JP Morgan has reiterated its underweight rating on Burberry Group PLC (LSE:BRBY), the FTSE 100 luxury goods group, warning that it is too early to back a sustainable turnaround at the British fashion house.
The bank's assessment came in a broader review of the European luxury sector following the first-quarter reporting season, which it said stress-tested quality across the industry amid rising geopolitical volatility, slowing tourist spending, and polarised brand momentum.
JP Morgan identified Brunello Cucinelli, Zegna, and Moncler as clear winners from the quarter, with all three posting strong retail performance driven by superior brand execution and robust demand for high-end ready-to-wear.
Jewellery also continued to outperform soft luxury, benefiting from positive structural drivers, which underpins JP Morgan's top pick of Richemont, the Cartier owner that reports next week.
The outlook for soft luxury names including Burberry is more challenging, the bank said, with pricing power and product mix capped and competition intensifying, particularly from Chanel.
JP Morgan said the broader backdrop for luxury was not as unfavourable as recent share price declines suggest, with wealth creation remaining strong in the US and specific markets such as Korea.
However, tourist spending is likely to remain subdued given the current geopolitical environment, making the second and third quarters particularly dependent on volatile flows.
The bank said it favoured companies with self-help angles to drive growth, whether through category exposure or specific brand momentum, rather than those reliant on a broader sector recovery.
Alongside Burberry, JP Morgan also maintained underweight ratings on Kering, the Gucci owner, and Swatch, citing continued macro uncertainty and downside risk to earnings estimates.
Among soft luxury names, the bank's preferred pick is Prada, while it said it was too early to argue for a sustained re-rating of LVMH or Hermès until fundamentals beyond the Middle East begin to inflect.
Burberry shares were trading at around 1,057p, down 2.4%.