LVMH, Hermes, and other luxury stocks suffer a $30 billion rout as investors brace for a US spending slowdown
- European luxury stocks slumped on Tuesday morning as fears grew of a US spending slowdown.
- LVMH fell 3%, Hermes dropped 4%, and Gucci-owner Kering slipped 2%.
European-listed luxury stocks slumped on Tuesday morning as worries grew of a US spending slowdown. The selloff wiped nearly $30 billion of market value from the sector, according to data from Bloomberg.
Louis Vuitton's parent company, LVMH, was down 3% shortly before 8 a.m. ET. Hermes dropped 4% and Gucci-owner Kering slipped 2%.
Investors in the luxury-goods industry are fretting more and more about about a potential slowdown in spending in the US.
"Slowing to negative growth year-on-year in the US is a building concern, especially given signs of softening demand from more economically sensitive aspirational consumers," Deutsche Bank analysts said in a research note published on Tuesday.
Many forecasters have projected that the US will suffer an economic slump or even a recession later this year, with GDP growth slowing to just 1.1% in the first quarter of 2023.
Deutsche Bank's base case is that the slowdown will hit Americans' wallets, resulting in them spending less on luxury goods.
Prior to Tuesday's selloff, luxury stocks had enjoyed a strong start to 2023, powered higher by expectations of a surge in sales thanks to China's recent economic reopening.
LVMH shares are still up 25% year-to-date despite their decline on Tuesday, with the fashion, champagne, and cognac conglomerate recently becoming the first European company to achieve a $500 billion valuation.
Hermes has jumped 34% in 2023, while Kering – which Deutsche Bank warned has been suffering from "creative turnarounds" like the exit of Alessandro Michele from Gucci – is up a more modest 12%.