Luxury stocks plummet on increasing Coronavirus fears

New York – Shares of European luxury brands Burberry and LVMH continued to fall on Tuesday morning trade on the companies’ exposure to the Chinese market, which has been hit by an outbreak of Coronavirus.

Data from Bain & Co. indicates that Chinese customers - shopping both at home and abroad - account for 90 percent of the luxury goods market growth. Furthermore, highlights the ‘Financial Times’, Chinese customers now account for more than a third of the value of luxury goods purchases.

Burberry, LVMH, Kering amongst the most exposed luxury groups to coronavirus’ worries

That leaves luxury fashion groups such as Burberry, LVMH, Kering and Richemont particularly exposed to a drop-off in Chinese demand lead by the worsening and fast-growing spread of coronavirus in the region. It’s worth recalling that luxury brands have so far have coped with decreasing sales since the political protests in Hong Kong broke out in 2019.

The fear of a worsening situation in China, one of the main markets for luxury brands, is rising rapidly, reaching the trading floor and spooking investors, warn experts consulted by FashionUnited.

LVMH stock tanks as coronavirus concerns spread across Asia

On Monday alone, Burberry Group and LVMH Moët Hennessy — Louis Vuitton both tumbled around 4 percent, Kering dropped 3 percent and Cie. Financière Richemont slid 2 percent, per Barron’s data.

To this date, the coronavirus is thought to have caused 106 deaths, prompting Chinese officials to report earlier today that the disease has spread to Beijing. According to China’s National Health Commission, there are more than 4,515 confirmed cases in the country. As reported by local and international media, coronavirus cases have been also recorded in Hong Kong, Thailand, the US, Australia, Singapore, Taiwan and Macau, leading to further tension in Hong Kong, which this morning announced it is planning to limit cross-border travel coming in and out mainland China.

Coronavirus fears drag Burberry’s shares

Burberry’s share price lost 4.6 percent by the close of London’s market on Monday, remaining on the downtrend on Tuesday as it lost a further 3 percent to 1,939.5 pence in the morning.

The spread of the virus – which started in the city of Wuhan – has affected Burberry’s stock as the luxury retailer has a sizable exposure to China, and the company recently outlined plans to target further growth in the country.

Burberry reported third-quarter figures earlier this month, sharing its plans to redouble their focus on Chinese customers. Amongst other actions, the quintessentially British label will bring its runway show to Shanghai in April and open a new social retail store in Shenzhen in 2021. Additionally, Burberry launched its first ever Lunar New Year campaign earlier this month.

Image: Burberry Official, China’s website