Luxury Stocks Are Going Out of Fashion. It’s the China Syndrome.

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The world's second biggest economy is in a slowdown. High-end retailers were counting on the wealthy opening their wallets. Now what?

Luxury stocks are at risk from China’s slowdown after riding high for months on optimism that the rich would return in force to shopping in the world’s second-largest economy and to traveling abroad to browse in the finest stores.Not long ago, for example, Wall Street considered shares in LVMH —the French company owns dozens of high-end brands, from fashion and fragrances to wine and watches—to be one of the best plays on the post-Covid reopening of China.

“Weak China macro data suggest a much softer consumption recovery post Covid-reopening than the strong rebound seen in the U.S. and Europe in 2021-22 and in Japan more recently,” Rogerio Fujimori, an analyst at Stifel, wrote in late July. And others in the luxury sector are faltering, too. Cie. Financière Richemont , which owns Montblanc and Cartier, is down nearly 19% since its peak of more than 155 Swiss francs in mid-May. Kering , which owns Gucci and Balenciaga, soared to 600 euros at the end of March; now, the stock is off almost 17%. Hermès International peaked later, at above 2,016 euros on July 31, but has lost more than 4% in just the past month.

 

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