RBC has tipped ‘hard luxury’ stocks Watches of Switzerland Group PLC (LSE:WOSG), Richemont and Kering as preferred plays in the luxury sector over ‘soft luxury’ stocks, although analysts also gave LVMH an outperform rating.
Hard luxury items refer to watches, jewellery, and other durable luxury goods, while soft luxury items typically include fashion, leather goods, accessories, and high-end apparel.
“We see better relative momentum in hard luxury – notably WOSG and Richemont following well-received recent results, and stabilising data points including Swiss watch exports and secondary watch prices,” said RBC.
Soft luxury data points, meanwhile, “remain fairly lacklustre, with website traffic trends fairly soft for most (except Balenciaga, YSL, Moncler, Chanel)”.
The luxury sector as a whole has seen a 3% decline in share prices over the past month, which RBC attributed to modest valuation multiple compression and lacklustre data points, especially in soft luxury.
WOSG has a 500p price target against a 416p publication price; LVMH a €915 price target against a €750 publication price; and Richemont a €160 price target against a €145.8 publication price.
RBC also highlighted Adidas as their top pick in the sporting goods sector, as it “offers the strongest EBIT three-year compound annual growth rate outlook underpinned by strong product/brand momentum, and potential for FY25 earnings upgrades in our view”.
The stock has a €250 target price against a €232 publication price.