Luxury brand sales in Europe rebounded after China lifted its ban on group tours earlier this year. Chinese tourists account for about 25 percent of European luxury goods sales, as per estimates from Goldman Sachs Group Inc.
The Chinese government earlier this year allowed group tours to Switzerland, Italy, Spain, France, Greece, Denmark, Iceland, and Portugal, and now in phase 2, it has ended a group travel ban to countries including the US, UK, Australia, South Korea, and Japan.
This has resulted in higher sales of luxury brands. The maker of Louis Vuitton bags rose as much as 2.6 percent in Paris, Hermès International gained 2.4 percent and L’Oréal SA advanced 1.8 percent, adding about €20 billion ($22 billion) in combined market value.
Rolex retailer Watches of Switzerland Group Plc climbed as much as 5.9 percent after maintaining earnings guidance in a trading update.
LVMH led luxury stocks higher in Europe on Thursday as China lifted a ban on group tours, boosting the case for travelers spending money on high-end watches and fashion.
According to market experts, adverse price elasticity effects suffered by the fashion industry in 2020, when spending from Chinese tourists has dried up is likely to unwind now.
After a solid start to the year, luxury stocks have drifted lower in recent months in response to weak Chinese consumer and economic data. Bullish investors are pinning their hopes on a revival in anticipation that Beijing will soon implement more decisive stimulus measures to kick-start a flagging economy.
Sentiment last week was also supported by signs of deal activity in the sector picking up. Capri Holdings Ltd soared in US premarket trading after the Wall Street Journal reported that the owner of the Michael Kors and Versace fashion brands was nearing a deal to be acquired by Tapestry Inc.
Luxury brands get a boost as China lifts ban on group travel by its citizens
