Bloomberg

(Bloomberg) -- The U.K.’s vote to leave the European Union sent shares of U.S. retailers tumbling for a second day on concern that overseas woes will compound the companies’ sluggish sales.

The Brexit vote threatens to hurt a top source of visitors to the U.S. and further strengthen the dollar, worsening two of the main headwinds that have been affecting U.S. retailers. Those concerns only exacerbate the companies’ domestic challenges, which include restrained consumer spending, a shift to online retailing, and declining mall traffic. Shares of PVH Corp., Tiffany & Co. and Ralph Lauren Corp. have been among the hardest hit by the last two trading days of Brexit fallout.

“A Brexit-induced tourism lull may further delay a potential recovery at already-challenged U.S.-based fashion-focused apparel brands,” Chen Grazutis, an analyst with Bloomberg Intelligence, said in a note Monday. Companies such as PVH and Ralph Lauren, which have direct exposure to European markets, “may become even more vulnerable domestically, given their high dependence on tourist-drawing outlets.”

The U.S. got 4.9 million visitors from the U.K. last year, making the nation the third-largest tourism source after Canada and Mexico, according to data by National Travel and Tourism Office. Those visitors accounted for about 6.3 percent of all international arrivals to the U.S.

American luxury companies are facing an industrywide slowdown and sagging earnings as they suffer from fewer buyers at malls and department stores. The strong U.S. dollar has also reduced the value of sales overseas. Tiffany’s troubles will be further impacted by the uncertainty in the international market, said Ike Boruchow, an analyst at Wells Fargo & Co.

“The headwinds to the global luxury consumer are pervasive,” he said in a note. “The ‘Brexit’ adds even more questions as of last week.”

PVH, the maker of Calvin Klein and Tommy Hilfiger apparel, has plummeted by as much as 18 percent in the past two days. The company gets about 27 percent of its sales from Europe. Ralph Lauren, which generates about 21 percent of its sales from the region, has dropped as much as 12 percent. Tiffany was down as much as 9 percent.

Other companies with exposure to Europe include watchmaker Fossil Group Inc., which made 33 percent of sales from the region in the last fiscal year. Its shares dropped as much as 15 percent in the past two days. Handbag seller Michael Kors Holdings Ltd. declined 11 percent.

To contact the reporter on this story: Stephanie Wong in New York at swong139@bloomberg.net. To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Kevin Orland

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