European Luxury Firms Trade Lower on Coronavirus Concerns

   By Mauro Orru

Stocks in the European luxury sector opened lower Tuesday as the spread of the coronavirus in China threatened consumer spending in the region, according to analysts.

Luxury companies such as Compagnie Financiere Richemont SA (CFR.EB) and Kering (KER.FR) were trading 3.71% and 3.86% lower at 75.3 Swiss francs ($77.8) and 575.9 euros ($638.7), respectively, at 0953 GMT.

"This epidemic is also spreading close to the Lunar New Year festivity, which is an important festive period of spending and traveling for Chinese consumers," said Paola Carboni, analyst at Italian investment bank Equita Sim. The exposure of listed luxury players to Chinese consumers--estimated between 33% and 35%--is consistent with the sector average. The exceptions are Brunello Cucinelli SpA (BC.MI)--estimated between 12% and 15%--and Burberry Group PLC (BRBY.LN)--close to 40%.

The coronavirus, which originated in the central Chinese city of Wuhan, was reported by authorities on Monday to have spread to Beijing, Shanghai as well as in the southern province of Guangdong near Hong Kong. At least 218 cases had been confirmed on Monday and three people had been killed by the virus, according to Chinese state media and health authorities.

"Fears of being infected might impact on travel flows and spending," Ms. Carboni said, noting the luxury sector's stock performance Monday was weak, down 2% to 3%.

According to Flavio Cereda, analyst at Jefferies, the performance of luxury-sector shares is down to "the virus story," noting that "if the Chinese consumer does not travel, luxury spend will be affected."

Loic Morvan, an analyst at Bryan Garnier, said any further negative development from Asia may put pressure on luxury share prices given the rally that boosted luxury groups in 2019, when LVMH Moet Hennessy Louis Vuitton SE (MC.FR) gained roughly 60%.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

(END) Dow Jones Newswires

January 21, 2020 05:37 ET (10:37 GMT)

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