Luxury Faces Headwinds in China, But Sector Remains Compelling -- Market Talk

Dow Jones10-30

1326 GMT - The luxury industry faces headwinds in China, a main concern when it comes to investing in the industry, but the sector remains compelling, Berenberg analysts Nick Anderson and Harrison Woodin-Lygo write in a note. The sector has become dependent on China, as the country accounts for 22% of revenue today, according to Berenberg estimates. "There is a growing risk, however, that China faces secular, not cyclical, headwinds," the analysts say. Despite a tough backdrop, the luxury sector remains compelling, with sustained margins, strong balance sheets, high returns, and strong free cash flow conversion, they add. Berenberg initiates coverage of Brunello Cucinelli, Hermes and LVMH with a buy rating. It also starts coverage of Kering, Richemont and Moncler with a hold rating and of Swatch Group, with a sell rating. (andrea.figueras@wsj.com)

(END) Dow Jones Newswires

October 30, 2024 09:26 ET (13:26 GMT)

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