Japan’s quake hits luxury brands

Tuesday, 15 March 2011
Shares of luxury retailers Coach Inc. and Tiffany & Co. tumbled Monday as investors fled companies with significant exposure to Japan following the devastation inflicted by Friday's earthquake and tsunami. Tiffany and Coach, both of whom get 18% of global sales from Japan, have closed stores and shortened hours around the country, and remain unsure about how long their businesses will be affected.

LVMH Moet Hennessy Louis Vuitton SA (MC FP), the world’s largest maker of luxury goods, declined 3.5 percent to 106.15 euros. Hermes International SCA (RMS FP) slipped 2.3 percent to 149.55 euros. Luxury goods makers dropped on concern that sales in Japan will suffer following the earthquake. Japan is the world’s second-largest market for luxury goods after the U.S., accounting for 11 percent of global sales, according to consulting firm Bain & Co.

The uncertainty is weighing on the retailers' stocks. Shares of Coach fell 5.2% to $53.15 in recent trading, and Tiffany lost 4.5% to $60.32. "There's a lot of disruption," said Standard & Poor's Equity Research analyst Marie Driscoll. "The outlook now is, 'Who's going to be buying luxury handbags and jewelry when you don't know where you live?'.

Panic selling has hit the US and European stock markets amid fears that a nuclear meltdown in quake-hit Japan could threaten the global economy, reported the Wall Street Journal. Four days after the world's third largest economy was struck by a massive earthquake and punishing tsunami, traders are still no closer to having a clear picture about spill-over risks.

Good news was on LVMH, which gained 2.05% Tuesday after announcing its intention of entering the race for Jimmy Choo. Burberry, lately under the spotlight for supposedly being the next object of desire of the French Luxury Group, also soared by 4.17%.

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