Multiple Major Banks Collectively Cut Luxury Sector Earnings Forecasts as Industry Posts Worst Annual Performance Since 2008
nashnova research
Over the past month, from Morgan Stanley to HSBC, major banks have slashed ratings and earnings forecasts for European luxury stocks; Goldman Sachs' luxury basket is down 15% year-to-date, on track for its worst year since 2008. This means → Wall Street's turn on luxury is no longer a handful of bears — it is a consensus-level repricing.
How bad is the damage?
Goldman Sachs' luxury stock basket has fallen 15% in 2026 as of Monday's close — on pace for its worst annual performance since 2008.
The heavyweights are leading the decline: LVMH and Hermès are both down roughly 37% year-to-date.
This means → the sell-off is sector-wide, not company-specific. Even Hermès — widely seen as the most resilient luxury name — has not been spared.
What exactly is Wall Street worried about?
RBC's core call: consensus earnings estimates for next year "assume a turning point that does not exist" — models bake in revenue acceleration and margin expansion, but no data supports either assumption today.
In plain terms = analysts are not saying luxury companies will lose money. They are saying "they won't earn as much as you think," because the forecasts rest on a demand rebound that has not happened.
Bernstein analyst Luca Solca's team went further: sample data from mainland China luxury malls showed July sales down 12% year-on-year. They labelled this the "fourth false dawn" of post-Covid Asian luxury recovery — the prior three rebounds (late 2023, late 2024, late 2025) all fizzled.
Who cut what?
Morgan Stanley: LVMH target price cut from €520 to €450, "equal-weight" maintained. The "historical pillars" underpinning luxury premiums — strong pricing power, China-driven structural growth, margin expansion, low earnings volatility — are being challenged. No room for re-rating over the next 12 months.
J.P. Morgan: LVMH target cut from €580 to €525, "neutral" maintained. China retail volatility and weakness expected to persist into 2027.
HSBC: LVMH and Burberry downgraded to "hold." Investors should not buy on cheap valuations alone — not until the "second derivative" of sales growth (the rate at which growth itself accelerates) improves. Jefferies: LVMH target cut from €510 to €440.
RBC: LVMH and Burberry downgraded from "outperform" to "sector perform"; 2027 EPS estimates cut for Kering, Moncler, Hermès, and Swatch Group.
What's the deeper worry beyond demand swings?
The immediate trigger is Asia demand stalling again, but Wall Street's deeper concern points to structural issues.
Morgan Stanley argues the core premium thesis for luxury — pricing power + China-driven growth + expanding margins + low earnings volatility — is being systematically challenged, not just temporarily disrupted. This reflects why long-only funds keep avoiding the sector: not short-term pessimism, but a belief that "the foundational assumptions of this story have changed."
Tighter tax scrutiny on offshore wealth is producing a "chilling effect" on high-net-worth spending. Meanwhile, the Iran conflict is pushing oil prices higher → stoking inflation fears → keeping central banks hawkish → threatening consumer spending, further suppressing recovery expectations.
If you had to buy, who does Wall Street pick?
Amid broad pessimism, hard luxury (jewellery, watches) is the only consensus preference. In plain terms = when handbags and apparel stall, jewellery still holds up relatively well.
Richemont is the top pick across multiple houses: RBC and Bernstein both name it their sector favourite; Bernstein calls it the "best name." Morgan Stanley favours Richemont, arguing jewellery brands are more resilient in China. UBS added Richemont to its European consumer-discretionary top-five list, noting its valuation is near a twenty-year low relative to peers.
Additionally, Ferrari is flagged by RBC as a resilient pick in the current environment; Barclays is overweight Richemont, Moncler, Burberry, and Prada.
When does the turning point arrive?
The debate centres on whether valuations are cheap enough, but until demand trends inflect, "greater caution" remains Wall Street's baseline tone.
This means → even after steep declines, the message from major banks is not "buy the dip" but "wait" — cheap does not mean bottomed.
When the turning point arrives, not a single bank has offered a clear timeline.
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