* LVMH shares down as much 7.2 pct
* Trading update bodes ill for Gucci, Richemont
* Hong Kong protests weigh on already weaker Chinese demand
* Weak rouble, Ukraine crisis damps Russian interest
* Strong euro, robbery fears impact Paris shoppers
By Astrid Wendlandt
PARIS, July 25 (Reuters) - The outlook for the luxury goods industry darkened on Friday as poor results from industry leader LVMH showed how the strong euro and political protests in Hong Kong were major factors curbing spending by Chinese and Russian customers.
Shares in LVMH, seen as setting the tone for the luxury goods industry, fell as much as 7.2 percent on Friday - the biggest one-day drop since 2009, dragging down companies in the sector such as Cartier-owner Richemont, down 3 percent and Gucci-owner Kering, which fell 3.7 percent.
LVMH’s trading update late on Thursday revealed a marked drop in business in Hong Kong, where pro-democracy protests have deterred Chinese visitors, as well as a drop in demand from elsewhere in China, and a much-worse-than-expected slump in Japan, boding ill for the sector.
“We believe this sends a cold chill to investors who bought back into luxury in the spring in expectation of an upturn in demand from Chinese buyers,” said JP Morgan Cazenove luxury goods analyst Melanie Flouquet.
Sales growth in the luxury goods industry, which bounced back between 2010 and 2012 after the financial crisis, has been slowing in the past two years, hit by China’s crackdown on corruption and conspicuous spending.
Many luxury brands, such as Louis Vuitton, Gucci and some watchmakers, had invested heavily in new shops in China since the mid-2000s to entice middle and upper class buyers.
China had been seen as the industry’s main growth engine, helping make up for lacklustre demand in Europe and Japan.
But on Friday, LVMH’s results cemented the view that buoyant demand from China would never return and the global luxury goods industry was entering a long period of modest growth.
“Sentiment towards the industry may not change direction until trends in Asia stabilise,” said Omar Saad, consumer goods analyst at New York broker ISI Group.
On Thursday, LVMH published first-half sales and profits below expectations and said fewer tourists, particularly from China, were shopping in Hong Kong. The former British colony is where many leading luxury brands earn more than 10 percent of their global revenue.
For Richemont, it represents about 16 percent of its sales and for Swatch Group, which on Tuesday expressed concern about future trading there, it is about 12 percent.
Together, Hong Kong, Macao and mainland China represent more than a third of sales for most leading luxury brands. The industry downturn has hit watchmakers hardest as timepieces are a classic gift-for-favours item.
“It will take a few months, if not a few quarters, for the situation to normalise,” LVMH Chief Financial Office Jean-Jacques Guiony said on Thursday of the group’s watch business in China. LVMH’s watch business, which includes the Hublot, Zenith, Louis Vuitton and Tag Heuer brands, is much smaller than that of Swatch and Richemont.
Adding to its woes, the world’s No.1 luxury group said growth in sales from Louis Vuitton, its main cash cow, had dropped in China in the second quarter from the first, while revenues from Chinese tourists declined in major European markets such as France.
The strong euro has made goods and services more expensive for tourists, and LVMH was the latest luxury group to complain that numbers of Chinese tourists in shopping hotspots such as Paris had dropped due to their fears of being mugged.
Chinese tourism associations say their citizens are targeted in Paris because they are thought more likely to carry cash than other tourists.
Russian tourists, the world’s No.2 luxury goods buyers after the Chinese, have been travelling and spending less on luxury goods in Europe due to the Ukraine crisis and the fall in the rouble, according to several luxury brands including Gucci and leather goods maker Salvatore Ferragamo.
But analysts said some of LVMH’s grim news was specific to the group. Louis Vuitton, the source of more than half of LVMH’s operating profit, has been struggling to counter a feeling among emerging market customers that it has become too ubiquitous.
The brand’s sales growth in the second quarter collapsed to zero from 9 percent the previous three months. Next week, all eyes will be on Gucci, which has seen revenue growth collapse in the past three years from over 10 percent to close to zero.
Like Gucci, Louis Vuitton has been trying to win back customers and regain exclusivity by strengthening its higher-end offering with leather goods and smart designs. But analysts said its latest results showed such efforts could take longer than expected to pay off. (Additional reporting by Alexandre Boksenbaum-Granier in Paris; Editing by Andrew Callus and Giles Elgood)