Steep sell-off: Luxury stocks lose $30 billion in one day over US demand fears

Stocks of global luxury brands faced a bloodbath on Tuesday, as they lost more than$30 billion overfears of a softening US economy hitting demand.

According to a Bloomberg report, shares of Hermes International fell as much as 5.5 percent, LVMH Moet Hennessy Louis Vuitton (LVMH) fell almost 4 percent, and Kering SA, owner of Gucci, saw 2 percent drop its share prices.

The sharp fall in luxury stocks meant that Bernard Arnault, the world's richest man and founder of LVMH, lost over $11 billion of his personal fortune.

Over the past year, the luxury sector's meteoric risehas made it Europe's equivalent of the United States Big Tech: a group of dominating enterprises whose growth has been resilient through economic ups and downs.

Despite Tuesday's downturn, luxury stocks have been outperforming by a large margin this year. LVMH's stock has jumped 25 percent, while shares of Hermes have risen 34 percent in 2023, despite a general economic downturn across the world.

A large part of the stock gain can be attributed to investors, who have gambled that Chinese consumers will be eager to spend after emerging from the world's tightest Covid-19 lockdown in late 2022.

US, Asia demand boosts luxury brands

The United States and Asia represent significant markets for the European luxury brands.

Hermes' quarterly revenues increased by 23 percent in the first quarter of 2023 (January to March), thanks in large part to the demand from Chinese shoppers for the luxury brand's scarves and kelly bags.

LVMH's stock price touched a record last month when the company reported a boost in sales. The stock rally also helped the world's biggest luxury brand to enter the most-valuable company list earlier this year.

According to LVMH's annual report for 2022, the United States accounted for 27 percent of the company's sales, while Asia, excluding Japan, accounted for 30 percent.

But early warning signs have appeared, with LVMH reporting a slowdown in US growth and Burberry Group reporting a decline in demand for trainers and entry-level items among younger Americans.