Europe luxury stocks slide after Richemont chairman says inflation is denting demand

afr.com:

Luxury-goods stocks slumped in Europe, wiping out more than $25 billion in market value, after Richemont chairman Johann Rupert said inflation is starting to dent demand across the region.

LVMH, recently dethroned by drugmaker Novo Nordisk as Europe’s largest company, fell 3.6 per cent to its lowest since early January. That reduced its market capitalisation below $400 billion, far from a peak of more than $500 billion earlier this year.

The luxury sector that has been under pressure over the last few weeks on persistent worries about the economic slowdown in China. Bloomberg

Richemont, the Swiss owner of Cartier and watchmakers including IWC and Vacheron Constantin, dropped 5.2 per cent and Moncler declined 5 per cent. Swatch Group, Gucci owner Kering and Birkin bag maker Hermes International also slid.

“We’ve seen the squeeze,” Mr Rupert, the leader and controlling shareholder of Richemont, told shareholders at the company’s annual meeting in Geneva on Thursday.

Also on Thursday, HSBC Holdings published a note cutting estimates and price targets across the luxury space. Analyst Erwan Rambourg attributed the changes to the impact of a recovering euro and a higher cost of growth for the industry in the short term.

It is a fresh setback for a sector that has been under pressure over the last few weeks on persistent worries about the economic slowdown in China, which accounts for about a fifth of industry revenue.

That adds to a reversal in the sales boom when economies started coming out of the pandemic as shoppers, helped by low interest rates and pent-up savings, splurged on pricey goods.

AlphaValue analyst Jie Zhang expects the sector to “remain sluggish and on a negative trend” until there is a “material change” in