Home News China – European Luxury Brands’ Stocks tank as Cornona virus spreads

China – European Luxury Brands’ Stocks tank as Cornona virus spreads

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The European stocks, including those of French luxury conglomerates, tumbled on Monday 27 January 2020, as the news of rising death toll and numbers of those affected by coronavirus over the weekend, spread. The Stoxx Europe 600 index fell 1.7% to 416.48, its worst one-day fall since August last year on Friday. As per reports, shares in LVMH were down more than 4% in early trading, as were those of Kering the parent company of Gucci. Hermès was down more than 5% at midday.Travel and luxury-goods companies had big declines as analysts figured the economic impact of the virus. Fears of world-wide travel being hit left airlines sharply lower, with Deutsche Lufthansa,EasyJet, Air France-KLM and International Consolidated Airlines Group all down over 4%.

There has been a change in the past two years, as Chinese shoppers are now buying more luxury brands in the numerous local stores that have opened, rather than when vacationing abroad. The coronavirus spread has impacted the shopping activity in these stores.

In 2019 the shares of LVMH had risen 65% and that of Kering rose 49%. For the same period Hermès was up 41%. The virus effect may be short term, and the margins will rise again. According to Bloomberg data, Kering and LVMH are trading at more than 30 times profit, Hermès at more than 50. The markets have good reasons to fear that the coronavirus may finally bring some sense of reality to valuations that were reaching absurd levels.

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