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Paris Attacks Are Weighing on the Outlook for Luxury Spending

Shoppers On Fifth Avenue Ahead OF Consumer Comfort FiguresShoppers On Fifth Avenue Ahead OF Consumer Comfort Figures
Pedestrians walk past a LVMH Moet Hennessy Louis Vuitton SA store on 5th Avenue in New York, U.S.Photograph by Craig Warga — Bloomberg via Getty Images

Shares of Europe’s top luxury brands slipped on Monday as investors worried that travel to Paris could be curtailed and possibly hurt sales in the wake of terrorist attacks in the city over the weekend.

LVMH Moet Hennessy Louis Vuitton, Christian Dior, and Hermes International were among the high-end fashion companies that posted stock declines. There are worries that spending in Paris—which Bloomberg reports is the second-largest city for luxury-goods spending after New York—could drop in coming weeks. Almost certainly, travel plans to Paris will be curtailed following terrorist attacks that left at least 129 dead and more than 300 wounded in the city.

France remains a very important market for luxury brands, even though most of the fashion houses have diversified and leaned more on Asia Pacific nations for growth in recent years. At Louis Vuitton, France accounts for 10% of revenue. The figure stands at 16% for Hermes. Although the Financial Times reports that Louis Vuitton has closed three of its stores in China and plans to close several more as the luxury sector there struggles with a slowing economy and an ongoing anti-corruption and anti-extravagance campaign.

Bloomberg reports that consumption in Europe greatly depends on tourism—and the impact of the Paris attacks could be even greater for the luxury houses as they gear up for the key holiday spending season. France is also the most popular destination for tax-free spending, according to Bloomberg, which cited data from payment processor Global Blue. Tax-free shopping accounts for about 20% of spending in France.