Why premium brands need not fear a China slowdown

LUXURY GOODS

The reporting season has demonstrated the luxury goods industry's resilience, writes Caroline Reyl, senior investment manager of the Pictet-Premium Brands fund.

On the surface, it would certainly seem like investors in premium brands should be concerned about a China slowdown. Luxury goods companies rely on Asia for 40% of their sales, with Chinese consumers accounting for around two thirds of that total. So, with China’s growth rate having recently weakened to 7.6% – its slowest pace since 2009 – luxury goods companies would understandably have cause for concern. However, looking at the majority of the earnings reports released recently, such fears look overdone for now.  Although there is evidence of a moderation in demand for luxury goods ...