European luxury stocks have faced their worst quarterly performance since the pandemic struck, as concerns over the bleak outlook in the US, Europe and China seem to catch up.
Having risen by 23% and 2% in the first and second quarters respectively, STOXX’s Luxury 10 index fell by 15% between July and September.
This marked the largest decline for the index, which includes the likes of Louis Vuitton Moet Hennessey, Ferrari (NYSE:RACE) and Burberry Group PLC (LSE:BRBY), since the first quarter of 2020.
Although luxury stocks had enjoyed strong post-pandemic growth, the recent downturn of the index suggests economic uncertainty around the world is starting to weigh on the sector.
“Up to now, luxury names were seen as a place to hide,” AXA Investment Managers European head Gilles Guibout commented.
However, a “normalisation” of consumer spending in Europe and America now looks to have stemmed progress, Hargreaves Lansdown analyst Sophie Lund-Yates explained.
Ahead of LVMH’s results on Tuesday, she commented: “Although luxury spending tends to be more robust than average consumption, investors are keen to hear if the uncertain environment has shaken [...] expectations.”
A slow recovery in China also looks to have hit stocks, with the country representing an important market for luxury firms.
Even though the STOXX’s index, which also includes Hermes, Christian Dior and Kering, is still in positive territory for the year, upcoming updates over the coming weeks will dive deeper into how the sector is faring.
Louis Vuitton will kick off third-quarter earnings on Tuesday 10 October, ahead of updates from Kering and Hermes later in October.
Demand will be a key point of interest, according to Deutsche Bank analysts, alongside investment into marketing on the back of lower consumer spending, as well as margins after price hikes this year.