How will coronavirus impact retail?
Retail analyst Erin Sykes and CFRA chief investment strategist Sam Stovall discuss the impact coronavirus is having on retail and whether there is reason to be distrustful of the Chinese government’s reports on the outbreak.
Airlines and casinos aren't the only businesses suffering from the coronavirus health emergency.
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Sales of Cartier jewelry and La Mer moisturizer that goes for $2,400 a jar are threatened, too, as their owners temporarily lose access to some of their biggest-spending customers.
The coronavirus, which originated in Wuhan, China, and has sickened more than 49,000 people while killing at least 1,383, has forced the lockdown of more than 60 million people to limit infection. The outbreak has also led to the temporary closing of some stores in mainland China and the grounding of U.S. flights into and out of the country through late April.
The restrictions have sidelined consumers who accounted for 33 percent of spending in the global luxury market in 2018, according to the management consultancy Bain & Co. By comparison, the U.S. consumer accounted for just 22 percent.
Hit the hardest are the "luxury stores who are gonna lose that Chinese consumer, that Chinese tourist who has been driving sales on 5th Avenue,” Storch Advisors CEO Gerald Storch told FOX Business’ Stuart Varney on Friday.
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Investors have already responded to the risk: Affected companies' share prices have tumbled since Jan. 20, the day the coronavirus was first reported to have spread outside of China.
|LVMUY||LVMH MOËT HENNESSY LOUIS VUITTON SE||90.09||-1.34||-1.47%|
|RL||RALPH LAUREN CORP||121.84||-1.14||-0.93%|
|GOOS||CANADA GOOSE HLDGS||31.00||0.00||0.00%|
Bernard Arnault, chairman and CEO Paris-based LVMH Group, which produces Louis Vuitton and Moet Hennessey wines, said on his company's full-year earnings call Jan. 28 that it was difficult to predict what the impact would be.
"If it lasts a couple of months or if it's resolved over the next 2, 2.5 months, then it won't be all that bad," Arnault said. "If it were to last two years, it would be a totally different matter."
LVMH, which said it remained "cautiously confident for 2020," agreed Nov. 25 to buy high-end jewelry retailer Tiffany & Co. for $16.2 billion. Tiffany reported double-digit sales growth in China late last year and has repeatedly stressed the importance of the country to its bottom line.
The jeweler, which disclosed plans last August for three flagship stores in China, said it has "temporarily closed several store locations in the affected areas" and plans to provide an update on the potential impact when it reports fourth-quarter results on March 20.