LVMH dragged luxury stocks lower after the maker of Celine handbags reported weaker-than-expected revenue growth, dealing a fresh blow to industry sentiment.
LVMH shares fell as much as 3.8% in Paris, the most since middle of February.
Gucci-owner Kering declined 2.2%, while Burberry Group dropped 2.9% in London.
The world’s biggest luxury-goods maker had proven resilient to ebbing demand that caused Prada to report its lowest annual profit in five years, yet this recent miss shows LVMH is not immune.
The attacks in Paris and Brussels and new biometric visa requirements deterring leisure travel from Asia are weighing on European sales.
Collapsing demand in Hong Kong and China, meanwhile, has led companies to curtail expansion there.
“The financial impact of recent terror attacks continues to take its toll,” John Guy, an analyst at MainFirst Bank, said in a note.
First-quarter sales gained 3% on an organic basis, decelerated from 5% in the previous period, LVMH said.
Unchanged revenue at its biggest division, fashion and leather goods, also missed estimates.
LVMH said sales in France accounts for about 10% of its business. They were hurt by a drop in tourism.
Total revenue for the period rose 4% to €8.62bn. Analysts predicted €8.73bn. LVMH, whose full name is LVMH Moet Hennessy Louis Vuitton, had a chilling effect on European shares yesterday, which were also perturbed by developments in Italian bank stocks.
An early rally in Italian bank stocks faded as some investors expressed scepticism over plans by Italian financial institutions for a €5bn fund to shore up the country’s weaker banks.
“LVMH’s numbers were not that good, and the problem with the Italian bank fund is that it is not big enough and it risks compromising the banks that are already in a much better shape,” said Francois Savary, chief investment officer at Geneva-based investment and consultancy firm Prime Partners.
The FTSEurofirst has fallen nearly 10% since the start of 2016 as concerns about a China-led global economic slowdown weigh on world stock- markets.
However, strategists at HSBC kept an “overweight” position on continental European equities.
“We continue to argue that Europe offers the best earnings story globally, although it has been disappointing so far, with the market being hurt by global growth concerns. We see a robust business cycle, policy support, and investor under-ownership,” they wrote in a note.
LVMH told reporters that the slowdown at Louis Vuitton in the first quarter was due in part to trading being down in double digits in Paris.
* Bloomberg and Reuters
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