Luxury stocks have started to outperform high streets brands once again as investors bet on a luxury upswing.
Brands which struggled last year – like Burberry and Kering – are bouncing back, while brick-and-mortar reliant firms like Primark are struggling.
The ten largest luxury retailers by market cap have seen their stock price rise by an average of 19 per cent in the year-to-date.
High street stocks, meanwhile, were up only 11 per cent, with three share prices – JD Sports, Asos and Primark-owner ABF – falling in the last two months.
Average high street performance has been driven by German retailer Zalando, which is up 23 per cent in the year to date.
The e-commerce giant’s share price has surged 101 per cent in the last year, far exceeding its peers.
“Over the past year, lower-cost high-street brands fared better in general as value-conscious consumers prioritised affordability amidst sticky inflation,” Lale Akoner, global market analyst at eToro said.
“Yet some of the most recognisable names to British shoppers within our basket – Asos, JD and Primark – were not part of this growth. Instead, they were burdened by persistent inventory and profitability issues, highlighting the pressures facing fast fashion in a competitive, discount-driven environment.”
Seven out of the ten biggest listed high street firms have fallen in the last five years.
Betting on luxury stocks
After a significant post-pandemic downturn driven by weak Chinese demand and overstretched European consumers, luxury is back in style.
Burberry is set to re-enter the FTSE 100 after falling out of the index last September, and even beleaguered Kering’s share price has risen 19 per cent in the year-to-date.
The luxury upswing kicked out with a set of bumper results from Richemont in January, which gave luxury stocks across the world a boost.
RBC analysts Piral Dadhania and Richard Chamberlain predicted at the end of last year that the luxury market would improve in 2025, with opportunities abound in North America and a stabilisation of the Chinese market.
“Whilst luxury has generally been a tough sector [in the second half of 2023 and in 2024]… the setup is improving,” the analysts said.
But Akoner warned that “it will take some time for [troubled stocks] to claw back their share price, especially as the Chinese economy is still facing challenges.”
Hermes continues to be the standout pick, with its stock price up 296 per cent over the last five years and 21 per cent in the year to date.
Hermes is one of the few luxury retailers not affected by the widespread luxury downturn over the past two years, which analysts have attributed to its strong brand identity and the status-object reputation of its Birkin bags.