Investing.com -- HSBC believes the luxury sector is approaching a turning point after four tough quarters, with sales set to improve in the second half (H2) of 2025 and more solid growth returning in 2026. The bank sees particular momentum in soft luxury, where brands have struggled with pricing and creative lapses. “After four quarters of pain, partly macro driven (FX, recessionary fears, global tensions) but, bluntly, mostly self-inflicted, we see luxury starting to do better in H2 2025 before reverting to more decent growth in 2026,” analysts led by Erwan Rambourg wrote. The team expects sales across its coverage to rise by 3% on average in the second half, following a 1% drop in the second quarter. The improvement should be supported by a more favorable comparison base in Japan and Europe, recovering sentiment among Chinese consumers, and fresh product launches at more accessible price points. The analysts also noted that while American consumers face short-term hurdles such as inflationary pressures and a tough comparison to last year’s post-election bump, it does not foresee a “dire scenario” there. To reflect the expected shift, HSBC downgraded Hermes to Hold from Buy, citing limited acceleration in sales despite its strong business model. Conversely, LVMH and Kering were upgraded to Buy from Hold. For LVMH, analysts pointed to Dior’s rebound, cost containment measures, and the potential to simplify its structure, raising their target price to €625 from €535. 3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. For Kering, analysts argued that new CEO Luca de Meo’s arrival should buy the company time to implement changes, with a target price lifted to €300 from €200. The upgrades come after both groups were among the sector’s worst recent performers in terms of growth. Kering’s sales were down 15% year-on-year in the second quarter, while LVMH’s fashion and leather division fell 9%. Yet HSBC sees “the second derivative of sales picking up visibly” for both companies. HSBC analysts argue that investors should focus less on valuations or margins and more on the trajectory of sales momentum. “Investors shouldn’t buy a stock because it looks cheap or because margins are increasing, but rather because the second derivative of sales growth is accelerating,” they said. "We see soft luxury brands, notably those within the LVMH and Kering portfolios, that suffered most from greedflation and a lack of creativity, starting to find solutions." Is LVMH part of an AI-powered winning strategy? ProPicks AI evaluates LVMH alongside thousands of other companies every month using 100+ financial metrics. Using powerful AI to generate exciting stock ideas, it looks beyond popularity to assess fundamentals, momentum, and valuation. The AI has no bias—it simply identifies which stocks offer the best risk-reward based on current data with notable past winners that include Super Micro Computer (+185%) and AppLovin (+157%). Want to know if LVMH is currently featured in any ProPicks AI strategies, or if there are better opportunities in the same space?