JPMorgan expects 'muted trends' from Q3 luxury earnings season

Burberry's stock was out of favour on Tuesday as demand concerns were weighing on the wider European luxury sector, with earlier optimism surrounding stimulus measures from China quickly fading.

The sector was also being dampened by comments from JPMorgan, which told investors not to get their hopes up ahead of third-quarter earnings season. The bank said earnings season will likely confirm "muted trends" for the luxury sector, with growth broadly in line with the second quarter despite easing comparatives.

"We think the main focus of this reporting will be comments from luxury executives regarding China stimulus measures and whether there has been any early evidence of a positive impact on luxury spend specifically," JPMorgan said in a research note.

"In our view, luxury fundamentals might remain challenged into year end, with 2025, especially H1, potentially another period of relatively more subdued growth."

Regarding Burberry, JPMorgan said that it sits 17% below consensus with its full-year EBIT estimates for the British high-end fashion brand, and has the stock on 'negative catalyst watch' ahead of its first-half results announcement next month.

Burberry was down 4.7% at 642p just before the close of play, pulling back after having risen by around 17% over the past month. Including Tuesday's drop, the stock has now fallen more than 54% over the year to date.