Before the bell: profit warnings drag down markets

Profit warnings turn Dutch champions into flops, leading to losses from Wall Street to Tokyo.

If you didn’t know it was Tuesday the 15th, you might have thought it was Friday the 13th. Everything that could go wrong, did go wrong, with our northern and southern neighbors being the main culprits. It all started with a sharp profit warning from charging station manufacturer Alfen. The company’s stock dropped 8.8% and ended the trading day down 5.5%. Worse still was ASML, the chip machine maker. After a communication blunder during its profit warning, its stock plummeted by a staggering 15.6%. To make matters worse, LVMH also issued a warning after markets closed. The French luxury goods producer saw its revenue shrink in the past quarter, while analysts had expected a slight increase. LVMH is likely to lose significant market value today. These profit warnings have weighed heavily on the markets. The Euro Stoxx 50 lost 1.9%, while the AEX index in Amsterdam recorded a 2.5% drop. The S&P 500 fell by 0.8%, and the Nasdaq lost 1%.

The same sentiment prevailed this morning on the Japanese stock market. The Topix (-1.2%) and the Nikkei (-1.8%) both lost ground. However, Hong Kong is bucking the trend, with the Hang Seng rising by 1.2%. Will today be better? Adidas is certainly trying. The German sportswear group announced this morning that its revenue rose by 10% in the past quarter, and it has raised its full-year outlook. Adidas is doing what Nike cannot. Later today, before Wall Street opens, Morgan Stanley and US Bancorp will report their results. We’re eager to see what happens.

Blunder

If you manage to visit ASML’s headquarters in Veldhoven (Eindhoven), you’ll see that the world’s most advanced chip machines are produced in a well-guarded fortress. And for good reason—the company’s technology is extremely valuable. However, the same cannot be said for its communications department. ASML was supposed to release its report at 7 a.m. this morning, but someone accidentally posted the profit warning on the website yesterday. The numbers aren’t even that bad, but the company noted that, except for AI, demand for new machines from chip manufacturers will take longer to recover. This constitutes a profit warning. The company also sees its profit margins declining. Investors were shocked, leading them to sell not only ASML (-15.6%) but also ASMI (-13.9%) and BE Semiconductor (-11.1%). Melexis (-1.4%) managed to limit the damage, but X-Fab lost 4.9%. Intel (-3.3%), Nvidia (-4.7%), Tokyo Electron (-5.1%), and AMD (-5.2%) also saw significant losses.

No luxury

Unlike ASML, LVMH did release its quarterly revenue figures after the close, as scheduled. But like the Dutch company, the French luxury goods producer disappointed. While analysts had expected a slight increase in revenue, LVMH’s high-end brands sold just €19.08 billion worth of expensive drinks, handbags, and other leather goods. That’s 4.4% less than in the third quarter of last year. So far, LVMH has held up relatively well in a sector where competitors have already taken hits, but now the company seems to be suffering from the strong yen and a decline in demand for luxury goods from China to the U.S. Since March, LVMH’s stock has already lost 29% of its value, and today it is likely to lose even more.

Did you know…

that LVMH’s CEO and billionaire Bernard Arnault was in royal company last week? He attended a banquet at the Élysée Palace in Paris during the state visit of King Philippe and Queen Mathilde of Belgium to France.

This article was translated from Dutch and was originally published on Spaarvarkens.be.