Burberry Down 57% This Year... 'Gucci' Kering Down 41%
"Chinese Wealthy May Not Return"
Recently, the market capitalization of European luxury companies has evaporated by approximately $240 billion (about 321 trillion won). Bloomberg reported on the 8th (local time) that the decline may continue as the Chinese economic downturn deepens.
According to Goldman Sachs' luxury stock index, luxury stocks have fallen by $240 billion after reaching a peak in March.
The stock that fell the most was Burberry, a representative British luxury brand. It has dropped more than 70% over the past year. Even this year alone, it has fallen 57%. It showed the worst performance among FTSE 100 companies, the representative index of the London Stock Exchange, and was delisted on the 4th.
Gucci's parent company Kering and Hugo Boss saw their stock prices fall by 41% and 47% respectively this year. Kering, which was once among the top 10 in the CAC40 index of the Paris Stock Exchange, has now slipped to 23rd place.
LVMH (Louis Vuitton Mo?t Hennessy), which was the largest European company by market capitalization, has been pushed down to second place. According to Bloomberg, LVMH's stock price has fallen 17% since the beginning of this year.
Burberry, Kering, and Hugo Boss have issued warnings about declining profitability, and LVMH stated that its core leather goods segment grew by only 1%, in contrast to the 21% growth last year.
Flavio Cereda, a GAM fund manager, stated that he expects luxury companies' sales to recover to the mid-single-digit range next year.
However, Susanna Putz, a UBS analyst, predicts that growth in the luxury sector will slow down for an extended period. She lowered sales growth estimates for the second half of this year and 2025, forecasting that the luxury industry is entering a unique cycle after several years of boom and price increases. Morgan Stanley's Edouard Aubin downgraded target prices, saying LVMH and Richemont are particularly vulnerable to the Chinese economic downturn.
In fact, such signals are appearing in various places. According to Bloomberg, LVMH's jewelry brand Tiffany & Co. plans to reduce the size of its flagship store in Shanghai by half. Luxury malls in Hong Kong are empty, and Swiss watchmakers are seeking government support due to declining exports.
Bloomberg stated, "An even more ominous sign is that the Chinese wealthy, who once flocked to luxury stores in Paris, Milan, and Hong Kong, may not return," adding, "Their demand for expensive goods has disappeared due to the economic downturn."
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