HSBC has downgraded two major luxury houses, moving LVMH and Burberry from Buy to Hold, and citing limited visibility for the second half of 2026 alongside a tougher set of year-on-year comparisons across the sector. The broker’s action came with both shares declining by more than 2% on the day.
In reaction to the more challenging near-term outlook, HSBC increased its sector beta assumption to 1.10 from 1.00. Analysts led by Anne-Laure Bismuth wrote in a note: "We think it is time to take a breather on some stocks until momentum more visibly improves."
HSBC’s coverage of luxury reported a 7.0% year-on-year gain in second-quarter organic sales, improving from a 5.8% rise in the first quarter. The bank said that performance was supported by robust jewellery demand and stronger traffic in the U.S. and parts of Asia.
Despite that quarter-on-quarter acceleration, HSBC warned that the trajectory is unlikely to be sustained. The analysts stated: "We believe H2 2026 won’t get any rosier and could prove more difficult to navigate," pointing to a tougher basis of comparison, softer mainland China sentiment and negative social-media reaction to an intellectual-property dispute involving a Chinese tea brand.
LVMH details
For LVMH, HSBC trimmed its price target to €490 from €600. The bank’s analysts flagged concerns about the Fashion & Leather division, which accounted for 72% of group EBIT in 2025. They see the division facing a slow recovery, noting that Louis Vuitton’s scale - around €20 billion in sales - makes further growth harder to achieve.
The note acknowledged progress on Dior’s turnaround under creative director Jonathan Anderson, but characterized the improvement as gradual. On LVMH’s valuation and underlying momentum, the analysts used a pair of brand references: valuation is "neverfull" but fundamentals "not speedy either," a nod to two of the brand’s handbag lines.
Burberry specifics
HSBC also reduced its Burberry target price to 1,200 pence from 1,350 pence. The bank said the turnaround led by CEO Josh Schulman has "progressed well," and noted that Burberry shares have risen roughly 51% since November 2024. Nevertheless, HSBC sees "limited scope for upwards sales and earnings revisions from here."
The analysts warned that Burberry will need a sharp acceleration on a two-year sales stack in China to hit consensus over the next three quarters, as year-on-year comparisons become more demanding. Reflecting the elevated sector volatility, HSBC raised its weighted average cost of capital assumption for Burberry to 9.9% from 9.4%.
Broader sector stance
While downgrading the two names above, HSBC retained Buy ratings on Richemont, Kering, Moncler and Prada, and kept Hold ratings on Hermes and Swatch. The bank continues to favor Richemont within its coverage, citing strong jewellery growth and solid management execution. HSBC framed its view as one where "hard luxury" should persistently outperform "soft luxury" as consumer spending remains polarized between wealthier and more aspirational shoppers.
The bank’s moves reflect a focus on near-term momentum and the comparative advantages of jewellery-led businesses versus fashion-heavy peers when consumer demand is uneven across regions and cohorts.