Luxury goods stocks tumble amid Chinese tax changes and weak US demand

European luxury goods companies are facing significant financial pressure as stock values for major players have dropped sharply this year. Data from the Paris Stock Exchange shows LVMH has lost 40.5% of its value, Hermès has declined by 39.3%, and Kering has fallen by 30.3% since the start of the year.

New uncertainty is emerging from China, where authorities have tightened taxation on asset transfers and income linked to foreign trusts. With a projected tax rate of 20%, these measures could reduce the disposable cash available to wealthy individuals, who represent approximately one-fifth of global luxury consumption. A deadline for voluntary disclosure of certain unpaid obligations is set for October 22.

Simultaneously, demand is weakening in the United States. Credit card spending data from Citi indicates that luxury purchases in the U.S. fell in August for the third consecutive month. This dual decline in major markets limits the ability of one region to offset weakness in the other. LVMH reported a 3% year-on-year decrease in revenue for the first half of the year, reaching 38.6 billion euros.