Luxury equities are showing early signs of recovery heading into the third quarter, helped by easier year-ago comparisons in China and steadier performance during July and August, according to RBC Capital Markets.
Analysts expect Hermes (EU:RMS) to achieve 10% organic revenue growth, while Burberry’s (LSE:BRBY) retail like-for-like (LFL) sales are anticipated to turn slightly positive. The focus now is whether this momentum can extend into Q4, when comparisons become more difficult.
For Hermes, RBC forecasts revenues of €3.9 billion, representing 10% organic growth, with Leather Goods up 14%, Ready-to-Wear rising 6%, and Other Hermes increasing 13%. Growth is projected across regions, with Europe and the Americas each gaining 11% and Asia rising 8%.
Analysts led by Piral Dadhania noted that Hermes remains “underindexed to tourism,” which could help cushion the impact of weaker travel-related spending.
Burberry’s second quarter is expected to generate retail revenues of £425 million, reflecting a 1% LFL increase, while wholesale sales are projected to decline 14%. RBC anticipates a first-half gross margin of 66.5% and adjusted EBIT of £10 million. The brokerage expects slight improvement in Greater China due to onshoring of spending, stable trends in the Americas, and softer performance in Europe, the Middle East, and Japan.
The analysts highlighted Hermes’ defensiveness and Burberry’s “well underpinned turnaround credentials” as appealing attributes within the sector.
Other luxury groups show mixed trajectories. RBC expects LVMH (EU:MC) to report group revenues of €17.95 billion, down 1% organically, with its Fashion & Leather division falling 5% amid continued weakness in Japan and softer demand in the U.S. and Europe.
Kering (EU:KER) is projected to experience steeper declines, with group revenues down 10% organically, driven by Gucci’s 17% drop. Moncler (BIT:MONC) is also expected to fall slightly, with revenues down 1% at constant FX, reflecting weaker retail LFL sales. By contrast, Richemont’s (BIT:1CFR) Jewellery Maison is forecast to grow 9% on a constant FX basis.
“We continue to view defensiveness at Hermes, relative underperformance at LVMH and well underpinned turnaround credentials at Burberry as attractive in luxury,” the analysts wrote.
While the sector remains in a cyclical downturn, share price movements are increasingly tied to expected revenue growth inflections in 2026 rather than short-term earnings revisions. RBC’s forecasts remain slightly below consensus for Hermes and Burberry, with EBIT estimates reduced by 3% and 7%, respectively. Nevertheless, both stocks are rated Outperform, with price targets of €2,300 for Hermes and 1,400 pence for Burberry.
The central question is whether the third-quarter gains are temporary or indicate a more sustained recovery. RBC notes that seasonal and gift-related demand, along with U.S. tariff-driven pricing, could provide partial support through the end of the year.
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