Goldman Sachs Group Inc (NYSE:GS) analysts in their research note, indicated that the luxury sector in Europe is headed for a 20% upside in the coming years. However, they caution that the sales in 2016 are set to slow down. The upside was forecast after the sector underperformed the Europe 600 SXXP Index.
Analysts William Hutchings and Isabel Zhang Zhang, recommended ‘selective’ buy into the sector, since the index has dropped 15% in the past year, and only 1% loss among all of the European index.
Top European luxury brand sales in 2016 are likely to slow down to 3.4%, the analyst noted. The driving force would be the appreciation of share prices, given the trend improvements, Goldman Sachs Group Inc (NYSE:GS) analysts noted.
Euro Luxury Brands
The high end, premium brands which are set for gains, according to the investment firm analysts are – BURBERRY GROUP UNSP ADR EACH REP 2 ORD(OTCMKTS:BURBY), MONCLER SPA NPV(OTCMKTS:MONRF)as well as Salvatore Ferragamo S.P.A., Firenze(OTCMKTS:SFRGF).
One of the first Europe-based luxury brands to receive an upgrade by Goldman Sachs analyst was LVMH Moet Hennessy Louis Vuitton SE(ADR) (OTCMKTS:LVMUY).
The brand was moved from Neutral to Buy ratings as they believe, Vuitton has diverse, largest and better cash generating business among all of the Euro luxury brands in business.
The other brands, including Burberry, Salvatore Ferragamo and Moncler Spa, held meaningful upside, according to the duo. These also are well-positioned to grow top and bottom line, apart from sector factors.
Chinese buyers
Goldman Sachs Group Inc (NYSE:GS) analysts state that one of the four reasons behind the upside forecast for the luxury brands is Chinese consumers. The spending on luxury products by the second largest economy in the world, is expected to rise to 6% this fiscal. Incidentally, the growth is much lesser than the 10% growth luxury sector sales saw in 2015.
The final take by Goldman Sachs Group Inc (NYSE:GS) analysts is to gain from the 3.4% growth in global luxury sales in 2016.
Anthony Young
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