be muted, Barclays says it does not see any fundamental issues in the core Fashion & Leather Goods division and expects LVMH to return to a healthier growth rate by the second half of the year

** It hikes its PT on the stock by 14% to 937 euros

** Among 29 analysts covering LVMH, 20 rate the stock "buy" or "strong buy", and nine rate it "hold"