Business
European Luxury Market Faces $240 Billion Decline as Chinese Wealthy Abstain from High-End Purchases Amid Economic Downturn
Shares in European luxury brands took a hit of $240 billion as wealthy Chinese consumers cut back on high-end purchases. The wealthy Chinese clientele, who used to crowd high-end shops in Paris, Milan, and Hong Kong, may not return due to the economic downturn.
Following a substantial loss of nearly a quarter-trillion dollars in their market worth over the past few months, European luxury companies might witness a further decline in their stock market power as China's economic slowdown intensifies.
Previously viewed as Europe's counterpart to the US's seven leading tech giants, stocks in businesses making premium clothes, handbags, and jewelry are floundering due to a decline in consumer spending. More troubling are indications that China's affluent, who used to be regular visitors to high-end shops in Paris, Milan, and Hong Kong, may not come back, as their desire for expensive goods has been dampened by the worsening economic conditions.
"The current year is proving to be more unpredictable and distressing, particularly because it follows a period of significant expansion," mentioned Flavio Cereda, a portfolio manager at GAM UK. He was alluding to the time right after the pandemic when customers, freed from restrictions, indulged in shopping and travel.
Burberry Group, the renowned British trench coat manufacturer, has experienced a severe downturn, resulting in its exclusion from the FTSE 100 stock index in London, having lost 70% of its market value within the past year. Although it is the only prominent brand to have been removed from the index, a luxury shares index compiled by Goldman Sachs has also seen a significant decrease in value, losing US$240 billion since its peak in March.
Kering, the parent company of Gucci, and Hugo Boss have experienced a significant decrease in value, losing nearly 50% over the past year. Kering, formerly a leading stock in the French CAC 40 index, has now dropped to 23rd place. Furthermore, industry heavyweight LVMH, who owns Moët Hennessy and Louis Vuitton, and was previously the biggest company in Europe in terms of market capitalization, has now fallen to the second position.
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