European luxury stocks tumbled on Wednesday, with Hermes leading the decline. The company's stock price slid 3.6%, followed by Kering and LVMH at 2% and Richemont at 1.1% dips. This selloff dragged the Euro Stoxx Luxury 10 Index down 1.9%, its steepest drop in a month.
This volatility reflects growing worries about the luxury sector. Consumer spending on high-end goods appears to be cooling, especially in China where the post-pandemic boom has stalled. Additionally, luxury stocks trade at a premium compared to the broader market, raising concerns about their valuations.
The recent slump comes on the heels of a warning from Chanel, which indicated a "more challenging environment" for the industry. Analysts anticipate rising pressure on profit margins for luxury brands.
This volatility reflects growing worries about the luxury sector. Consumer spending on high-end goods appears to be cooling, especially in China where the post-pandemic boom has stalled. Additionally, luxury stocks trade at a premium compared to the broader market, raising concerns about their valuations.
The recent slump comes on the heels of a warning from Chanel, which indicated a "more challenging environment" for the industry. Analysts anticipate rising pressure on profit margins for luxury brands.
“After three years of exceptional growth for our industry, we are now entering a more challenging environment,” said Philippe Blondiaux, Chanel’s global chief financial officer.
According to CIC Market Solutions analyst David Da Maia, operating income at Chanel was eroded by more than 100 basis points because of a 20% increase in marketing spending.
“The group refers to a less favorable market environment in 2024 and gives no indication — unlike in previous years — of its performance in recent months, suggesting that its growth has clearly slowed since the beginning of the year, in line with the sector as a whole,” Da Maia said in written comments.
“The group refers to a less favorable market environment in 2024 and gives no indication — unlike in previous years — of its performance in recent months, suggesting that its growth has clearly slowed since the beginning of the year, in line with the sector as a whole,” Da Maia said in written comments.