September 29, 2011 / 8:15 PM / in 6 years

Coach, Tiffany, other luxe stocks fall on China fears

* Coach, Tiffany shares fell 11 percent

* LVMH and Hermes also dropped

* S&P Retail Index closed down 1.4 pct

Sept 29 (Reuters) - Shares of Tiffany & Co (TIF.N), Coach Inc COH.N and Ralph Lauren (RL.N) tumbled on Thursday on concerns that a major engine of their growth -- China’s fast-growing middle class -- may be sputtering.

Tiffany and Coach shares fell as much as 11 percent in regular trade, while Ralph Lauren dropped 7 percent. They all pared some losses at the close.

Upscale jeweler Tiffany, handbag maker Coach and clothier Ralph Lauren derive a growing percentage of their sales in China.

But signs that China’s economy may be cooling off pose a greater threat to the consumption of high end handbags and designer dresses than Europe’s problems, one analyst said.

“The risk is a China blow up, not the Euro debt crisis,” Morningstar analyst Paul Swinand told Reuters. “People were assuming luxury is a safe haven and are now rotating out.”

China’s benchmark index, the Shanghai Composite Index, ended at a 15-month low on Thursday. Last week, data revealed that China’s once-booming manufacturing sector contracted for a third consecutive month.

China is closing in on Japan as the world’s second largest market for luxury goods, after the United States. Greater China’s luxury market grew 23 percent last year.

Tiffany’s sales in Asia outside Japan rose 45 percent in its most recent quarter, fueled by Chinese consumers who covet high end, Western brands. Coach now gets about 5 percent of sales in China and expects that to reach 10 percent in a few years.

French luxury companies LVMH (LVMH.PA) and Hermes International (HRMS.PA), which also rely on China, closed down 5.2 percent and 6.2 percent, respectively.

One of Tiffany’s largest shareholders, Trian Fund Management, this week sold 400,000 shares, or 8 percent of its Tiffany holdings. Meanwhile, Citigroup Global Markets lowered Ralph Lauren to “hold” from “buy” on Wednesday.

Overall, shares in store chains struggled on Wednesday. The S&P Retail Index .RLX ended down 1.4 percent.

Reporting by Phil Wahba in New York, editing by Bernard Orr

Our Standards:The Thomson Reuters Trust Principles.
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