Photo: Christian Wiediger / unsplash.com
LVMH shares fell by 2.3 per cent, dropping to their lowest level since 2020. Shares in Hermès and Kering, which owns Gucci, lost around 3 per cent. Shares in Brunello Cucinelli, Richemont and Burberry fell by 1–2 per cent.
According to Reuters, the STOXX Europe Luxury 10 index, which tracks the sector’s largest companies, fell to its lowest level in nearly three months. Since the start of the year, it has lost around 19 per cent, whilst the European market as a whole has shown much more stable performance.
The sector’s main problem is demand. Companies have been facing a slowdown in sales for several years now, and spending by affluent consumers has yet to show clear signs of a sustained recovery. The cautious forecasts from the manufacturers themselves are also doing little to boost investor confidence.
According to Bank of America’s assessment, third-quarter data point to a slowdown in demand of around 3 percentage points compared with the second quarter. The weakest performance is being seen in the US, Japan, South Korea and other Asian countries.
Following the fall in share prices, companies’ forecasts have become more subdued; however, the market does not yet regard this as grounds for a turnaround. Equita analyst Paola Carboni notes that uncertainty surrounding growth rates in the second half of the year remains high due to a more challenging basis for comparison, as well as macroeconomic and geopolitical risks.
The European luxury sector is awaiting convincing signs of a recovery in demand. As these are currently lacking, investors are preferring to steer clear of the sector.
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