European luxury stocks faced a challenging 2024, hit hard by China’s slowdown and significant declines in giants like LVMH and Kering. Could Q4 2024 and 2025 signal a recovery for the sector?
Despite robust global economic growth and rising global wealth, European luxury stocks have faced significant headwinds in 2024. Giants like LVMH, Kering, and Moncler have suffered steep declines.
Have the wealthy stopped being wealthy? Or have they simply stopped spending? Neither, it seems.
The luxury sector’s challenges can be traced primarily to the East—Russia to some extent, but especially China.
Will 2025 mark a turnaround? While the outcome remains uncertain, early signs suggest the potential for recovery.
Why 2024 Has Been a Difficult Year for European Luxury Stocks
While the global economy has shown resilience and stock markets have reached new highs, luxury stocks have defied this trend. The Amundi S&P Global Luxury UCITS ETF, a barometer for the sector, has moved sideways.
High-profile names such as LVMH (-22%) and Kering (-25%) have been particularly impacted.
Moncler, known for its premium winter apparel, has also seen a 15% decline.
This disconnect is particularly striking against the backdrop of strong market recoveries in the West.
It’s Not Wealth That’s Lacking: The Resilience of Supercars and Luxury Yachts
The challenge isn’t a lack of wealth among affluent consumers. Evidence lies in the strong performance of companies like Ferrari, which saw its stock rise 12% in 2024.
The automotive sector’s "supercar" niche continues to thrive, buoyed in part by the electric vehicle (EV) boom, with brands like Tesla experiencing a 50% gain despite volatility.
The Italian yachting industry, represented by firms such as Sanlorenzo, has also outperformed, with a 15% rise in stock prices.
This growth has been driven by robust demand for luxury yachts, particularly in the Middle East and U.S. markets.
These trends underscore that luxury is not in crisis across the board.
Resilient and innovative sectors continue to attract both consumers and investors, while traditional fashion and accessories brands bear the brunt of the downturn.
So, what’s behind this divergence?
China: The Jammed Engine of the Luxury Market
China’s economic slowdown has emerged as the key obstacle for luxury brands in 2024.
Between 2012 and 2018, China accounted for more than half of global luxury spending growth.
By 2018, Chinese consumers contributed nearly one-third of global luxury goods sales.
In 2024, however, China’s retail sales growth has stalled, hovering barely above 0%.
This slowdown stems from multiple factors, including a real estate crisis that has shaken consumer confidence and a lack of decisive economic policies to stimulate spending.
Despite high savings accumulated during the pandemic, Chinese consumers remain reluctant to spend on high-end goods, weighing heavily on the luxury market.
China’s Economic Stimulus: A Turning Point in 2025?
In response, Chinese authorities have introduced a $1.4 trillion stimulus package, focusing on restructuring local government debt to free up resources for future investments.
However, the measures lack direct initiatives to revive the real estate sector or boost consumer spending, leaving investors cautious.
Nonetheless, there is optimism on the horizon.
The Central Economic Work Conference in December and the National People’s Congress in March 2025 will be pivotal in shaping policies aimed at restoring consumer confidence.
If China succeeds in incentivizing spending, the luxury sector could finally rebound.
Technical Analysis of the Amundi S&P Global Luxury UCITS
The Amundi S&P Global Luxury UCITS ETF serves as a key benchmark for the luxury sector. While it employs synthetic replication (lacking direct holdings in luxury stocks), it remains a significant indicator of overall market performance.
In 2024, the ETF maintained a sideways trend, posting growth between 5% and 8%, largely thanks to its exposure to luxury automotive stocks like Ferrari and Tesla (TSLA). Meanwhile, the RSI (Relative Strength Index) shows the ETF is not in oversold territory, unlike many fashion-related stocks suffering double-digit losses.
This divergence highlights that the crisis is not universal across the luxury market. Instead, it is heavily concentrated in the East—a region that remains a critical growth driver yet is currently experiencing economic contraction.
Original article published on Money.it Italy 2024-12-03 20:04:00. Original title: Crisi azioni del comparto lusso, ecco perché il 2025 potrebbe segnare la svolta
