Luxury stocks take major tumble: LVMH, Kering, Richemont

Luxury retail stocks, such as brands LVMH (MC.PA), Kering (KER.PA), and Richemont (CFR.SW), have fallen off tremendously, reversing their year-to-date profit gains. Morgan Stanley analysts have decreased the price targets for both Kering and LVMH, and additionally downgraded Richemont to an "Equal Weight" rating. The luxury market is anticipated to face a slowdown in demand in the coming year.

Yahoo Finance's Akiko Fujita and Rachelle Akuffo break down the details of the downturn in consumer luxury spending.

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Video transcript

RACHELLE AKUFFO: All right, now for today's chart of the day. As consumers stay increasingly cost conscious, it's been a tough year for luxury stocks. Shares in French luxury giant LVMH, Cartier owner Richemont, and Gucci parent company Kering have all nearly erased their year-to-date gains, and that trend isn't expected to reverse anytime soon. Morgan Stanley lowering its organic growth and 2024 profit forecasts for most luxury companies, warning that demand could soften in both China and European markets.

Morgan Stanley's Edouard downgraded Richemont to equal weight while also lowering his price targets for LVMH and Kering as well. I mean, a lot of people are wondering when we were going to see some of that luxury market-- those luxury consumer spenders start to bite a little bit. Starting to see those cracks, especially when it comes to Chinese consumers, Akiko.

AKIKO FUJITA: Yeah, and that's going to be a tough headwind for these brands, especially going into what is typically the busiest shopping season of the year. But you're right to point out the headwinds that we have seen in China. You know, you go back to where we were at the first-- you know, the first half of the year.

The expectation that there would be a bounce back in that market which has been so important for these luxury brands, that just hasn't happened. And we've heard more and more that consumers are getting increasingly cautious. Yes, last year we were talking about the resilience of the luxury brand, but it feels like that has really started to trickle over into some of these names.

RACHELLE AKUFFO: It's true. And even this idea of stealth wealth-- perhaps people not wanting to be quite as showy at the moment. We're seeing a lot of premium goods that don't necessarily have all the logos splashed across them, so perhaps some consumer trends to watch in terms of what they're spending on as well as them being more discretionary as well.

AKIKO FUJITA: I don't know, Rachelle. If you're spending that money, I think consumers still want that branding out there, but we'll see. I am not the one that's spending thousands of dollars on some of these products, so not one to speak.

RACHELLE AKUFFO: Same here. I might treat myself a little bit. For the most part, yeah, that's not what my budget is looking at.