Vuitton and Hermès go on sale on the stock market

The downturn in the luxury goods sector is clearly not over. Even Hermès, the king of luxury, is struggling. This is evident from its 6% drop today, following a nearly 4% decline yesterday, despite no specific news related to the company. The issue lies in its high valuation and exposure—like its rivals—to the slowdown in Chinese consumer spending.

Swept away in 2023 by the lack of recovery in the Chinese economy, its main source of growth, the sector rebounded at the beginning of 2024 on yet another wave of hope for a recovery in the former Middle Kingdom, only to stall once again. Persistent doubts about Chinese growth, along with more recent concerns about U.S. growth, are contributing to the overall gloomy climate.

A new warning label named Tiffany

 

Now, every warning shot quickly turns into a blow. This morning, Bloomberg reported that Tiffany, LVMH’s jewelry subsidiary, has decided to downsize its flagship store in Shanghai due to poor sales performance in the first half of the year.

 

"Tiffany, which opened the two-story store in Shanghai's Hong Kong Plaza with great fanfare in late 2019, has decided to give up about half of the space," Bloomberg reports, citing several sources. "In a challenging economic environment, Chinese consumers have become increasingly selective about the brands they choose and the shopping experiences they seek. Luxury brands must innovate to protect their margins during the downturn while maintaining brand momentum," notes AlphaValue analyst Jie Zhang, who covers the luxury sector.