Can Hermes growth, Burberry’s turnaround signal momentum for luxury stocks in 3Q?

Investing.com -- Luxury stocks are showing tentative signs of improvement into the third quarter, supported by easier Chinese comparatives and steadier trends in July and August, according to RBC Capital Markets. 

Analysts forecast Hermes to deliver 10% organic revenue growth and see Burberry’s retail like-for-like (LFL) sales turning marginally positive. The focus now is whether this momentum can extend into the fourth quarter, when comparatives turn more challenging.

For Hermes, RBC expects revenues of €3.9 billion, up 10% organically, with Leather Goods rising 14%, Ready-to-Wear up 6% and Other Hermes up 13%.

Growth is expected across regions, with Europe and the Americas each up 11% and Asia up 8%.

Analysts led by Piral Dadhania said that Hermes remains “underindexed to tourism,” which should help offset softer travel-related spending.

Burberry’s second quarter is forecast to show retail revenues of £425 million, representing a 1% LFL increase, while wholesale is expected to decline 14%.

For the first half, RBC projects a gross margin of 66.5% and adjusted EBIT of £10 million. The broker anticipates modest improvement in Greater China from onshoring of spending, stable trends in the Americas, and softer performance in Europe, the Middle East and Japan.

The analysts highlighted Hermes’ defensiveness and Burberry’s “well underpinned turnaround credentials” as attractive positions in the sector.

Other luxury players show mixed trajectories. RBC expects LVMH to post group revenues of €17.95 billion, down 1% organically, with its Fashion & Leather division falling 5% amid ongoing weakness in Japan and softer demand in the U.S. and Europe.

Kering faces steeper declines, with group revenues forecast to fall 10% organically, led by Gucci’s 17% drop.

Moncler is also set to edge lower, with revenues down 1% at constant FX, reflecting softer retail like-for-like sales.

Richemont’s Jewellery Maison, by contrast, is forecast to rise 9% on a constant FX basis.

“We continue to view defensiveness at Hermes, relative underperformance at LVMH and well underpinned turnaround credentials at Burberry as attractive in luxury,” analysts wrote.

The sector remains in a cyclical downturn, but share price moves are increasingly tied to revenue growth inflections expected in 2026 rather than near-term earnings revisions.

RBC’s estimates remain slightly below consensus for Hermes and Burberry, with EBIT forecasts cut by 3% and 7% respectively. Still, both stocks are rated Outperform, with price targets of €2,300 for Hermes and 1,400 pence for Burberry.

The key question is whether third-quarter improvements prove temporary or signal a more durable recovery. RBC suggests festive and gift-related demand, alongside U.S. tariff-led pricing, could provide partial support into year-end.