I've written here several times about the luxury goods industry and our concerns that China's hard landing alongside its changing political environment will affect sales across the board.
This week that view gained some traction as Burberry announced that like-for-like sales are not just flat but fallingand that its profits would be "around the lower end of market expectations". Burberry shares fell 18% and dragged much of the rest of the sector down with them. LVMH was down 4% at one point yesterday and Richemont 6%.
It is possible, of course, that Burberry's stumble will be a one off. But it doesn't seem that likely. Either way, the only surprising thing is that the fall off in the sector is a surprise to anyone at all. Not only has the Chinese hard landing been obvious for some time but it doesn't take much of a leap to see that, as most recent luxury goods growth has come from China, a Chinese slowdown both in economic growth and in the political gift-giving environment was going to force a slowdown in luxury goods growth.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Also of interest should be the below charts (both taken from Bloomberg with the first put together by Mike Malone from Mint Partners). The first charts the prices of wine, iron ore, Burberry and Richemont and the second iron ore and Chinese stocks.
There are two things to note here. First, while iron ore isn't a commodity most analysts have historically tended to pay much attention to, perhaps its time has come (note too that, while I am not sure I agree, some think it has bottomed it recorded its biggest ever one-day gain yesterday). And second, if you hold shares in Richemont, you might want to think about selling them.
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
Inheritance tax receipts jump 11% even before Autumn Budget overhaulOfficial figures show inheritance tax receipts are rising even before the chancellor’s changes to reliefs
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
