Luxury goods concerns after Japan quake
Luxury goods stocks were under pressure on 14 March 2011 as investors fretted about the impact of the Japanese earthquake on demand for leather handbags and other goods from one of the largest luxury buying nations in the world.
Japan represents around 23% of the world market for hard and soft luxury goods, compared with the US and Europe at 25% each and China at 13%, according to research by broker MF Global.
European luxury firms including LVMH Moet Hennessy Louis Vuitton, PPR and Hermes International traded down amid concerns about luxury sales.
“Weaker consumer sentiment, and the psychological impact of conspicuous consumption, is likely to affect luxury good sales, clothing and jewellery retailers and prestige cosmetics companies. A number of department stores and apparel retailers may also be out of action as a result of damage or lack of electricity,” MF Global said in a note to clients.
Japan accounts for around 19% of sales at leathergoods specialist Hermes and at jeweller Bulgari, which is currently the subject of a takeover offer by LVMH which itself is around 9% exposed to Japan, according to MF Global.
Sales generated in Japan and by Japanese people travelling abroad will also be influenced directly by the earthquake, however “more negative for luxury goods companies would be if a nuclear accident [weighs] on the general global mood, because luxury sales depend on people’s confidence,” said Patrick Hasenboehler of Swiss private bank Sarasin.
RBS analyst John Guy said that the luxury sector historically returns to outperformance once things start to stabilize after a crisis.
