How The Paris Attacks Could Impact Luxury Goods This Holiday

Paris-Memorial
Messages and flowers left by mourners outside the French Embassy in Berlin, Germany following terrorist attacks in Paris.
Getty Images.

Despite the tragic events that transpired in Paris over the weekend, U.S. markets have been fairly quiet. While some analysts have been positive about the markets’ apparent resilience — stock markets have historically reacted negatively in the short-term following terrorist attacks, bouncing back fairly quickly — others have pointed to potential long-term consequences of the attacks on the luxury goods sector.

At 2:17 p.m. EST, the S&P 500 had gained 7.17 points to 2,060.36; the Dow Jones Industrial average climbed 87 points to 17,569.43; and the Nasdaq was up 24.26 points to 5,008.88.

European stocks were also in the green, Germany’s DAX rose 258 points to 10,971.04; England’s FTSE was up 122 points to 6,268.76; and France’s CAC 40 had gained 133 points to 4,937.31.

While the short-term results could offer market watchers some solace, Cowen and Co. analyst Oliver Chen cautioned that slowing global travel overall could impact retail stocks while incoming tourism to Europe — which had been benefiting from the stronger U.S. dollar in recent months — could see a reduction.

We view recent acts of terrorism in Paris as a negative for global luxury players, given fears of further attacks in Europe may lead to lower store traffic and pressure revenue performance in the region,” Chen wrote on Nov. 16. “In our coverage, retailers with the largest exposure to Europe and the Middle East include: Richemont (38 percent mix), Fossil Group Inc. (34 percent mix); Hudson’s Bay Co. (Germany 31 percent mix; Belgium 2 percent); LVMH (27 percent), and Abercrombie & Fitch (26 percent).”

Heightened fears of terrorism, Chen noted, could also add top-line headwinds for companies such as Tiffany & Co., HBC and Macy’s Inc. while dampening consumer spending during the upcoming holidays.

“U.S. consumers could be more frugal with holiday purchases and devote mindshare to news watching, especially given U.S. presidential debates,” Chen wrote.

Meanwhile, the economic backdrop for the 2015 holiday season has already spurred concerns following a slew of dismal earnings in the third quarter — which saw holiday-shopping hotspots Macy’s, Nordstrom Inc., Dick’s Sporting Goods and others miss Wall Street forecasts.

Unseasonably warm weather, elevated inventories, concerns about an impending Federal Reserve interest rate hike and FX pressures have all been blamed for offsetting a low unemployment and higher disposable income among consumers due to record-low oil prices.