Core Insights - The report by Bank of America indicates that the overall luxury goods demand in Q2 2025 will be similar to Q1, presenting three scenarios: good, bad, and ugly [1] - Despite global economic fluctuations, local demand in Europe, Asia, and the Americas remains strong, while tourism in Japan and Europe continues to decline [1] - The luxury sector is facing pressure on EBITDA margins due to weak revenues and high fixed costs, with a 6% downward revision in profit forecasts compared to market consensus for H1 2024 [1] Group 1: Market Performance - Luxury goods companies' stock prices have dropped by 8% since the beginning of 2025, with consensus EPS also lowered by 8%, resulting in a dynamic P/E ratio of 22x, at the historical median [2] - Q2 2025 revenue trends show a 1% decline compared to Q1, with a weighted average indicating a 2% year-over-year decrease [2] - In the Americas, luxury spending improved by 3 percentage points in Q2, with jewelry consumption accelerating to +3% [2] Group 2: Regional Insights - In Europe, tourism spending deteriorated by 8 percentage points from Q1 to Q2, reaching -13%, while local demand remains stable [3] - Japan's tourism spending is expected to slow by 30-50 percentage points in Q2, leading to a 16 percentage point drag on overall revenue [3] - In China and other Asian regions, jewelry sales in China and Hong Kong, along with gaming revenue in Macau, improved by an average of 10 percentage points, while South Korea showed a slight decline of 6% [3] Group 3: Company-Specific Insights - LVMH is expected to face a bifurcated Q2, with fashion and leather goods potentially underperforming, while EBITDA margin pressures are anticipated [5] - Hermès forecasts a 9% revenue growth for Q2 and a 40.1% EBITDA margin for H1 [5] - Kering's performance is expected to align with previous guidance, with upcoming Q2 results being crucial for assessing market consensus risks for H2 2025 and 2026 [5] Group 4: Sales Forecasts - Prada's sales are projected to decline by 1% in Q2 due to adverse conditions in Japan, while Miu Miu continues to grow at 40% [6] - Zegna's performance improved in April, with a projected growth of 5% for Q2 [6] - The consensus revenue forecasts for various luxury brands indicate slight declines, with LVMH expected to generate $81.591 billion, down 2.3% from consensus [7] Group 5: Macau and Hong Kong Insights - Macau's gaming revenue forecast for 2025 has been revised down by 5%, with expected growth of only 1% compared to previous estimates of 6% [8] - Hong Kong's retail sales showed improvement in April, with a 2% decline compared to a 6% drop in Q1, indicating a recovery trend [12] - Visitor numbers in Hong Kong increased to 3.8 million in Q2, reflecting a 13% year-over-year growth in April, although still below 2019 levels [13]

Core Viewpoint - Bank of America reports a 1% year-over-year decline in luxury goods revenue for Q1 2025, a 4 percentage point drop from Q4 2024, indicating a slowdown across all regions [1] Group 1: Market Trends - The luxury goods sector is expected to show mixed signals in Q2 2025, with both positive and negative indicators [1] - Despite global economic volatility, local demand remains strong in Europe, Asia, and the Americas [1] - The tourism sectors in Japan and Europe are deteriorating, with a full recovery unlikely [1] Group 2: Financial Projections - EBIT profit margin outlook for H1 2025 is uncertain, with revenue weakness exerting pressure on profitability [1] - Bank of America projects a 6% lower profit expectation for H1 2025 compared to market consensus [1] - The luxury goods sector is currently trading at a 22x P/E ratio, within the historical valuation range [1] Group 3: Regional Performance - In the Americas, luxury spending improved by 3 percentage points in Q2, with jewelry spending up 4 percentage points [5] - In Europe, tourism spending dropped by 8 percentage points, while local consumption remains stable [5] - In Japan, tourism spending is expected to decline by 30-50 percentage points, leading to a 16 percentage point negative impact [5] Group 4: Company-Specific Insights - LVMH's Q2 performance is critical for assessing its fashion and leather goods division, with a potential EBIT margin pressure [6] - Hermès is expected to see a 9% year-over-year revenue growth in Q2, with an EBIT margin of 40.1% [6] - Kering's Q2 performance is anticipated to align with previous guidance, with upcoming comments during earnings expected to influence market expectations for H2 2025 and 2026 [6] - Richemont's jewelry business remains strong, but market consensus on margins may be overly optimistic [6] - Moncler is projected to have flat revenue in Q2, with a 4% growth in retail revenue [6] - Prada's revenue is expected to decline by 1% in Q2 due to adverse factors in Japan, while Miu Miu is expected to grow by 40% [6] - Zegna is expected to see a 5% revenue growth in Q2, up from 4% in Q1 [6] - Swatch is projected to break even in H1 2025 [6]