Prada, Kering, LVMH, Burberry and Richemont are worried by Apple

Would you look good in a flak jacket? How about a tank top modelled on a bulletproof vest? Combat chic is not for everyone. But investors in fashion companies might like the trend. Body armour could be useful if China’s economy takes a heavy pounding. Chinese shoppers account for nearly a third of luxury sales. That explains why shares in heavily exposed companies such as Prada, Kering, LVMH, Burberry and Richemont were hit after Apple’s revenue warning this week. Not all the iPhone maker’s problems can be pinned on China. But its struggles added to worries about the trade war, a cooling housing market and currency fluctuations that have already dragged down share prices. Prada’s has tumbled by nearly a third in the past three months. The S&P global luxury index is now trading at less than 14 times next year’s earnings, down from 19 a year ago… By 2024, Chinese consumers will make up at least 45 per cent of the luxury market, says Bain. But the road to growth is bumpy. A big test will come in February. China’s new year celebrations traditionally tempt shoppers to splash out. Some brands — such as Kering’s Gucci label — might do better than expected. But expect weaker brands to come under pressure. A flak jacket could be handy after all.

Lex.

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