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3245 
We believe recent economic and financial market developments
warrant a downward revision in sector earnings estimates (by
6% for both 2008e and 2009e). But we are not surrendering to
the gloomy scenario currently factored into most luxury stock
valuations. We expect organic sales growth to slow from 13%
in 2007e to 9% in 2008e (we previously forecast 10.5%). We
believe that fast-growing customer groups from Asia ex-Japan,
Eastern Europe and the Middle East should, alone, add 6% to
sector top-line growth in 2008e, as they account for c30% of
total sales and should continue to grow at c20% in sales terms
in 2008. In 2008e, our 9% worldwide organic sales growth
forecast should still be sufficient to generate moderate EBIT
margin expansion despite negative exchange-rate effects (as
hedging fades out).
We have also factored higher risk premiums into our DCFbased
target prices to reflect lower earnings predictability. Even
on our lower target prices, however, we see sufficient total
potential return to reiterate our Overweight ratings on LVMH,
PPR, Luxottica, Bulgari, Tod’s, Safilo, Christian Dior and
Coach and to upgrade Burberry (from Neutral to Overweight)
and Hermès (to Neutral from Underweight).
These stock valuations assume a gloomy scenario (most regions
slowing significantly at the same time), which we believe is
unlikely. We remain more cautious on watch makers
Richemont and The Swatch Group (both Neutral) and Tiffany
(Neutral) as their growth is more cyclical, in our view.

目录
No surrender 3
Rating changes 3
Marked underperformance since mid-2007 4
Valuations assume a gloomy scenario 4
Sector risks 4
Not all doom and gloom 6
What did we learn recently (the facts)? 6
Not all doom and gloom 9
On average, we cut 2008e and 2009e EPS by 6% 11
What if we are too optimistic? 11
Companies 13
European stocks 14
US stocks 20
Financials & valuation: 22
Disclosure appendix 36
Disclaimer 39