Market Pulse | Staying the Course

Savigny Luxury Index February 2013 | Source: Savigny Partners

LONDON, United Kingdom — The Savigny Luxury Index (“SLI”) gained 2.7 percent in February, underperforming the MSCI World Index (“MSCI”) by over one percentage point. The SLI lost ground at the beginning of the month following the questions raised on sector growth by LVMH’s annual results announcement.

Big news

• Most analysts felt that LVMH’s organic growth numbers for 2012 were a bit lower than expected. This, combined with Mr. Arnault’s comments about curbing Louis Vuitton’s worldwide expansion in order to preserve its image, raised some doubts about growth prospects for the world’s leading luxury group and, therefore, for the sector as a whole.

• Such doubts were compounded when, shortly thereafter, the Chinese government banned TV and radio advertisement for expensive gifts as part of a continuing crackdown on corruption, causing the SLI to take another hit.

Going up

• Bucking the trend of political gloom in the country, our Italian contingent did particularly well during the month. Ferragamo, Prada and Tod’s share prices were boosted by growing exposure to wealthy travellers from emerging countries (mostly China); the three of them showing share price growth in double digits.

Going down

• Coach slipped by a further 5 percent as investors continue to question the robustness of its core business and its diversification strategy.

• LVMH slid 5 percent following its results announcement.

What to watch

• Imposed fiscal discipline in the euro zone has caused the common currency to become very strong, potentially dampening tourists’ appetite for luxury goods.

Sector Valuation

Market Pulse February 2013