JPMorgan sees luxury upside

European luxury stocks have become a selective buy after months of underperformance, according to analysts including JPMorgan, which said signs are emerging that the sector may have bottomed. Reports published on September 2 said the shift in tone followed heavy lagging versus the broader market through May, even as investors remained cautious about China demand and earnings momentum. Analysts did not describe a broad rebound. They said any recovery was likely to be gradual and uneven, with stronger houses expected to lead. ### Why are analysts changing their tone now? JPMorgan said luxury stocks have often outperformed when confidence is this depressed, according to a Bloomberg-reported analysis carried by FashionNetwork and other outlets on September 2. The same reports said signs that consumer confidence and earnings growth may be bottoming out were prompting a less negative view on the sector. (us.fashionnetwork.com) FashionNetwork reported that owning luxury stocks had become “almost a contrarian trade,” reflecting how far sentiment had swung against the group. Oninvest, also citing Bloomberg, said the prolonged decline in luxury shares may be nearing an end, though analysts warned the recovery would not be quick or linear. ### If the sector has bottomed, why aren’t analysts calling for a broad rally? (us.fashionnetwork.com) Analysts said the expected recovery would be selective rather than sector-wide. Oninvest reported that recommendations were centered on quality names rather than the full luxury universe, with LVMH, Hermès and Richemont among the stocks highlighted. JPMorgan’s own published luxury market outlook has also described a sector still facing macroeconomic pressure, including weaker discretionary spending and tougher trading conditions. (us.fashionnetwork.com) That backdrop helps explain why banks are framing the call as a stock-picking opportunity rather than a clean turn for every luxury name. ### Why do LVMH, Hermès and Richemont keep coming up? LVMH, Hermès and Richemont were the names most often cited in the September 2 coverage as preferred ways to express a recovery view in luxury. (en.oninvest.com) Analysts’ preference for those groups reflects a focus on companies seen as higher-quality operators with stronger brand positioning and resilience than weaker peers, according to the reports. (jpmorgan.com) The distinction matters because the reports did not say demand had fully recovered. They said the improvement case rests on stabilization in confidence and earnings growth, not on a return to broad-based luxury spending strength. ### What risks are still hanging over the trade? China remains one of the biggest variables for the sector, and JPMorgan’s earlier luxury outlook said macro headwinds and consumer caution were still constraining demand. (us.fashionnetwork.com) FashionNetwork’s September 2 report also described the relief case as tentative, tied to bottoming signals rather than clear acceleration. The path matters to investors because analysts explicitly said the rebound, if it comes, is likely to be progressive rather than linear. (us.fashionnetwork.com) That leaves room for further volatility in earnings, sentiment and share prices even among favored names. ### What should investors watch next? September 2 analyst commentary put the focus on whether bottoming signs in consumer confidence and earnings growth translate into company results over coming quarters. (jpmorgan.com) JPMorgan, UBS and other banks have all argued in recent months that luxury recovery calls depend on selectivity and on evidence from the strongest houses. The next tests will come through trading updates, earnings reports and fresh bank research on companies such as LVMH, Hermès and Richemont. (en.oninvest.com) Those reports will show whether the improving tone remains confined to a few names or spreads more broadly across European luxury. (us.fashionnetwork.com) (jpmorgan.com)