China's Economic Slowdown Hits Luxury Brands Burberry And Louis Vuitton

When the going gets tough, the tough stop buying Louis Vuitton handbags and Burberry coats. China’s economic slowdown has hit luxury brand companies, with Burberry shares falling by 12 percent Thursday after the company reported weak sales, the Associated Press reported.

Burberry said revenue had slowed over the past half year with weak sales in China and Hong Kong. Revenue for the last six months ending Sept. 30 increased by less than one percent when compared to a year earlier ending at $1.7 billion.

Burberry’s announcement comes after LVMH, known for its more than 70 luxury brands including Louis Vuitton, Bulgari, Fendi and Celine, announced Tuesday that China’s stock market sell-off in August, which reverberated around the globe, had hit luxury good sales.

“The Chinese stock market collapse has taken its toll and we expect this to have an impact only for a few months,” said Jean-Jacques Guiony, the chief financial officer for LVMH, according to Reuters. “We are seeing more Chinese tourists but they are spending a little bit less, that is … the growth rate is not as high as it was in the first half.”

LVMH saw its shares fall by over 3 percent Tuesday. Burberry said it expected growth to speed up in the second half.

“While mindful of this external volatility, our plans for the festive season position us well to return to a more positive sales trend in the all-important second half," said Chief Executive Christopher Bailey.

Luxury brands have descended on emerging markets in recent decades. Rising incomes, especially in China, have driven up demand for designer name brands. Chinese consumers now represent the world’s biggest purchasers of luxury goods.

The Hong Kong and China markets accounted for approximately a third of Burberry’s sales, Fortune reported. The company announced it would cut bonuses.

Strong sales in Japan and the U.S. would not be enough to make up for the fall in China for both companies. Uncertainty remains over China’s economy with the country’s gross domestic product at its lowest growth level since 2009.