By Cristina Gallardo


The economic slowdown in China, a key market for luxury goods, and poor performance at specific brands weighed on luxury stocks in Europe, with Burberry, Swatch Group and Mulberry leading the decline.

Luxury retailers' fortunes have been hit by a sharp drop in demand due to China's slowing economy, as middle-upper-income groups face negative real-estate equity, softer productivity and lower consumer spending, analysts at Baader Europe said.

At 0942 GMT, the Stoxx luxury index was down 1.5%.

China's gross domestic product grew 4.7% in the second quarter compared with the same period a year earlier, missing forecasts, despite Chinese government efforts to boost consumer confidence.

This means luxury retailers are now operating "in a world where Chinese sales can no longer be taken for granted," said IG chief market analyst Chris Beauchamp.

The biggest decliner Monday was British fashion brand Burberry, which in addition to falling sales in China, suspended its dividend and replaced its chief executive amid a downturn in luxury spending. At 0942 GMT, shares plunged 15% to 754 pence.

Burberry reported a quarterly sales decrease of 21% in China , while Swiss watchmaker Swatch also said its first-half sales fell due to weaker demand in China, and warned that it expects the Chinese market to remain challenging until year-end.

News on China's economy and Burberry weighed on other fashion retailers in Europe. The shares of the Swiss watchmaker Swatch Group fell 9.5% at CHF174.25 Monday morning, while those of Kering, owner of the Balenciaga and Gucci brands, were down 3.1% at EUR328.70.

Mulberry Group's shares decreased 4.9%, Prada shares fell 3.9%, LVMH Moet Hennessy Louis Vuitton were down 1.4% and Richemont fell traded 2.7%.


Write to Cristina Gallardo at cristina.gallardo@wsj.com


(END) Dow Jones Newswires

07-15-24 0609ET