Japan worries hit luxury firms

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Japan worries hit luxury firms

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Shares in luxury goods companies fell on Monday, hit by worries about future sales in Japan after the earthquake.

Japan is the world’s third largest market for such items and accounts for 11 percent of global luxury sales.

It is a significant contributor to the profits of firms such as Hermes, Burberry, LVMH and Richemont.

Analysts said the earthquake will harm Japan’s economy and severely hamper discretionary spending.

“The luxury goods sector could be badly impacted short-term after the Japanese earthquake last Friday,” said MF Global. “As far as the European consumer sector is concerned in the wake of the earthquake, we believe that the ‘early cycle’ recovery rally in Luxury now seems vulnerable.”

However some industry experts noted that the zones affected by the earthquake were not ones where luxury goods makers had major outlets, and estimated that between 10 to 20 percent of Japanese luxury buyers make their purchases abroad.

Japan makes up around 19 percent of sales for Hermes, nine percent for LVMH, 16 percent for PPR’s Luxury Business Group, which owns Gucci and Yves Saint Laurent, and 12 percent for Switzerland’s Richemont group.

Other shares to suffer were Tod’s and Burberry, which makes about seven percent of its sales in Japan.