LVMH Leads Luxury Lower on Weakened Asia Demand

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July 25 (Bloomberg) -- Bloomberg’s Andrew Roberts examines second-quarter results from LVMH as weakened demand from Asia pushed down sales and impacted stocks throughout the luxury sector. He speaks on “The Pulse.”

China is the big problem, guy, good morning.

Luxury stocks and luxury companies in general have pretty much acted as a proxy for consumption in asia, particularly china.

The biggest surprise this morning or certainly was last nights when lvmh reported, in the second quarter, chinese consumption inside and outside the country weakened quite significantly and that had a bearing obviously on sales of handbags, cognac and watches.

Across lvmh's portfolio.

There were some things i think the markets expected.

Japan increased the v.a.t. about 3% in april and obviously the disappearance over the malaysian aircraft in march had some influence on consumption in thailand and singapore, but i think the market is most concerned about what is going on inside and outside china.

Hong kong is a big area of concern.

Some of the protests there have really dented demand and i think we have to remember that hong congress is where a lot of chinese -- hong kong is where a lot of chinese shoppers go where they can take advantage of the prices there relative to the mainland.

I was looking at the luxury sector.

It looks pretty clear here to the rest of the sector.

Everything is down on the back of this.

This is a bellwether stock.

What it is telling us is if lvmh is having problems, everybody is having problems.

Big alarm bells are ringing.

The stock which has gucci, a big rival to louis vuitton, lvmh has been viewed as perhaps dealing with some of the issues that louis vuitton was facing.

It is trying to move that brand upscale and make it a bit more exclusive introducing more expensive products and reducing the amount of logo out there, trying to appeal to a wealthier customer so it can insulate itself.

Gucci seems to maybe not be addressing that issue in quite same way.

I think the view is if louis vuitton is suffering, then gucci may be having major problems.

It reports next week.

Two month ago nobody thoulingt thought the luxury sector in europe could put a foot wrong.

I think i spoke to value retail earlier this month and scott, who runs it, the outlet stores a of the luxury stores, luxury brands so they can distribute maybe last season's stock at lower prices.

He was saying that management, the idea of what's going on in china with the companies he is speaking to, executives there are panicking is what he basically doctor how he said it.

What we're seeing is growth is very easy in china when it was all about perimeter growth.

Just opened more stores.

You got bigger sales.

Improved.

Everyone was excited about the prospects for that business.

Now that that is not happening.

Now that it is perhaps harder to generate growth, you have to run that as a real business, he was seag some of the companies he has been speaking to this china, some of the big name luxury brands, their management there is fearful.

They are not sure what to do.

There is a problem and that translates both to europe as well.

Europe is a region where luxury companies have been relying on chinese tourism.

If there are fewer chinese tourists coming to europe, with french and the rest of european local demand not particularly performing well, there is a huge problem for the luxury industry.

Yeah.

Not done with this yet.

In other company news, anglo america's profits are risen.

-- have risen.

I asked about the assets that are on the block potentially.

We're seeing expression of interest literally on a weekly basis.

There is lots of interest for assets.

From our point of view, we're in good shape.

Our operating earnings are improvering.

Cash flow is improving.

Balance sheet is in good shape.

Certainly while we're still making capital investments, we are increaseing the debt, but we

This text has been automatically generated. It may not be 100% accurate.

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