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The Chinese consumer has been a bit of a let-down for luxury brands. This week both British label Burberry and Chow Tai Fook, the Hong Kong-based jewellery retailer, saw their shares hammered after they announced disappointing growth in mainland China.
The second-biggest economy saw GDP growth slip to 7.6 per cent in the second quarter, from 8.1 per cent in the first.
Same-store sales growth in the country for both companies was still in double-digit territory in the three months to June 30, but that no longer satisfies investors accustomed to seeing big expansion in Chinese demand for everything from chequered trench coats to Winnie the Pooh figurines in solid gold.
Burberry shares were down 10 per cent in the two days after its first-quarter results came out on Wednesday.
Chow Tai Fook lost 11 per cent after its results were announced on the same day. The Hong Kong company’s managing director described the slowdown as growth “at a normal rate” after a year when same-store growth for the whole group was 40 per cent.
That was the same tone adopted by Macau casino operators, who say the main reason for revenue growth slowing from 30-40 per cent year-on-year in 2011 to 7 per cent in May was the “base effect”.
Investors appear sceptical, judging by recent sell-offs. But analysts say some stocks may have been oversold, especially in the higher end of the luxury market, as the 1.5m dollar millionaires in China are less likely to curb their spending habits than the aspiring wealthy, they say.
The millionaires are also more likely to shop in Europe today for their handbags now that the euro is down nearly 20 per cent against the renminbi in a year.