Barclays Research has turned modestly positive on Europe’s luxury goods industry after a better-than-expected third-quarter earnings season suggested that the wave of analyst downgrades may finally be coming to an end.
The bank said that “2026 estimates are in the right place,” underpinned by resilient demand from affluent U.S. consumers and early evidence that “China’s market does not seem to be getting worse.”
As part of its sector review, Barclays upgraded Moncler (BIT:MONC) to “overweight” and downgraded Hermès (EU:RMS) to “equal weight,” while maintaining LVMH (EU:MC) at “equal weight” and Kering (EU:KER) as well as Ferragamo (BIT:SFER) at “underweight.” The brokerage said it continues to hold a “neutral” stance on the overall European Luxury & Specialty Retail space.
Moncler’s upgrade reflected what analysts described as an “attractive risk/reward” setup, with a €61 price target. Barclays noted that the Italian luxury outerwear maker had “benefited less than peers from the sector rebound” and could show sequential growth in Q4 despite challenging comparisons.
Engagement indicators such as Google Trends were said to be “supportive,” while management’s early fourth-quarter comments — “October started well and results are positive” — reinforced optimism.
Moncler’s U.S. expansion remains a key growth driver, with its store base projected to rise 4–5% annually over the next three years. The stock trades at a 2-year forward P/E of 20.7x, representing a 5% discount to its 10-year average.
By contrast, Hermès was cut to “equal weight” with a €2,310 price target, as Barclays cited “fewer short-term catalysts to drive the shares.” The French luxury house, known for its defensive earnings profile, posted single-digit organic growth year to date, a trend Barclays expects to continue through year-end.
Analysts observed that Hermès “still trades on a 2Y fwd PE of 40.0x, which is 1% above its historical average,” calling the stock’s valuation stretched as revenue outperformance narrows. EBIT margins are expected to stay near 40%, as “the operating leverage of the brand is relatively low.”
For LVMH, Barclays kept its €560 target price and Equal Weight rating unchanged. The firm’s Fashion & Leather Goods division is forecast to decline 5% in Q4 amid tougher comparisons, though cost efficiencies may cushion margin pressure. The brokerage also factored in a higher French corporate tax rate, trimming its 2026 EPS forecast by 3%.
Kering’s earnings forecasts for FY25 and FY26 were raised by 18% and 10%, respectively, resulting in a new price target of €245, though Barclays maintained an “underweight” rating. The report noted that the Gucci owner’s 51% rally in recent months “has not been accompanied by EPS upgrades,” and that its 2-year forward P/E of 27.5x now stands almost double its 10-year average.
Barclays also pointed to encouraging signs from China, with LVMH reporting that “Mainland China [was] turning positive in Q3,” while Hermès cited “a quite strong and dynamic business” during Golden Week, and Ferragamo described “an encouraging improvement in China.”
The brokerage added that Richemont (BIT:1CFR) and Burberry (LSE:BRBY) — both due to report mid-November — could benefit from “positive read-across” trends seen among peers.
Despite growing optimism, Barclays warned that the recovery remains fragile, noting that “the sector is not out of the woods yet.” Most brands still posted negative Q3 sales growth, and store traffic challenges continue. While the bank sees potential for improvement in 2026, it cautioned that “a significant EPS momentum inflection is not guaranteed.”
Leave a Reply