Luxury Brands' Third-Quarter Results Likely Subdued as China Tightens Taxation

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3▲0 ▼3Impact / 5
Summary · why it matters

China's intensified taxation of the wealthy is emerging as a fresh headwind, and the third-quarter results of major luxury brands are likely to be subdued. Shares of France's LVMH and Hermes have each fallen about 40 percent since the start of the year, while Kering is down 29 percent, deepening investor pessimism. Under China's new tax rules, wealthy individuals who used overseas trusts to avoid taxes on their assets must declare and pay unpaid taxes from the past several years by the 22nd, raising concerns about a chill in consumption. Alexis Bonhomme, head of luxury-industry consultancy Trinity Asia, noted that the 20 percent tax is hitting ultra-wealthy spending directly. LVMH, the first clue for investors, reports on the 12th, with analysts expecting quarterly sales of 18.5 billion euros, up 1 percent from a year earlier, while Kering and Hermes report on the 22nd.

Impact on assets 3

Consumer Discretionary▼
Kering SA
KER
▼ NegativeDemandrelevance

China's intensified taxation of the wealthy is expected to chill luxury consumption, weighing on Kering's sales ahead of its Q3 report.

Hermes International SCA
RMS
▼ NegativeDemandrelevance

China's crackdown on tax avoidance by the wealthy is seen as a fresh headwind to luxury spending, pressuring Hermes' Q3 results.