After a tough quarter for global luxury, Barclays names 3 stocks to play the sector right now

Published Mon, May 6 20247:20 PM EDT

Amala Balakrishner @in/amala-balakrishner @_amalabk

Consumers, particularly those in China, have been tightening their purse strings and cutting their spending on luxury goods in light of macroeconomic uncertainties. But Barclays notes that several companies in the sector make good plays right now. The MSCI Europe textiles, apparel and luxury index has fallen nearly 3% in the last month. Year-to-date, the index is up by nearly 5.8%, but has plunged by 8.6% in the last 12 months. Referencing data from the first-quarter Vogue survey of Chinese customers, Barclays noted that respondents continued to cut their spending on luxury goods, with 56% spending less that 22,500 Chinese yuan ($3,118.85) in the past quarter. While consumers' spending intentions for the second quarter shows that they plan to spend more money on luxury, the investment bank's analysts "remain cautious about the possibility of seeing improving trends." Still, expenditure on luxury goods is expected to rise to 68% this year from 66% in 2023, they wrote in a May 3 research note. Here are three stocks the investment bank likes right now. LVMH Barclays is bullish on French label LVMH and raised its target price by nearly 13.6% to 937 euros ($1,009.18). That gives the stock — whose rating was raised to "overweight" — just over 20.2% upside potential. LVMH's portfolio includes Tiffany & Co, Christian Dior, Louis Vuitton and Sephora. "LVMH-owned brands continued to enjoy strong desirability in Q1," Barclays's analysts noted, adding that Dior and Louis Vuitton remain in the top five most purchased brands of the names the bank covers, with 36% and 28% of those surveyed having bought from them, respectively, in the quarter. Tiffany topped the list for the jewelry segment. Moncler Italian fashion house Moncler also made it to Barclays' list "despite signs of normalising trend in April." "We remain confident that Moncler will deliver above-market growth for the rest of 2024," the analysts wrote. Barclays has a target price of 68 euros, representing 5% potential upside. Richemont Also on Barclay's list is the Switzerland-based Richemont , which produces and sells jewelry, watches, pens, accessories and clothes, among other things. "We view the Q1 24 edition of the Vogue survey as a positive read across for Richemont. Jewelry emerged once again as the most in-demand product category, with 37% of respondents stating they bought jewelry over the past quarter, and strong purchase intention in Q2 24," the analysts wrote. The brand's "desirability" and "spending intentions" for it rose more than those of its peers, according to the survey, the bank noted. Barclays' target price on the stock is 168 Swiss francs ($182.62), which gives it around 28.2% potential upside.