China's tax crackdown piles pressure on luxury brands as US spending falters
XLY•China's 20% tax levy on wealthy individuals and signs of softer US luxury spending are adding pressure on brands ahead of third-quarter results. Analysts expect LVMH quarterly sales of €18.5 billion, up 1% year over year.
1. China tax deadline
Wealthy Chinese individuals who used offshore trusts have until October 22 to declare and pay years of back taxes under Beijing's new rules. The 20% levy may curb spending by ultra-high-net-worth shoppers, while mall data points to a sharp slowdown in mainland China, Bernstein analysts said.
2. Brands see mixed demand
Industry sources said conditions in mainland China remained weak, with smaller quiet-luxury labels such as Brunello Cucinelli and LVMH's Loro Piana outperforming Louis Vuitton and Gucci. US credit card spending on luxury goods fell for a third consecutive month in August, according to data tracked by Citi.
3. Results due next week
LVMH reports results on Monday, with analysts expecting quarterly sales of €18.5 billion, up 1% from a year earlier. Kering and Hermes report on October 22; Kering has warned of a further contraction at Gucci.
