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AI-DRIVEN INCOME FEARS CLOUD LUXURY OUTLOOK

Concerns over how AI could reshape white-collar employment are showing up in investor conversations on the luxury sector, according to RBC Capital Markets.

Following recent U.S. marketing trips that revealed some of the softest sentiment since 2014-2016, RBC notes how clients are now also questioning demand drivers over the longer term rather than just short-term earnings risks.

"The more existential question being asked in meetings relates to the longer-term impact of AI on white collar jobs and the subsequent impact on middle class purchasing power for luxury goods," say analysts at the Canadian bank including Piral Dadhania.

RBC adds appetite for European luxury stocks remains pretty muted as weak earnings momentum persists.

The bank's scorecard shows negative or flat earnings momentum across most names, with 2025 results failing so far to confirm a sustained recovery in China or generate the upgrades it sees as necessary for the sector to work this year.

"Lack of earnings momentum = lack of investor interest".

Still, RBC notes selective positives.

LVMH LVMH.PA "is starting to look attractive", Burberry BRBY.L may deliver EPS upgrades and Hermes' HRMS.PA offers defensive growth. EssilorLuxottica ESLX.PA remains its top idiosyncratic pick, and Nike NKE.N is favoured sporting goods.

(Danilo Masoni)

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