Because Hermes, Moncler, Lvmh and Burberry are not so fashionable on the stock market
Uncertainties about the performance of the Chinese economy are damaging the performance of many European brands, from Hermès to Moncler. Here are numbers, context and forecasts
Shares of many European luxury clothing and accessories brands, such as France's Hermès and Italy's Moncler, are down on stock exchanges in Milan, Paris and London. The main reason is one: in China, a huge buyer of high-end products, producer and consumer price indices rose more than expected in October , and stagflation (a period of high inflation and low growth) is feared.
HOW DID SALVATORE FERRAGAMO GO
Italian fashion house Salvatore Ferragamo lost 6 percent, the biggest daily decline since June 2020, writes Reuters : fears over the impact of a new wave of coronavirus infections in Asia overshadowed the positive results (more than expected) of the third quarter of the year.
LIKE HERMÈS, MONCLER, BURBERRY AND MORE
Shares of other luxury brands such as Moncler, Hermès, Kering (French), Burberry (British) and LVMH (the French group that controls Louis Vuitton) all lost between 2 and 3 percent, performing worse than the market average. European.
THE ROLE OF CHINA
In October, factory-gate inflation in China (the one concerning the prices of goods just out of production plants) was at its highest in twenty-six years: the profit margins for producers were therefore reduced, and it is feared that the overall growth the second largest economy in the world may be affected.
Neil Wilson, an analyst at Markets.com, thinks the combination of rising inflation and weakening imports will result in a slowdown in Chinese demand for European luxury products.
Generally it is Chinese demand that drives the luxury sector. In 2019, according to UBS data, China alone accounted for a third of European luxury brands' sales, and 28 percent in 2020.
The political decisions implemented in the country have a very significant impact on the performance of the sector. For example, the European luxury industry lost 15 percent from August to October following the announcement in China of a wealth redistribution plan. From March 2020 to August 2021, the sector had grown by 140 percent.
FORECASTS
Forecasts say that growth in China will slow further in the final period of 2021, after the annual lows already reached last quarter.
The country's economic performance is uncertain, undermined by the debt crisis of the Evergrande real estate group and the increase in cases of COVID-19 in Asia. Luxury companies could be impacted.
WHAT GOLDMAN SACHS SAYS
In fact, this week, Goldman Sachs bank cut its forecast on the increase in sales of the international luxury industry. The value for 2022 went from 33 to 9 percent; the estimate for 2023 from about 40 per cent to 7.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/settore-moda-lusso-calo-cina/ on Wed, 10 Nov 2021 15:12:07 +0000.