Amid the heat of the Fashion Week season, Morgan Stanley updated its recommendations for the luxury sector, changing the outlook for financial operators. The institute promoted Kering e LVMH, raising them to an “overweight” rating, while downgrading Hermès e Prada at the “equal-weight” level, thus signaling a reduction in expectations regarding their future returns.
A new medicine for the sector: creativity
According to Morgan Stanley, the "restoration of the creative offering" is the main driver of the renewed enthusiasm for luxury houses. For Kering in particular, the investment bank has identified potential for revival thanks to the recent change in creative leadership—with fresh debuts and renewed momentum in the brands it controls.
Even at LVMH, the renewal is evident: Morgan Stanley has highlighted how the strategic shift in brands such as Dior, Celine and Fendi is helping to reawaken investors' expectations.
Optimism isn't limited to creativity: analysts report that some companies are realigning their pricing policies toward more accessible ranges, aiming to stimulate domestic demand. This mix of stylistic innovations and commercial strategies has proved particularly appealing to the market in recent days.
The thorns behind growth: the weaknesses of Hermès and Prada
Although the luxury sector is benefiting from favorable momentum, Morgan Stanley has significant reservations about the prospects for Hermès e PradaIn the case of Hermès, analysts acknowledge that the brand has already experienced a very lively growth phase and is now in a "normalization" phase compared to the extraordinary rates of previous years.
Per Prada, instead, the threat comes from increasing competitive pressure and the difficulty of maintaining one's high-end appeal in a context where accessibility becomes a strategic value.
Morgan Stanley also reduced its target prices for Hermès (to 2.420 euros) and Prada (to HK$53), reflecting a more cautious view on development prospects.
How the market reacts
In response to these assessments, prices reacted vigorously. In Paris, the stock Kering It recorded a leap after its promotion by Morgan Stanley, supported by a newfound confidence in the brand and its creative potential.
In the broader context, the European luxury index hit its highest level since the end of May, driven by positive trends in LVMH, Kering, and Dior, which gained between 3% and 7%.
Volatility and Uncertainties: Risks to Monitor
However, the context is not without pitfalls. Among the most critical factors are:
- Slowing demand in ChinaLong identified as a stress point for European luxury, the Chinese market continues to generate uncertainty.
- Tensions over US tariffs: trade policies between the United States and Europe can affect pricing dynamics and fashion houses' margins.
- Excess optimism about organic recoveryAnalysts warn that the composite factors – creativity, pricing and demand – will have to translate concretely into sales to confirm that the negative phase is over.
Morgan Stanley, while confident, appears aware of these headwinds: the decision to downgrade Hermès and Prada reflects a strategic prudence aimed at safeguarding portfolios from potential downturns.