LVMH stocks slide
A BEARISH Morgan Stanley note on prospects for luxury-goods stocks spoiled the day for LVMH, pushing the shares to a six-month low even after the Louis Vuitton owner reported third-quarter fashion and leather-goods sales that were hailed as strong by analysts.
The stock slid as much as 5.2 percent in Paris, while shares in rivals Kering, Hermes International and Moncler SpA also tumbled. The luxury sector has slumped over the past week on concerns about a customs crackdown on undeclared imports in China, with a Gucci video adding to jitters over demand for items among millennial customers.
LVMH’s 11 percent stock decline in the past month is the steepest monthly drop since August 2015, coming after China’s biggest devaluation in two decades. Investors are seeking excuses to lock-in profits ahead of an uncertain fourth quarter, according to RBC Capital Markets’ Rogerio Fujimori and other analysts.
The luxury sector “looks stretched on a number of our indicators even after the recent correction,” Morgan Stanley analysts led by Krupa Patel wrote in a note, downgrading the subgroup to underweight from neutral.
China’s luxury shoppers may be shunning pricey autos, but they’re still finding an appetite for handbags and champagne as the trade war plays out unevenly across the country’s highend retailing landscape.
But report cards from LVMH, home of Louis Vuitton leather goods and Dom Pérignon champagne, as well as casino operators in Macau offer signs that the trade fight with the US and the accompanying economic slowdown aren’t entirely derailing the China-led boom in top-end retail. That’s helping to offset gloomier scenarios in BMW and Mercedes showrooms and luxury real-estate offices.
LVMH said on Tuesday that its luxury retailer DFS performed especially well at the key Chinese tourist destinations of Hong Kong and the gambling enclave of Macau, while the company’s wines and spirits business “grew rapidly” in China, too. LVMH said it did well in all its markets as it reported a 10 percent jump in third-quarter sales.
Chinese demand is “intact,” said Deborah Aitken, senior analyst at Bloomberg Intelligence in London. “LMVH is the first to confirm Asian markets are buoyant.”
The economic stand-off between the US and China escalated last month when President Donald Trump slapped a 10 percent duty on $200 billion of Chinese imports. China said it would retaliate with levies on $60 billion (R877bn) worth of US goods. As retailers pass on the duties to consumers and Chinese markets sell off, the spat has raised concerns that shoppers would rein-in spending. | Bloomberg