Maximize Your Investments with Luxury Sector Analysis

Among the top luxury brands, Brunello Cucinelli stands out with an impressive earnings growth forecast of 14% and 15% for 2025 and 2026, up from 10% in 2024. This growth surpasses both Hermès and LVMH, with expected earnings growth for 2026 at 12% and 9% respectively.

Despite recent setbacks, Kering is expected to bounce back strongly with an earnings growth of 26% in 2025, following a 43% decline in 2024. However, caution is advised as there are underlying challenges in revitalizing their portfolio.

When it comes to valuation, Hermès remains the most expensive company with a forward P/E ratio of 39 for 2026, although it is a significant decrease from the current 48 in 2024. This reflects the market’s premium on Hermès’ brand strength and consistent growth.

Similarly, Brunello Cucinelli trades at a P/E ratio of 35 for 2026, also high but justified by strong growth prospects. On the other hand, Kering presents a more attractive valuation, with a P/E ratio expected to drop to 12 in 2026, a significant discount compared to its competitors.

When considering potential returns, both Brunello Cucinelli and Kering show significant upside, with expected price increases of 29% according to current target prices. Despite slower growth, LVMH offers a solid potential return of 24%, reflecting market confidence in their resilient and diverse business model.

Hermès offers a more modest upside of 7%, supported by their unparalleled brand value and historically high profit margins and earnings growth.

Looking at the latest stock performance, Brunello Cucinelli has outperformed its competitors with a 20% return in the past year, closely followed by Hermès with 14%. In contrast, Kering has struggled with a 47% decline in stock price, while LVMH has seen a 15% decrease year over year, although it is up 92% over a five-year period.

Analysis:

For investors, the luxury sector presents a complex landscape. Hermès and Brunello Cucinelli justify their high valuations with strong growth prospects and a valuation based on next year’s earnings forecasts below the ten-year average. They also have the most loyal customers with the highest income, making them less sensitive to a slowdown in the global economy.

LVMH, with its diversified portfolio of over 70 brands, remains a safe bet, offering moderate growth with reasonable valuations based on historical metrics.

On the other hand, Kering appears to be a value play, with lower valuation multiples reflecting the relatively high risk that customers may not return as quickly as expected.

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