Pessimistic on Luxury, Berenberg Slashes Price Targets for LVMH, Hermes, and Kering
Berenberg announced on Thursday that it has significantly lowered its price targets for major European luxury goods manufacturers, starting with French giants LVMH, Hermes, and Kering, whose valuations are now considered at risk.
The German bank indicated it has reduced its target for LVMH, the sector leader, from €560 to €420 while maintaining its hold rating on the stock.
Berenberg also cut its target for Hermes from €2,600 to €1,850, though it continues to recommend a buy on the shares. Its target for Kering, which remains a sell, was lowered from €190 to €175.
The End of the Golden Age for the Sector
In its research note, the Hamburg-based institution justified the reduction in its forecasts by citing a pessimistic outlook for the sector, for which it anticipates a downward revision of market estimates.
"The luxury sector's ability to return to its historical growth rates of 6% to 7% per year is now compromised by structural and lasting headwinds," the bank warned.
From a medium-term perspective, Berenberg explained that it expects an annual growth rate in the range of 3% to 4%, far from the 6% to 7% currently projected by the consensus. This shift is attributed not only to declining demand from Chinese consumers but also to reduced appetite from "aspirational" middle-class customers and younger Gen Z shoppers.
A Risk of Multiple Contraction
According to its analysts, this unfavorable dynamic poses a risk to profit margins and, consequently, to valuation multiples.
"Assuming the historical relationship between market valuation and margins remains valid, a return to the low margins that prevailed before 2017 carries the risk of a contraction in capitalization multiples to the levels seen at that time," the German bank cautioned.
In addition to LVMH, Hermes, and Kering, Berenberg also lowered its price target for Italy's Brunello Cucinelli (buy) from €120 to €95. Conversely, its targets for Richemont (hold) and Swatch (sell) were raised from 150 to 155 Swiss francs and from 115 to 130 francs, respectively.
On the stock market, shares of LVMH (+1.4%), Hermes (+0.7%), and Kering (+1%) were nonetheless trending higher, supported by bargain hunting following their poor performance since the beginning of the year, as investors have moved away from technology stocks over the past several sessions.
LVMH Moët Hennessy Louis Vuitton SE is the world leader in luxury products. Net sales break down by family of products as follows:
- fashion and leather items (46.7%): brands such as Louis Vuitton, Christian Dior, Celine, Loewe, Kenzo, Givenchy, Fendi, Emilio Pucci, Marc Jacobs, Berluti, Loro Piana, etc.;
- watches and jewels (13%): Bulgari, TAG Heuer, Zenith, Hublot, Chaumet, Fred brands, Tiffany, etc.;
- perfumes and cosmetics products (10.1%): perfumes (Christian Dior, Guerlain, Loewe, Kenzo, Givenchy brands, etc.), makeup products (Make Up For Ever, Guerlain, Acqua di Parma, etc.), etc.;
- wines and spirits (6.6%): champagnes (Moët & Chandon, Dom Pérignon, Veuve Clicquot, Krug, Ruinart, Mercier, Château d'Yquem, Domaine du Clos des Lambrays, Château Cheval Blanc, Colgin Cellars, Hennessy, Glenmorangie, Ardbeg, Belvedere, Woodinville, Volcán de mi Tierra, Chandon, Cloudy Bay, Terrazas de los Andes brands, etc.; No. 1 worldwide), wines (Cape Mentelle, Château D'Yquem, etc.), cognacs (mainly Hennessy; No. 1 worldwide), whisky (mainly Glenmorangie), etc.;
The remaining net sales (23.6%) are from selective distribution through the Sephora, DFS, Miami Cruiseline chains and Le Bon Marché and La Samaritaine department stores.
At the end of 2025, products are marketed via a network of 6,283 outlets located throughout the world.
Net sales are distributed geographically as follows: France (8.3%), Europe (18%), Japan (7.9%), Asia (26.5%), the United States (25.6%) and other (13.7%).
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