LVMH Profits Sink After Hong Kong Protests

Louis Vuitton owner LVMH has suffered in sales during its second quarter. The industry leader, known for its luxurious fashion and cosmetics, has undergone a tough downfall, and according to Reuters, this is due in part to protests Hong Kong.

Reuters reported that LVMH shares sunk nearly 7.2 percent on Friday, which is its largest drop in 24 hours since 2009. Other company sectors are suffering the repercussions as well, and the conflict is stemming from pro-democracy protests and government spending advisories in Hong Kong, according to Red Luxury.

“We believe this sends a cold chill to investors who bought back into luxury in the spring in expectation of an upturn in demand from Chinese buyers,” said JP Morgan Cazenove luxury goods analyst Melanie Flouquet, according to Reuters.

This situation brings rise to serious concern, as China has become a major market and filled a void that Europe and Japan have been unable to fill. South China Morning Post reported that LVMH Chief Financial Officer Jean-Jacques Guiony acknowledged the business decline, but did not give an explanation besides the Chinese government’s “efforts to crack down on corruption and conspicuous spending.”

In addition, Louis Vuitton is accountable for nearly 50 percent of LVMH’s revenue. Therefore, with it struggling to maintain customer appeal, LVMH is experiencing an even greater fallback.

“Sentiment towards the industry may not change direction until trends in Asia stabilize,” said Omar Saad, consumer goods analyst at New York broker ISI Group, according to Reuters. Until then, however, LVMH might be seeing more than one quarter of declined sales in its near future.

 

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