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Investing.com -- Jefferies has revised its ratings on Hugo Boss (ETR:BOSSn) and Pandora (OTC:PANDY). Hugo Boss was downgraded from to "hold," while Pandora was upgraded to "buy."
This reflects Jefferies' view on the contrasting performance and prospects within the European retail sector, with Hugo Boss facing headwinds and Pandora showing stronger potential.
The downgrade of Hugo Boss is attributed to persistent challenges in driving gross profit growth and a lack of compelling evidence pointing to a significant recovery in European consumer spending.
While the German luxury fashion house remains positioned to benefit from an eventual rebound, Jefferies analysts flagged the absence of near-term catalysts that could decisively improve its performance.
As a result, the price target for Hugo Boss has been lowered to €45 from €50. Analysts noted that despite the brand’s operational potential, uncertainties around macroeconomic conditions and consumer behavior limit its upside.
This cautious approach aligns with Jefferies’ broader view of market dynamics in the European non-luxury discretionary sector.
In contrast, Pandora has been upgraded to a "buy," with its price target raised to DKK 1,550 from DKK 1,300.
The decision reflects Pandora’s strong growth outlook, underpinned by new product lines that have enhanced demand visibility and addressed past concerns about sales volatility.
Jefferies analysts said that Pandora’s ability to sustain resilient margins, leverage operational efficiencies, and maintain a strong shareholder return profile.
The Danish jewelry maker’s income yield of 5.3%, compared to a peer average of 2.9%, was particularly noted as an attractive feature for investors.
Analysts also pointed to Pandora’s capacity to weather challenging economic conditions through its focus on innovation and cost management.
Jefferies’ contrasting recommendations for Hugo Boss and Pandora flag the nuanced challenges facing Europe’s consumer discretionary sector.
While consumer savings and disposable income levels remain elevated in some regions, spending intentions have been hindered by geopolitical uncertainties and inflationary pressures. This has led to significant divergence in the performance of key players.
The retail environment remains highly mixed, with some companies, such as Pandora, finding opportunities to expand their market presence through product innovation and operational agility, while others, like Hugo Boss, struggle to build momentum in a subdued spending landscape.
In the absence of a clear macroeconomic inflection point, Jefferies has focused on bottom-up analysis to guide its recommendations.
Market positioning, margin resilience, and earnings momentum will help companies perform well currently.
Shares of Hugo Boss were down 3.7% at 05:54 ET (10:54 GMT), while Pandora traded higher at 1.6%.