Luxury Investors' Concern : China is seeking undeclared Louis Vuitton bags

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Big problems

Unclaimed goods that have been brought to China are normal, until recently. During this period of the trade war, this Chinas move is affecting the luxury brands. For the luxury investment house, what problems do they face?

Luxury Investors' Concern : China is seeking undeclared Louis Vuitton bags

Chinese border guards seek undeclared Louis Vuitton bags, Gucci loafers and Tiffany necklaces in travelers suitcases / Ph: Pexels

Big problems

Chinese border guards seek undeclared Louis Vuitton bags, Gucci loafers and Tiffany necklaces in travelers suitcases. This leads to many consequences.

Shares of some luxury brands such as Prada SpA and Shiseido Co., are down globally with signs that Chinese officials are cracking down travelers who are returning from places like Paris, London, and Tokyo with luxury goods. Stricter supervision raises fears about the slump in Chinese consumer spending - the plentiful consumption market for luxury brands.

‘Spending on luxury goods by traveling Chinese shoppers in overseas markets could slide on concerns of increased scrutiny by customs authorities. This may hurt sales in the country of origin for branded goods in popular categories such as cosmetics and bags,’ said Bloomberg Intelligence analyst Catherine Lim.

Louis Vuitton LVMH owners shares fell 7.1 percent. This is the most significant drop since 2009. Owners of Gucci Kering SA, Tiffany & Co., Michael Kors Holdings Ltd., Tapestry Inc. is similar. This crisis has spread to Asia. Prada sharply decreased to 11% in Hong Kong. Shiseido Japan Cosmetics Co. drops more than 8%. In Korea, LG Household & Health Care Ltd. and Amorepacific Corp. down more than 7%.

“The luxury brand shares are usually hit the most amid the depressed sentiment over the slowdown in Chinese consumption,” Terry Hong, an analyst at Guotai Junan Securities Co said. “Investors are likely overreacting on the negative news when the market is weak.”

The LVMH insists that Chinese officials are cracking down the visitors back with luxury goods. Some items are sold for a profit when shoppers return home (the cost of buying them in the country of origin is much cheaper than buying them in their hometown) which is cutting the sales of other stores in Beijing or Shanghai.

The influence of this step by the Chinese government is enormous. Soon, what kind of difficulties do luxury investment house face? Do they have any way to overcome this trouble? Let's see how the situation progresses.