From Morningstar: 2025-03-31 05:28:00

The European luxury goods industry faces challenges from weak Chinese demand and Trump’s tariffs, affecting share prices. Analysts believe luxury brands may not be significantly hurt by potential tariffs due to consumer mobility and pricing power. Kering’s Gucci has seen a decline in popularity and sales, prompting a change in creative director to revitalize the brand.

Burberry is considered undervalued and is focusing on its core strengths in outerwear and accessories after struggling in the leather goods market. The brand saw a rise in sales last Christmas but faces challenges in regaining market confidence. L’Oreal is undervalued but has a balanced exposure across developed and emerging markets. Despite disappointing Q3 sales, the company sees growth opportunities in Latin America and India.

Puig, a Spanish fragrance provider, is undervalued despite disappointing share price performance. The company is expanding into makeup and skincare to diversify its offerings. While the business has a high dependence on luxury fragrances, management’s decision to moderate this category could pose a challenge. Analysts are concerned about the impact on future growth. Portfolio manager Jordi Sebastiá Tomàs predicts positive sales growth for Puig this year, citing strong brands and geographic diversification. However, he warns of potential impact from Trump’s tariff wars, as 36% of Puig’s sales come from the Americas. Despite this risk, Puig’s pricing power and diversification could help mitigate any effects. No securities mentioned in the article are owned by the authors.



Read more at Morningstar: Europe’s Most Undervalued Luxury Stocks