Positive outlook for European luxury, but polarisation continues - UBS
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POSITIVE OUTLOOK FOR EUROPEAN LUXURY, BUT POLARISATION CONTINUES - UBS
UBS European luxury analysts are back from a trip to the U.S. with some key takeaways about the U.S. consumer and its impact on the sector.
"The trip highlighted the luxury industry's further heavy focus on the US market, which is seen as the key battleground in the current context of ongoing macro uncertainty in China," they write in a note.
But they say U.S. tariffs on European imports are seen as the biggest risk, and could test the resilience of local demand with the expectation that most of the impact would be passed onto the consumer.
Zooming in, jewellery and high-end watches are shining bright, and UBS's trip confirmed a global trend of strong polarisation in brand and category performance.
Jewellery takes the place of the most universally flagged top performing category.
The strongest momentum was seen in brands Cartier and VCA - UBS has "buy rating" on owner Richemont CFR.S - as well as Bulgari, owned by LVMH LVMH.PA which UBS rates as neutral.
"Elsewhere, the high-end watches are holing up well with wealthy consumers seeing the top brands such as Rolex and Patek Philippe as a good store of value," they write.
Leather goods meanwhile are more subdued and are expected to stay weaker for longer, non inclusive of Hermes HRMS.PA.
"When it comes to fashion, the best performing brands continue to be Prada and Miu Miu (Prada, Buy), as well as Loewe and Loro Piana (LVMH, Neutral)."
The UBS teams notes it heard universally positive feedback on the new CEO of Burberry given his strong track record in the US market. They have a neutral rating on Burberry BRBY.L.
(Lucy Raitano)
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