Cartier Falls 10%... Luxury Empire Stocks That Were Soaring Plunge Sharply

Richmond Stock Price Plummets 10%

The stock prices of Richemont Group, a global luxury empire, and Louis Vuitton Mo?t Hennessy (LVMH) plunged sharply in a single day. With disappointing performance and worsening demand forecasts in the world's largest luxury markets, the United States and China, market attention is focused on whether the stock prices will end their boom period and enter a sustained downward trend.

Richemont, which owns luxury brands such as Cartier and Van Cleef & Arpels, closed at 137.90 Swiss francs on the Swiss stock exchange on the 17th (local time), down 10.43%. This double-digit drop was the largest decline in closing price in 14 months.

On the same day, LVMH (-3.73%) and Herm?s International (-4.21%), the top two European companies by market capitalization listed on the Paris stock exchange, also showed a simultaneous weakness with declines of 3-4%. These stocks, which had soared for six consecutive trading days since the 6th, were hit hard by the sharp drop in Richemont’s stock price. LVMH, which surpassed a market capitalization of $500 billion for the first time among European companies in April, has recently lost nearly $70 billion in market value due to the downturn.

The sharp decline in luxury stocks on this day was led by Richemont’s disappointing second-quarter sales report. Richemont announced in its second-quarter (company’s first quarter) earnings report that sales growth in North America, including the United States, turned negative compared to the same period last year. The U.S. market is Richemont’s single largest market by sales, and this performance came as a major shock to investors.

Emmanuel Cau, head of European equity strategy at Barclays, said, "The sharp drop in stock prices today proves that investors overestimated the strength of American consumers." He added, "The excess savings accumulated during the pandemic are running low, and news that the real growth rate of disposable income has started to slow is acting as a negative factor for demand forecasts in the Americas," predicting further declines.

[Image source=Reuters Yonhap News]

Alongside the United States, China, the other largest luxury consumer market, also added pessimism to earnings forecasts as signals of delayed economic recovery poured in. China’s National Bureau of Statistics announced that China’s second-quarter gross domestic product (GDP) growth rate was 6.3%, below the market expectation of 7%. Retail sales, which gauge domestic demand, also fell short of market expectations, and the youth unemployment rate broke its all-time high record again, with a series of weak economic indicators across the economy.

Foreign media focused on whether the sharp drop in luxury stocks, which had been at the center of the European stock rally, would signal a shift to a sustained downward trend. Bloomberg pointed out, "China’s reopening was expected to offset the weakness in the U.S. market, but there are increasing forecasts that this momentum is weakening."

While lowering expectations for earnings forecasts, Richemont maintained its annual sales guidance. Burkhart Grund, Richemont’s Chief Financial Officer (CFO), said in a conference call after the earnings announcement, "We maintain the company’s sales outlook, but it is difficult to say that U.S. sales have yet emerged from the downturn."

This content was produced with the assistance of AI translation services.