Luxury brands hit by weak consumer spending in China
Listed luxury retailers have been laid low by disappointing consumer spending data from China and downgrades from analysts at Barclays.
Consumer prices growth in August was weaker than economists had expected, with prices in China rising by 0.6 per cent year-on-year. Factory gate prices, measured by the producer prices index, were down by 1.8 per cent from the previous year.
Meanwhile, analysts at Barclays, after spending two weeks travelling across China meeting industry experts, have concluded that weakness in the sector is structural, not cyclical, and will remain “weaker for longer”.
The retail figures and Barclays’ caution weighed heavily on Burberry, shares of which have fallen by almost 60 per cent this year. They lost another 29½p, or 4.9 per cent, to 575p, their lowest since the financial crisis in 2009. The Asia Pacific region accounts for almost half of the 150-year-old brand’s revenue.
Last month Burberry replaced Jonathan Akeroyd, 57, as its chief executive only two years into his tenure, and will be ejected from the FTSE 100 later this month. Joshua Schulman, 53, who has a track record in high-end and aspirational luxury at Coach and Jimmy Choo, has been brought in to lead a turnaround.
Burberry was not alone in struggling as the new week got under way. Shares in Kering, the luxury goods powerhouse behind Gucci, Balenciaga and Yves Saint Laurent, fell €5.95, or 2.5 per cent, to €230.30 in Paris. The Barclays team warned that “Gucci’s recovery story could be delayed” as China’s economic environment deteriorates further and with other Kering brands unlikely to offset that weakness. In Frankfurt, shares in Hugo Boss, the German retailer, closed down by €1.68, or 4.7 per cent, at €33.85.
Barclays’ analysts expect China’s luxury goods sector to grow by about 4 per cent in 2025, down from an earlier forecast of 7 per cent.
