China’s Luxury Slump: LVMH Takes a Hit as European High-End Brands Feel the Pinch
European Luxury Brands’ Stock Prices Plummet Amid Slowing Chinese Demand
Shares of major European luxury goods companies fell sharply on the 5th (local time), with traders pointing to concerns about slowing demand in the Chinese market as the cause.
As the world’s major economic engines cool rapidly, investor confidence in luxury stocks is waning. An index tracking Europe’s 10 largest luxury stocks fell more than 3% on Thursday, coming close to the lows it hit during the market crash in early August.
In Paris, LVMH shares were down 3.64% on the day, while Hermes and Italy’s Brunello Cucinelli were down 6.42% and 5.25%, respectively. This decline was significantly steeper than the 0.4% drop in Europe’s broader STOXX 600 index.
JPMorgan’s decision to withdraw its buy rating on Chinese stocks this week, citing the risk of another tariff war after the U.S. election in November and concerns about a slowdown in China’s economic growth, has also contributed to the decline.
Growth in China’s service sector slowed in August, prompting some companies to cut staff amid concerns about rising costs. Analysts highlighted reports that LVMH-owned Tiffany is shrinking its Shanghai flagship store as one reason for the weakness in luxury stocks.
“Concerns about Chinese demand have disproportionately affected the luxury sector,” said Yelena Sokolova, a senior equity analyst at Morningstar, adding that the closure of flagship stores “could have a domino effect.”