Fashion
Luxury stocks’ nascent revival is about to face earnings test
By
Bloomberg
Published
October 14, 2025
The recent rally in the shares of luxury goods makers will be put to the test this earnings season, as valuations are already back at demanding levels.
After a rocky first half of the year, a gauge tracking the sector has jumped 14% over the past two months in a relief rally as damage from the Trump administration’s tariffs prove less severe than feared for exporters. That’s cranking up the pressure on companies to deliver market-pleasing results, even as they battle challenges like China’s uneven economic recovery and the stronger euro.
Earnings and sales growth for luxury companies has been lacking for almost two years amid falling demand from key markets such as China- which for decades had been a key support. Analysts have been cautious about calling a recovery, with data from Deutsche Bank AG showing no substantial acceleration in sales for the sector until the first quarter of 2026, at the earliest, as the industry remains stuck in its post-pandemic slump.
For this season, the sector could see easier year-earlier comparisons as third-quarter numbers begin to roll out- kicking off with LVMH Moët Hennessy Louis Vuitton SE on Tuesday. But the overall picture remains blurry.
“The recent rally does set the bar higher,” said Buenyamin Ak, a research analyst at Flossbach von Storch AG. “I would expect that providing unquantifiable, loose hopes would lead to disappointing price reactions.”
Europe’s flagship sector has grappled with lacklustre demand from the crucial Chinese market. Repeated calls that the sector’s most important source of growth is on the brink of a comeback have failed to prove correct.
Recent Chinese factory activity data showed evidence that sluggishness in the economy persisted through the end of the third quarter. Moreover, the summer ended with two of the weakest months for retail sales this year and the recent Golden Week holiday reflected subdued consumer spending.
To make things worse, the euro has climbed 12% this year against the dollar. That’s a burden on margins for luxury manufacturers, who have their costs based in the common currency but generate most revenue outside of Europe.
For some analysts, these twin external headwinds could provide the nudge companies need to confront problems closer to home.
“Weaker brands blame macroeconomics- tariffs, the China real estate market, geopolitical tensions- when the reality is more down-to-earth,” HSBC Holdings Plc analyst Erwan Rambourg wrote in a note. “Products grew too expensive and there was a lack of innovation/creativity.”
Investors have recently favoured shares in companies with a willingness to tackle internal crises dragging on performance. Take Gucci owner Kering SA and UK fashion brand Burberry Group Plc as examples. Their shares have climbed 27% and 21% this year, respectively.
After years of underperformance, Kering posted its best-ever quarterly stock gain on optimism that new CEO Luca de Meo will revive the Gucci brand. At Burberry, early signs of success from CEO Joshua Schulman on refocusing the brand on its British roots and better promoting its flagship outerwear products have triggered a recovery rally in the shares. However, the revival in sales and profits hasn’t materialised yet.
“There has been some speculative buying in recent weeks, focused on companies with new creative leaders but where we have yet to see any real evidence of an earnings inflection,” said Sam Glover, a fund manager at EFG Asset Management.
After seeing its stock plunging 42% between January and June, LVMH was upgraded to buy last week by analysts at Deutsche Bank and Morgan Stanley. They see the Christian Dior and Louis Vuitton owner as among the potential beneficiaries of less pessimistic sentiment among investors.
LVMH’s management team “has reacted with a number of management and creative designer changes,” said Deutsche Bank’s Adam Cochrane. “With a tough consumer backdrop, an increase in the pace of innovation and exciting customers with new products is paramount.”
But a look at analyst estimates for the company’s profits shows it still trails those of rival Hermes International SCA, while the rebound in the stock since June has sent its valuation back to near 25 times forward earnings.
Over the past month, fashion weeks in Paris and Milan have offered a glimpse of how luxury companies plan to convince shoppers to open their wallets again. Investors, however, may need more time before they share in the enthusiasm elicited by the latest catwalk presentations.
“If you just follow a fashion calendar and sort of a lead time, these collections would most likely come to stores at the very end of the second or third quarter next year,” UBS Group AG analyst Zuzanna Pusz said. “At this stage, that’s the earliest we could see things improve.”
Wholesale revenue dropped 12.8 per cent on a currency-adjusted basis to €4.9 billion, while direct-to-consumer (DTC) sales increased 3.4 per cent, lifting the DTC share to 32.4 per cent from 28.9 per cent.
Regionally, sales fell 6.9 per cent in Europe, Middle East and Africa (EMEA), 7.4 per cent in Asia-Pacific and 10 per cent in the Americas, with North America driving much of the decline.
Puma has reported sales of €7.3 billion (~$8.61 billion) in FY25, with currency-adjusted revenue down 8.1 per cent amid strategic reset actions.
