"European Core Assets" - European version of Mag 7 also collapsed

The cold winter of European luxury goods continues.

For a long time, the core assets of European stocks, luxury goods stocks, have been regarded as the European version of the Mag 7, but now they are performing weakly due to weak consumption. Data shows that Goldman Sachs' luxury goods stock price index has shrunk by a significant $240 billion from its peak in March.

Looking at individual brands, luxury goods giants Kering Group and Hugo Boss have almost halved their market value in the past year, while Burberry's market value has plummeted by 70% during the same period, leading to its removal from the FTSE 100 index. LVMH has also dropped from being the largest company in Europe by market value to the second position.

From financial reports, the decline in industry profits is significant. Kering Group, Burberry, and Hugo Boss have all issued profit warnings, with LVMH's key revenue department - the leather goods department - seeing a quarterly sales growth of only 1%, far below the 21% from a year ago.

GAM's fund manager Flavio Cereda stated that this indicates a shift in consumer trends from post-pandemic overconsumption to normalization:

"This year is even more unstable, more painful, because it comes after excessive growth."

Cereda believes that next year, luxury goods companies' sales may rebound to the "mid-single digits," and he expects the industry's long-term trend to remain at this level, with optimism for top luxury brands like Hermes.

UBS analyst Zuzanna Pusz predicts that the outlook for the luxury goods industry will be "slower for longer," and she has lowered expectations for organic sales growth in the second half of this year and in 2025, stating that "after several years of high pricing prosperity, the industry seems to be entering its own specific cycle."

Bank of America's Ashley Wallace also mentioned that expectations for the second half of this year may be too high, while Morgan Stanley's Edouard Aubin pointed out that LVMH and L'Oréal are particularly vulnerable to economic slowdown, leading to a downgrade in their target prices.

Some opinions suggest that current stock valuations are more reasonable, providing investors with entry opportunities.

Morningstar analyst Jelena Sokolova stated that the luxury goods industry has long-term competitive advantages, and the trough period may be a good time for investment. Sokolova is optimistic about Kering Group, expecting its Gucci brand to benefit from strong brand awareness