Market Pulse | The Luxury Consumer Is Back

Savigny Luxury Index March 2011 | Source: Savigny Partners

LONDON, United Kingdom This month’s Market Pulse shows a continuing upward trend for luxury and fashion stocks versus the MSCI World market benchmark, erasing any lingering doubts about the return of the luxury consumer.

Big news

• Luxury brands have had an excellent start to the year reporting strong Q1 results. Double digit sales growth has been fuelled by continued strong growth in China and economic recovery in the US and Europe

• The Savigny Luxury Index made a big jump mid-April when Burberry and bellwether LVMH announced better than expected results, prompting share price increases amongst their European peers

Going up

• Burberry jumps to the top of the valuation leaderboard as its retail-led strategy continues to pay dividends and its share price surges on bid speculation

• US luxury companies share prices have rebounded as concerns over exposure to Japan eased after strong results announcements; Tiffany and Coach both gained over 10 percent

Going down

• Luxottica and Safilo have lost some ground in valuation terms as a weak US dollar weighs on revenues outlook

What to watch

• Whilst market concerns over the Japan earthquake have eased, potential long-term consequences for the sector are still unclear

• Word going round is that many brands have been experiencing very high double-digit like-for-like growth in the last 6 to 8 weeks, prompting views that the luxury consumer is back and is spending without shame again

Luxury Sector Valuation, April 2011

Pierre Mallevays is a contributing editor at The Business of Fashion and founder and managing partner of Savigny Partners, a corporate advisory firm focusing on the retail and luxury goods industry