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European firms suffer Chinese hangover

Tuesday, November 26, 2013 - 01:32

Nov 26 - Shares in French spirits group Remy Cointreau and German retailer Hugo Boss have dived after both their results were hit by the slowdown in China. Joanna Partridge looks at whether they will be the first of many in the coming months.

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They are a favourite of many in China but Hugo Boss is feeling the country's pain. The German fashion house won't meet its profit target of 750 million euros in 2015 and it's partly due to the slowdown in China. It does hope to meet a 3 billion euros sales target that year. But its shares dived as much as six percent on the warning. And it wasn't the only major European firm suffering the same problem. Shares in French spirits group Remy Cointreau fell 8 percent after it warned of a double digit decline in full year operating profit. It seems Chinese wholesalers are still running down high inventories. That makes an unpleasant cocktail when mixed with an uncertain economic climate in Europe. Jeremy Batstone-Carr from Charles Stanley says European companies must prepare for a new look China. (SOUNDBITE) (English): JEREMY BATSTONE-CARR, DIRECTOR PRIVATE CLIENT RESEARCH, CHARLES STANLEY, SAYING: "It's certainly fair to say with regard to China that it's not an absolutely one-way bet. The metamorphosis from an export or investment-led economy to a consumption-driven economy is not going to be easy. China is absolutely not a one-way bet in the near term, but over the medium to longer term we are optimistic and therefore we think there will be significant opportunities for Western-based companies to be involved in that." One of the big problems is a crack down on gift giving. The Chinese government no longer allows personal spending by civil servants. That's taken its toll on several major drinks firms in recent months. So far this year Remy's stock has fallen 14% due to concerns over China.

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European firms suffer Chinese hangover

Tuesday, November 26, 2013 - 01:32