As China cuts back on iphones, LVMH handbags could be next
HONG KONG/PARIS: After Apple Inc.’s shock profit cut, investors were quick to make the connection: if Chinese consumers are cutting back on iphones, Louis Vuitton handbags could be next.
Apple’s sales revision cascaded through global markets, hitting suppliers and rivals, but also a raft of luxury-goods companies that rely on the same clientele that likes to splurge on Apple’s latest products. Hong Kong-listed Prada SPA, Gucciparent Kering SA, LVMH Moet Hennessy Louis Vuitton, Burberry Group Plc and Richemont, the parent of jeweller Cartier, all declined in the wake of Apple’s shortfall. “It’s going to become significantly more challenging to do well in China because the market is tightening up,” said David Roth, CEO of WPP Plc’s ‘The Store’ global retail practice. “This is a challenging signal that people need to button down and understand China better and prepare.”
Apple cut its quarterly revenue outlook to $84 billion from as much as $93 billion, blaming it in part on a pullback in demand within China. That set off warning bells throughout the luxury industry, as Chinese consumers account for about 30% of the $1 trillion in luxury-goods spending worldwide, according to Euro- slowed. Others have maintained monitor International. a more bullish tone, with both
Pradadroppedasmuchas3.6% LVMH and Kering citing robust in Hong Kong on Friday. In China sales in October.
Europe on Thursday, Kering SA A key test for retailers will fell 5.5%, while LVMH dropped come with China’s celebration of 3.8% and Burberry tumbled 5.9%. the Year of the Pig, which begins
For years, companies from on February 5. The week-long LVMH to Tiffany & Co. have tar- Chinese New Year holiday is traditionally geted China’s wealthy tourists, a major occasion for who sought out pricey handbags, shoppers from China to splurge. jewellery and other luxury items About two-thirds of those sales while on vacation in Paris to take place outside the country as Dubai. Investors are worried that tourists open their wallets while sliding yuan, China’s trade warhit travelling abroad. economy and a government But with the US trade war crackdown on overseas purchases weighing on China’s stocks and could dent demand. currency, and President Xi Jinping’s
Richemont, which lost 2.8%, government trying to bolster has already been feeling the heat. a faltering economy, more The Swiss watch and jewellerygoods mainlanders are choosing to do maker signalled in November their shopping inside China that Chinese sales growth has rather than on overseas trips.