The luxury industry is seeing a decrease in stock following Chanel's early warning that the sector is headed for more challenging times. Experts, as reported by Bloomberg, claimed that their stock hit was due to their profit margins being under increasing pressure.
To be specific, the Euro Stoxx Luxury 10 Index plummeted as much as 1.9%, the biggest drop in nearly a month. This came after the privately held Chanel Ltd. released its 2023 financial record.
While the well-known fashion, cosmetics, and jewelry business reported double-digit revenue and profit growth, the spotlight was on the company's cautious outlook.
On the other hand, luxury stocks of beauty product producer L'Oreal SA jumped as high as 1.7% after Chanel announced "very strong growth" across all categories for its fragrance and cosmetics business.
Luxury Stocks Update
Luxury stocks have been turbulent this year, with weak updates and warnings from companies such as Kering SA. Experts assumed that customers are hesitant to spend due to rising product costs caused by inflation, according to VCPost.
Besides that, post-pandemic recovery in the major Chinese market has stalled.
Elevated valuations haven't helped either, with the sector trading at above-historical average future price-to-earnings ratios and a massive 100% premium to the overall market.
Luxury brands like Hermes International also plummeted 4.3% on Wednesday, while Kering sank 2.4%.
Meanwhile, LVMH Moet Hennessy Louis Vuitton SA was down 2.1%, and Richemont 1.9%.
Join the Conversation