This is certain to have far-reaching consequences for the high-end sellers. Analysts at Jefferies expect Chinese consumers to account for close to half of the global luxury market this year, compared with 37% in 2019.
Swatch Group AG, Burberry Group Plc, Cie Financiere Richemont SA, Gucci-owner Kering SA, and Prada SpA are among the companies most exposed to greater China, according to analysts at Citi. But the country’s outsize influence on the market means no group will be able to escape trouble in the bling kingdom.
The one exception may be LVMH Moet Hennessy Louis Vuitton SE. But even though it is less dependent on China than many of its peers, it is more exposed to North American shoppers. It generated a quarter of its first-half sales in the U.S. And this region shares some of the same pressures as China, from rising Covid-19 cases to a more muted retail environment. Add in fading stimulus measures and a switch from spending on things to experiences, and the second biggest global luxury market could lose steam too.
That’s a potential double whammy for luxury groups and their investors. No wonder share prices have fallen roughly 10%-15% over the past week. Yet even so, valuations remain close to record highs.
The sector better enjoy it while it lasts.
This article was provided by Bloomberg News.