In her most recent weekly report on the luxury sector, Morgan Stanley analyst Claire Kent noted that SARS and war represent "significant setbacks" to Hong Kong’s inbound tourism that could cost $200 million in lost sales over the next two months.
"We believe that non-Japan Asia will continue to see a difficult 2003, due both to negative currency impact and lack of tourism," she wrote.
In his LVMH note, Dossin characterized the firm as the "strongest self-help story" in the sector, given the extensive restructuring, especially at Sephora and DFS. He noted, however, that he expects a slowdown is the coming months due to subdued travel flows, trimming full-year DFS sales estimates from a 2 percent gain to a 1 percent loss.
He also noted that consumer boycotts against French products, in retaliation for the French government’s vocal opposition to the American-led war in Iraq, represent a "heightened" possibility. "This would presumably hit logo products harder," Dossin wrote. "We estimate logo products represent over 60 percent of Louis Vuitton’s sales and profits."
Sagra Maceira de Rosen, a J.P. Morgan analyst in London, wrote in a research note that luxury goods in general see about 13 percent of their revenues from Southeast Asia. So far, the analyst noted that sales levels in Hong Kong average 50 to 70 percent below plan. Of concern if the epidemic progresses is an expected decline of Japanese tourists to Hong Kong and other countries in the region. That timing would coincide with upcoming key national holidays: Golden Week, an annual Japanese holiday from April 29 to May 5, and the Labor Holiday week for the Chinese from May 1 to 9.
Canceled trips from Japanese visitors, who are likely to stay closer to home, will boost sales domestically, while other typical tourist draws could be affected.