China's tax crackdown piles pressure on luxury brands as US spending falters
MC•China's 20% tax levy on wealthy individuals and signs of weaker US luxury spending are expected to weigh on third-quarter results for luxury brands. Citi-tracked US credit card spending on luxury goods fell for a third consecutive month in September.
1. Tax pressure in China
Wealthy Chinese who used offshore trusts to shelter assets have until October 22 to declare and pay years of back taxes under Beijing's new rules. The 20% levy may curb spending in a market that accounts for roughly a fifth of global luxury purchases, while mainland China mall data pointed to a sharp slowdown.
2. US spending softens
Citi-tracked US credit card spending on luxury goods fell for a third consecutive month in September as broader consumer confidence weakened. Industry sources said smaller quiet-luxury labels such as Brunello Cucinelli and Loro Piana were outperforming Louis Vuitton and Gucci in mainland China.
3. Results due next week
LVMH reports 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 analysts to expect a further contraction at Gucci.
