Luxury family businesses hit by China; hedge funds

Big luxury brand family businesses like LVMH, Prada, Salvatore Ferragamo, and Swatch are suffering as a result of the economic slowdown in China and to add to their problems hedge funds are targeting their stock as they short companies with big exposure to the Chinese market.

Listed on the Hong Kong stock exchange, Prada’s stock price is down 8% in the last month and 23% since the start of the year. Owned by the Prada family since 1913, more than a third of the Milan-based group’s revenue comes from the Asia-Pacific region. Swatch’s share price is down nearly 10% in the last month and has fallen more than 16% since the start of the year.

Swiss-based Swatch, which is owned by the Hayek family and makes luxury watch brands like Omega and Blancpain, sells around a quarter of its watches in China. Ferragamo’s share price is down more than 8% in the last month, but the year to date stock performance of the Florence-based family business has been strong, up 23%.

The share price of the world’s biggest luxury goods company in terms of revenue, LVMH, has fallen by 12% in the last month, although it is still up 11% so far this year. Paris-based LVMH is owned by the Arnault family.

A report in the Wall Street Journal said a number of global luxury businesses have been targeted by hedge funds as a result of their exposure to the Chinese market. This will place further pressure on their stock performance in the weeks ahead.

Meanwhile, as stock markets take a pounding worldwide, the DAX Plus Family Index, which comprises many German family-controlled listed businesses, as well as other listed family businesses outside of the country, is down in the last month by 8%, but up 13% so far this year. This compares with MSCI World Index, which is down just over 6% in the last month, but only up 4.7% so far this year.