The economic slowdown has wiped almost $200 billion off the luxury sector’s value in recent months.
| Photo Credit: Reuters

The prolonged downturn in luxury spending in China is unlikely to reverse this year, analysts and executives warn, deepening a rout which has wiped almost $200 billion off the sector’s value in recent months.

Profit warnings from Burberry and Hugo Boss and a 27% drop in quarterly sales in China, Macau and Hong Kong from Richemont this week have reinforced concerns about weakness in China, where middle-class shoppers have cut spending on big-ticket items.

According to consultancy Bain, China accounted for 16% of 362 billion euros ($393.8 billion) of global luxury spending last year.

But data on Monday showed China grew much more slowly than expected in the last quarter as a protracted property slump and job insecurity hampered a fragile recovery.

Expectations for the second-quarter earnings season were already low in the luxury sector, but the slew of bleak reports have dashed hopes of a recovery in the second half.

“China is in the repair shop,” said Bernstein analysts after a recent visit to the country. Analysts said that Cartier owner Richemont’s quarterly sales report on Tuesday had confirmed their fears about lacklustre demand in mainland China.

According to Bain, which in June predicted this year would be the weakest for the global luxury market since the height of the pandemic, China’s richest people are avoiding flaunting their wealth in favour of more discreet fashion.

Jitters about China have spooked investors, which has wiped 180 billion euros off the sector since March.

This aerial photo taken on April 22, 2024 shows a general view of flooded buildings and streets after heavy rains in Qingyuan city, in China’s southern Guangdong province.
| Photo Credit: AFP

Heavy rainstorms that swept across southern China over the weekend killed at least four people in riverside cities, while a search was underway for 10 others missing, state media said Monday.

The official Xinhua news agency said three people died in Zhaoqing city while one rescuer died in Shaoguan city. It didn’t say when or how they died.

The two cities in Guangdong province are among the worst hit areas of sustained torrential rains that began late last week.

Footage on state broadcaster CCTV showed rescuers in rubber boats evacuating residents from inundated shopping streets and residential areas.

By Monday, about 110,000 people had been evacuated across the province, while 25,800 people were in emergency shelters, according to Xinhua.

In Guangzhou, the capital of Guangdong province, the government said that as of 10 a.m. (0200GMT) on Monday, the city had logged a cumulative rainfall of 60.9 centimeters (24 inches) in April — the highest monthly rainfall since record-keeping began in 1959.

China’s Central Meteorological Observatory extended a rainstorm warning through Tuesday evening, with heavy rain expected in large swaths of southern China, including parts of the Guangxi region and Guangdong and Fujian provinces.

Floods also battered neighboring Jiangxi province. CCTV, citing the Jiangxi Provincial Flood Control and Drought Relief Headquarters, said 459 people had been evacuated. Rains and floods have affected 1,500 hectares of crops in the province and caused financial losses of more than 41 million yuan ($5.7 million).