(BFM Stock Exchange) – Bernstein revised its market forecast for the sector on Monday, now tabling on a 2% contraction this year, against growth of 5% previously. The financial intermediary believes that luxury, already abused on the stock market, is far from having reached a floor. UBS fears indirect effects on customers.

Flagship compartment of the Parisian square, luxury is not spared the world’s world stock panic.

Since Donald Trump announced his customs duties last Wednesday on all American imports, LVMH lost 10.4% and Kering 14.6%. Even Hermès, the best student in the sector and a high value refuge on the coast, abandons 9.5%.

These groups will not be immune to American customs duties. Because most of the luxury goods sold in the United States are actually imported and not manufactured in the country of Uncle Sam. “Apart from Louis Vuitton, we are not aware of an important luxury brand with significant production sites in the United States at present,” HSBC wrote on Friday.

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This means that luxury goods will arrive with customs surcharge, Donald Trump having announced a rate of 20% for European imports.

The demand for luxury products will be assigned. This Monday, April 7, Bernstein lowered its market forecast for the entire sector, now retaining a 2% contraction against growth of 5%, previously. Or a colossal revision of seven percentage points.

Second and third order effects

“The uncertainty and probable pursuit of the rout of the stock markets create a prophecy that is achieved by itself: a global recession,” says Bernstein.

The financial intermediary is not really worried about the impacts of “first order” on luxury, that is to say the repercussions in terms of price. Bernstein estimates that these customs surcharges could be neutralized by luxury groups if they pass price increases ranging from 1% to 4%.

“It is less than the 5% to 7% of price inflation in comparable data that we have found in the sector in the last 50 years,” highlights the financial intermediary.

“What concerns us are the effects of second and third order: uncertainty, the recent stock market crash, the devaluation of the dollar and the threat of a global recession,” warns Bernstein.

This would then constitute a “black swan” scenario, that is to say an event in which the market does not believe until it sees it, as the appearance of a black swan.

In view of all these opposite winds, Bernstein warns that the sector is still likely to suffer. “The luxury products sector is on average far from a valuation floor. If the context does not change, we expect a new drop” of titles, warns the design office.

A problem of perspective

By the way, Bernstein, believes that Hermès is the value of the most defensive luxury among all players in the sector in Europe, including Ferrari.

“The Ferrari consumer base is much narrower and easier, while Hermès is aimed at a larger number of consumers who can be more exposed to the slowdown in macroeconomic conditions,” says Bernstein.

Hermès, like Richemont, moreover, also harvested “the fruits” of his discipline on prices during the pandemic, the saddler having then increased his prices less than his competitors, adds the financial intermediary.

Note that HSBC shares the point of view of Benstein, judging that it is not so much the price increases as the second order effects that will mistreat the sector.

“The elephant in the room is not really the mechanics of customs tariffs on loss and profits from the luxury sector, but rather a combination of wealth destruction”, with the fall in American markets, “of a more limited American purchasing power (the Eurodollar is three years higher) and the sequential deterioration of consumers in the United States and, perhaps,” noted on Friday.

“All this comes back to the immeasurable ‘we do not buy luxury products because we are rich, but because we have good prospects,” concluded HSBC.

“We believe that the indirect impact on the companies we cover, associated with the risk of consumers’ feeling, is probably a much more likely risk for the sector, and which is difficult to estimate,” also abounded UBS last week.

“Customs duties are likely to have an impact on global demand, but especially on the two most important consumer nationalities in the sector, Americans and Chinese, who represent 55% of luxury business sales together. We note that this occurs at a time when the sector is faced with a lower cycle with little visibility on an upcoming return to a positive dynamic.”

UBS calculated, by excluding potential price increases decided by companies, negative impacts on operational results 2025 of companies ranging from -2% (for Moncler and Hermès), at -45%, for Salvatore Ferragamo, via -6% for LVMH and -9% for Hermès.

Deutsche Bank, for its part, believes that the customs prices will cause tariff increases among luxury groups of 7% in the United States and 2% throughout the world. “We consider that the more heritage and higher-end brands like Hermès and Richemont are best placed to impose price increases in the United States”, judge Deutsche Bank.