Wholesale declined while DTC share increased.
Margins contracted and EBIT turned negative, leading to a net loss.
Q4 saw sharper declines across regions and categories.
Puma expects further sales softness and negative EBIT in FY26.
By product segment, footwear sales decreased 7.1 per cent, apparel declined 9.7 per cent and accessories fell 8.5 per cent, although selective growth was observed in running, training and premium sport style lines, Puma said in a press release.
Profitability weakened significantly during the year. Gross margin contracted 260 basis points to 45.0 per cent, impacted by promotional activity, inventory reserves, unfavourable mix and currency effects. Adjusted EBIT turned negative at €165.6 million, while reported EBIT declined to -€357.2 million after €191.6 million in one-off costs related mainly to the cost efficiency programme and goodwill impairments.
Loss from continuing operations widened to -€643.6 million, translating to earnings per share of -€4.37 versus €1.88 in the prior year.
From a balance sheet perspective, inventories rose 2.3 per cent to €2.06 billion as inventory takebacks from wholesale partners supported distribution clean-up. Working capital increased 20.2 per cent, while trade receivables and payables declined sharply in line with reduced sales and purchasing activity. Puma ended the year with additional financing capacity, including €1,202.2 million in unutilised credit lines.
Fourth quarter (Q4) performance reflected the peak impact of the strategic reset. Currency-adjusted sales declined 20.7 per cent to €1,564.9 million, with reported revenue down 27.2 per cent due to currency headwinds. The decline was driven by deliberate reductions in wholesale exposure, inventory clearance actions and lower promotional intensity.
Wholesale sales fell 27.7 per cent in Q4, while DTC revenue decreased 8.0 per cent, although DTC share increased to 41.1 per cent from 35.5 per cent. Regionally, sales dropped 12.6 per cent in Asia-Pacific, 22.2 per cent in the Americas and 24.3 per cent in EMEA.
Across product divisions, footwear sales declined 25.4 per cent, apparel fell 13.7 per cent and accessories dropped 18.2 per cent, with selective resilience in training and performance running categories.
Profitability deteriorated sharply. Gross margin declined to 40.2 per cent from 47.7 per cent due to promotions, inventory provisions and currency effects. Adjusted EBIT fell to -€228.8 million, while reported EBIT reached -€307.7 million following one-off costs linked to restructuring and impairment charges. The quarter ended with a loss from continuing operations of -€335 million.
Arthur Hoeld, CEO of Puma, said: “2025 was a reset year for us. We want to establish Puma as a top 3 sports brand globally, return to above-industry growth and generate healthy profits in the medium term. It is crucial to make the Puma brand less commercial and ensure we once again excite our consumers with attractive products, compelling storytelling and distribution in the right channels. I am satisfied with the progress we have made so far. We cleaned up most of our distribution by reducing promotions in our own channels and cutting our exposure to those wholesale channels that damage our brand’s desirability. To better position our product icons and our performance offering and tell more engaging product stories, we created the right structures inside our company. We also addressed operational inefficiencies and further optimised our cost base.”
Looking ahead, Puma expects currency-adjusted sales in fiscal 2026 to decline in the low- to mid-single-digit percentage range, with EBIT projected between -€50 million and -€150 million. Capital expenditure of around €200 million is planned as the company continues investments in brand repositioning and digital capabilities, added the release.
Fibre2Fashion News Desk (SG)
Nominal GDP, or GDP at current prices, is estimated to grow at 8.6 per cent to reach ₹345.47 trillion in FY26 against ₹318.07 trillion in 2024-25.
India’s real GDP is estimated to grow at 7.6 per cent to ₹322.58 trillion (~$3.54 billion) in FY26 compared to the first revised GDP estimate of ₹299.89 trillion for FY25 (7.1 per cent growth).
It released the new series of annual and quarterly national accounts estimates with FY23 base.
Real GVA is projected to grow at 7.7 per cent to reach ₹294.40 trillion in FY26 against ₹273.36 trillion in FY25.
Real gross value added (GVA) is projected to grow at 7.7 per cent to reach ₹294.40 trillion in FY26 against ₹273.36 trillion in FY25 (a 7.3-per cent growth rate).
Nominal GVA is estimated to grow at 8.7 per cent to hit ₹313.61 trillion during FY26, against ₹288.54 lakh crore in 2024-25.
Robust economic performance in FY26 is primarily on account of robust real growth observed in the second quarter (8.4 per cent) and third quarter (7.8 per cent).
The manufacturing sector has been the major driver of resilient performance of the economy the consecutive three fiscals after rebasing, a release from the ministry said.
Both private final consumption expenditure and grossed fixed capital formation exhibited more than 7-per cent growth rate in FY26.
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