LVMH, Burberry Downgraded to Hold as Luxury Stocks Brace for a Tough 2026 Second Half

The broker's action reflects a view that softness in the luxury market — for which LVMH functions as a proxy — is likely to persist, while Burberry's recent turnaround efforts are seen as leaving little room for further gains.

The wider sector has been under pressure this year, weighed down by weak demand in China and by the effect of conflict in the Middle East on tourist spending. A Goldman Sachs Group Inc. basket of luxury equities has fallen 13% year-to-date, and LVMH is trading at its lowest absolute price-to-earnings ratio in a decade.

In a note from a team led by HSBC's Anne-Laure Bismuth, analysts pointed to softer momentum in mainland China, negative social media reaction to a trademark dispute between LVMH and Molly Tea, and a slowing pace of sales in South Korea and North America as factors that could drag on the sector in the coming months.

Bismuth wrote that investors should not buy a stock simply because it looks cheap on valuation or because margins are rising, but rather because the second derivative of sales growth is improving. Her team does not see scope for more constructive momentum in the second half.