Investing.com – European luxury stocks gained momentum recently as Goldman Sachs issued a “modest” growth outlook for the sector in 2025, forecasting a 3% currency-adjusted revenue increase.
Despite the subdued growth outlook, this revaluation has created opportunities for selective equity investments in the industry.
The note highlights the importance of long-term structural factors such as high barriers to entry, strong brand equity and pricing that ensure the luxury sector’s resilience even during periods of slow growth.
Analysts indicate that valuation support is emerging in the sector, with the current price-to-earnings ratio trading below its ten-year average by around 11%.
This divergence opens up avenues for savvy investors to capitalize on potential rebounds, especially as Western markets show early signs of recovery and expectations of a cyclical pick-up in Chinese demand in the second half of 2025 mount.
The Goldman Sachs forecast underscores the important role of China, where the recovery has been delayed by persistent problems in the real estate market and broader economic difficulties.
Drawing parallels with previous downturns such as the US financial crisis and Japan’s stagnation in the 1990s, the report predicts that demand for luxury goods in China will start to recover positively in the third quarter of 2025.
This turnaround is expected to lead to earnings growth, supported by improved consumer confidence and government stimulus measures.
In this challenging landscape, Goldman Sachs has singled out specific companies poised to outperform, upgrading stocks like Moncler and Prada ( OTC 🙂 to Buy.
Brands with strong market positioning, such as LVMH, Moncler and Prada, are noted for their ability to expand market share at attractive valuations.
In addition, the analysis identifies defensive stocks such as Brunello Cucinelli and Zegna as suitable for navigation in the near term.
At the same time, high-end brands that serve segments of stable customers and those facing the expected Chinese rebound are seen as strategic investments.
The dynamics of the sector in 2025 suggest that prices, rather than volumes, will remain the key driver of growth, with an expected contribution of 3–4% to total revenue. However, profitability is expected to remain flat due to continued pressure in the first half of the year, partially offset by an improvement in the second half.
Analysts caution against seeking exposure to turnaround stories such as To dry (EPA: ), citing a more cautious outlook for brands trying to regain lost market share.
This moderate optimism is tempered by risks, including uncertainty surrounding the trajectory of China’s recovery, macroeconomic pressures and potential regulatory challenges.
However, the 2025 forecast provides a roadmap for discerning investors who prefer brands with defensive qualities, robust pricing strategies and exposure to recovering geographies such as China.
The sector’s resilience and long-term growth trajectory, supported by strong consumer demand for high-end goods and the continued appeal of iconic luxury brands, make European luxury stocks an intriguing investment option, especially as the market adjusts to these new dynamics.
