Investors are suddenly feeling a little iffy on luxury — worried that the epic run by the ultra wealthy is finally hitting a speed bump.
And the agita led to a luxe selloff in the markets on Tuesday.
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Among the decliners were Hermès International, down 6.5 percent to 1,890.20 euros; Moncler, 5.4 percent to 61.20 euros; Farfetch, 5.3 percent to $5.33; LVMH Moët Hennessy Louis Vuitton, 5 percent to 834.20 euros; Brunello Cucinelli, 3.9 percent to 79.75 euros; Compagnie Financière Richemont, 3.5 percent to 148.45 Swiss francs; Kering, 3 percent to 525.90 euros; Canada Goose Holdings Inc., 2.7 percent to $16.60, and Burberry Group, 2.7 percent to 22.67 pounds.
Deutsche Bank research analyst Matt Garland raised concerns about weakness in aspirational customers in the U.S. in a note to clients advising that it was “time to be more selective.”
“Slowing to negative growth [year-over-year] in the U.S. is a building concern, especially given signs of softening demand from more economically sensitive aspirational consumers,” Garland said. “The strongest performing luxury names — including Hermès, Moncler, LVMH and Richemont — have been able to evidence strong execution on domestic China demand and a greater resonance with younger and affluent consumers globally, with underperforming names — including Ferragamo and Kering — suffering from the impact of creative turnarounds and greater exposure to more aspirational luxury consumers, particularly in the U.S.”
The well-heeled have hung on remarkably well — through the pandemic and its aftermath — but the higher interest rates that followed the big run-up inflation could be too much for U.S. high-end consumers.
This month, Richemont chairman Johann Rupert characterized the Federal Reserve’s quick campaign to move interest rates dramatically higher as “reckless.”
“The United States will not be as buoyant as a year ago, and I actually think we are in for a harder landing than we’d hoped for,” said Rupert, who said the U.S. slowdown likely began in November. “And it will affect everybody.”
Investors seem now to be thinking more along the same lines.
Not long ago, the U.S. shopper was seen as a bastion as Chinese consumers were locked down by COVID-19 restrictions and Europe suddenly found itself caught up in war after Russia’s invasion of Ukraine.
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