Hermès may be more than its weight in gold, but other luxury houses in
Europe can equally expect their stock to rise over the next year, according
to Goldman Sachs.
“We see 20 percent upside over 12 months for the luxury sector,” after
underperforming the Stoxx Europe 600 index, and following a recent
sell-off, said Goldman analysts William Hutchings and Isabel Zhang Zhang,
in a Monday note.
“[We] believe this is an opportunity to buy selectively into the sector,”
after it fell 15 percent over the past year compared with a 1 percent loss
for the pan-European index.
Among the four themes Goldman sees driving the luxury market this year is
spending in China. Spending in that market should rise 6 percent in 2016.
But that’s less than the 10 percent growth logged in 2015, and would mark
the slowest rate since the Chinese luxury market opened a decade ago, said
Goldman.
“The emerged and emerging middle class have a lower propensity to spend on
luxury — but the desire for branded, status luxury brands remains
unchecked,” the investment bank said. This “means selling affordable
luxuries (products and services) to the masses,” with three-fourths of
total growth in 2016 expected to come from 70 million middle-class
consumers in China.
Such consumers have annual disposable income of 30,000-65,000 dollars
Goldman wrote.
Still, “we expect China to remain the greatest contributor to global
growth—over 50 percent of the aggregate growth of the industry,” the
analysts said.
Overall, Goldman expects global luxury sales to rise 3.4 percent in 2016,
down from 4 to 5 percent over the past two years, mainly because of slowing
growth in China and in the U.S.