Burberry Group is the worst performing stock on the pan-European FTSEurofirst 300 index, with rival luxury goods companies also falling as traders cite a Chinese advertising ban on certain expensive gift items as hurting the sector.
China’s Xinhua state news agency reported earlier this week that the country’s radio and television stations are to ban advertisements for expensive gifts such as watches, rare stamps and gold coins.
“Ban on TV/radio in China hurting luxury sector,” says a trader, commenting on the fall in Burberry’s share price.
JN Financial trader Rick Jones says Burberry and other luxury goods companies may have to deal with the prospects of slower growth from their Asian markets in future.
“The growth coming from Asia might be slightly diminishing. There are signs that we’re expecting to see lower growth forecasts for Burberry,” says Jones.
Jones adds that JN Financial had sold some Burberry stock on Wednesday at 1,420 pence but would hold the stock down to the 1,350 pence level.
Burberry drops 4.5 percent to 1,366 pence, underperforming a 0.1 percent rise on Britain’s blue-chip FTSE 100 index, while the STOXX 600 European personal and household goods index - which includes luxury companies - falls 0.8 percent to make it the worst-performing European equity sector.
France’s LVMH falls 0.7 percent, Richemont also retreats by 1 percent while Swatch declines by 1.2 percent.
Burberry’s share price, which is up 10 percent on the month with only 1 percent increase in earnings per share estimates and has outperformed the industry 5 percent in a week, has been further impacted by a management shake-up.
The company announces on Thursday that it is replacing its chief financial officer and creating a new chief operating officer position.
“What we have noted with this company historically is that the directors have a good track record of buying shares,” says Simon Maughan, strategist at Olivetree Financial Group.
“The team are very united, so that when there was the sharp share price fall in September 2012, (the management) all stepped up and bought shares, along with non executives and independents ... Thus, more so than for other companies, the breaking up of this united management team may be perceived a negative,” he says.
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