Luxury goods stocks like Burberry Group PLC (LSE:BRBY), Kering and Ferragamo are not worth buying despite their cheap valuations, JP Morgan analysts believe.
All three of the stocks have been placed on negative catalyst watch and the US investment bank does not believe there is scope for improvements over the next 6-9 months.
Management at some of these luxury companies have claimed demand will remain muted deep into 2024, leaving the JP Morgan analysts unable to identify a short-term positive catalyst.
Burberry, the British designer clothes brand, has – like many of its mainland Europe peers – tumbled in 2023, losing close to 25% of its market value and being forced to scale back its revenue targets.
A slowdown in Chinese demand, combined with weak sales in regions like the US, is pushing the sector back towards more normalised trends and has even led to sales misses for industry juggernaut Louis Vuitton Moet Hennessy (EPA:MC).
When China lifted its strict COVID measures back at the start of the year, luxury boomed and stocks were outperforming most of the every day retailers like Next PLC (LSE:NXT) and Tesco PLC (LSE:TSCO).
It even resulted in Bernard Arnault, the head honcho at LVMH, becoming the richest man in the world for a few months, racing ahead of Tesla boss Elon Musk who was facing troubles of his own.
Winter trading is expected to be stronger than last year for much of the luxury sector, due to China having still been in lockdown in 2022.
However, poor interest from the rest of the globe means JP Morgan sees little chance of any positive surprises.
Burberry is trading flat on Wednesday, having opened trading at 1,537p.