Luxury stocks lose luster after LVMH disappointment

Luxury stocks saw a major sell-off on Friday after LVMH results disappointed and renewed concerns over a slowdown in the Asia market continued to worry investors.

LVMH shares - seen as the bellwether for the luxury sector – were down 6.16 percent in the early afternoon, while Kering saw a 3.95 percent decline and Christian Dior dropped 5.72 percent.

Investors have become nervous about the health of luxury players after LVMH reported profits of 2.57 billion euros ($3.46 billion) in the first half of 2014, a 5 percent drop from the same period last year.

Read MoreGucci loses shine but Kering CEO 'not worried'

Asia concerns

There was particular concern over Asia as organic sales in Japan slumped 11 percent in the second quarter after a 32 percent rise in previous quarter. The slowdown was due to the rise in sales tax which hit consumer spending. Growth in the rest of Asia was at 3 percent.

John Hay | Lonely Planet Images | Getty Images

"What really surprised us in the call was the magnitude of the sequential slowdown for fashion and leather across key Asian markets like Hong Kong, Mainland China and Singapore," Credit Suisse said in a research note.

Profit from the fashion and leather goods business was flat in the first half of the year, while wines and spirits saw a 15 percent plunge, driven mainly by destocking of cognac in China as the government cracks down on corruption.

Read MoreChina'sprostitution crackdown hits cognac

The French company also said that fewer Chinese tourists were shopping in major European centers and the political unrest in Hong Kong has reduced the number of tourists buying goods there.

Consumers 'bored' of LVMH

In attempt to change its fortunes, LVMH is hiking prices and producing products with fewer logos, especially at its cash cow Louis Vuitton brand. Chinese consumers have fallen out of love with flashy logos and are looking for something more subtle.

"People were starting to get bored with LVMH because there was a bit of commonness in its luxury goods but the product is looking a lot better and prices are bit higher," Rahul Sharma, managing director at Neev Capital, told CNBC in a phone interview.

Read MoreChinese brides give diamond market sparkle

"The turnaround is taking longer than expected. Sales didn't get much better either and there is valid concern that the sector is a bit worse."

Investors will now be focusing on Kering, the parent company of Gucci, when it reports earnings on Wednesday.

The Asian market has been a continual concern for luxury players who are no longer getting the level of growth they expect from the region. This coupled with slower macroeconomic growth in Europe on several companies in the sector.

But Sharma said that investors should not be "alarmist" over slower Asia growth.

"I think you are seeing normalization in Asia, particularly China. It has been so strong for so many years and people expect that continue. But it is not realistic to expect that," Sharma said.

- By CNBC's Arjun Kharpal