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<h3>RBC COOLS ON LUXURY: ‘REVENUE GROWTH IS VANITY’</h3>
Luxury stocks may have rallied over the past six months, but RBC reckons this sector has entered a phase in which revenue beats - like Richemont’s (CFR.S) stronger-than-expected sales last week - are no longer enough to sustain the momentum.
The Canadian bank says the recent rally has been driven by a valuation re-rating. That means the next leg higher will need EPS upgrades, something that looks increasingly scarce.
“What is required are earnings upgrades.. and they appear to be in short supply, despite fairly meaningful negative revisions in 2025,” write analyst Piral Dadhania and his RBC colleagues. They say the selloff in Richemont shares following revenue beats across the board is illustrative of this shift, and also reflects “crowded positioning and elevated expectations”.
In detail, RBC anticipates positive EPS revisions over the next 6 to 12 months for only two of the stocks under coverage - Burberry (BRBY.L) and Nike (NKE.N) - helped by cost cuts.
Adidas (ADSGn.DE) , Kering (PRTP.PA) , Richemont, Swatch (UHR.S) and Pandora (PNDORA.CO) face downgrades, while neutral trends are in store for LVMH (LVMH.PA) , Hermes (HRMS.PA) , Cucinelli (BCU.MI) , Moncler (MONC.MI) DrMartens (DOCS.L) , WOSG (WOSG.L) and EssilorLuxottica (ESLX.PA) .
To sum it up, they say: “Revenue growth is vanity; earnings upgrades are sanity”.
(Danilo Masoni)
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RBC has expressed caution regarding the luxury sector, stating that while luxury stocks have seen a rally, revenue growth alone is insufficient for sustained momentum. The bank highlights that earnings upgrades are necessary but scarce, with only Burberry and Nike expected to see positive revisions. Other luxury brands like Adidas and Richemont may face downgrades. RBC concludes that "revenue growth is vanity; earnings upgrades are sanity."

LIVE MARKETS-RBC cools on luxury: 'Revenue growth is vanity'