Impact of Chinese Yuan devaluation on European luxury brands

During the week of August 11th, the Yuan was depreciated by 3% to 4% against US dollar.  This might impact Chinese consumption of luxury products in two ways: first, European imported luxury goods might become too expensive for the emerging middle class segment if the prices are not adjusted; second, the budget devoted to luxury goods by Chinese tourists in Europe might be depleted. Chinese clients represent up to 30% of worldwide sales for several European luxury brands.

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One thought on “Impact of Chinese Yuan devaluation on European luxury brands”

  1. The recent devaluation of the Chinese Renminbi has caused greater uncertainty about the state of the Chinese economy, and the question remains whether there will be further devaluation. The devaluation in isolation is likely to have a muted impact on the sector, is unlikely to influence travel trends hugely, pricing gaps or profit translation. However a further devaluation would continue to increase the negative impact on the sector, which may also imply further weakness in the Chinese economy. Recent comments from Ferragamo, which reported numbers on 27th August, suggested that there has been no material change in trading since the crisis took place. More recently, Richement and Prada reported strong growth in Europe and Japan, which did help to compensate for weaker growth in China. This is an example of traveler habits being determined by currencies which reveals that Euro and Yen weakness are driving tourist sales in these regions.

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