Savigny Partners, is one of my favorite and most reliable sources of information about the luxury sector. Written from financial perspective, their review is concise and informative.
Sector Review
Issue 12, August 2010
S A V I G N Y P A R T N E R S L L P
SLI performance January 2010 to date – not quite out of the woods yet
A mood of cautious optimism in Q1…
The Savigny Luxury Index posted a solid overall gain of 22.4% since the beginning of the year, outperforming
the MSCI World index by 19 percentage points. The overall sentiment was that the sector is on the rebound,
with Bain forecasting a four percent rise in sales for the sector for 2010. Q1 results posted by our
universe of companies showed both strong sales and profit growth. Nevertheless the overriding message
was one of cautious optimism with some of the sales growth in Q1 being attributed to retailers restocking
depleted inventories. Some concerns were raised as to whether LVMH powerful Q1 growth, which sent its
share to a 10-year high, would be sustainable for the whole year.
… consolidated into very strong prospects for the sector
Signs of improved prospects for the sector continued to come out of company and sector announcements.
Swiss watch exports posted a healthy increase in June, and Hermès lifted its full year sales growth target
on the back of surprisingly strong Q2 figures released on 20 July (27% growth for the quarter or 20% at
constant exchange rates). The overall view is that more good news is to come, underpinned by strong demand
in emerging markets, especially China, and by the recovery of demand in the USA, which should continue
to prop up wholesale channels. LVMH recently released half year results confirmed the trend, beating
estimates with a 16% growth for the first semester.
Has the Aegean brew poisoned the equity well?
The Greek sovereign debt crisis which unfolded at the end of April sent global markets into turmoil. The
SLI was not immune and went into a tumble, losing eight percent of its value from end-April to mid-May.
The respite of the rescue package announced at the beginning of May was short-lived, with the fear of Aegean
contagion to other markets such as Spain and Portugal resulting in another dip in early June. Whilst
July saw both a strong recovery in the MSCI World index (+4.8%) and the SLI (+9.6%), there are lots of
frayed nerves as a result of this macro-economic uncertainty. The luxury sector is setting sail again but
the Aegean tidal wave continues to rock the fragile boat of recovery – the sails have been hoisted but will
the boat capsize?
Issue 12, August 2010
