Market Pulse | A Steady Ship in Volatile Waters

Savigny Luxury Index March 2013 | Source: Savigny Partners

LONDON, United Kingdom — The Savigny Luxury Index (“SLI”) gained 1.6 percent in March, outperforming the MSCI World Index (“MSCI”) by just half a percentage point. The SLI has been quite volatile over the month with the eurozone crisis and the US debt ceiling taking centre stage again.

Big news

• Corporate announcements have been overshadowed by the unfolding of the Cyprus banking crisis, which contributed to the SLI losing ground in the second half of the month.

• Swatch group has reached an undisclosed agreement with Swiss competition officials over its planned reduction in the supply of watch movements to third parties. Final approval by the competition commission is expected in early July. The group has reduced deliveries in 2012 and 2013 and will announce in July how it can entirely phase out deliveries.

• PPR is said to be well on its way to acquiring Italian jeweller Pomellato for an estimated €350 million. Offers from rivals were rumoured to have been rebuffed.

• Italian notebook maker Moleskine has launched its IPO process, with an estimated market value of €561 million, or between 22 and 29 times earnings.

• Hermès posted outstanding annual results with its operating margin reaching 32.1 percent, the highest level since the company listed in 1993.

• PPR unveiled plans to rename itself “Kering,” effective 18 June,  as part of its transformation from a retail conglomerate to a luxury and lifestyle group.

• Mulberry issued its second profit warning in six months. Retail sales deteriorated over the last ten weeks, in part due to reduced tourist spending at its London stores. Meanwhile wholesale transactions are expected to drop by 15 percent versus last year as a result of the company’s transition towards retail.

Going up

• PPR gained 2.4 percent over the month as the group moved closer to being a pure luxury and lifestyle player and announced a new identity.

Going down

• Mulberry’s share price fell by 17 percent following its latest profit warning. The fall would have been worse but for rumours of a pending take-over offer which helped the share price recover some of its lost ground.

• Burberry lost 3.5 percent amidst signs of slower tourist spending in Europe.

What to watch

• Emerging designer businesses and businesses in the contemporary category are currently much discussed across the industry. Will this herald a new wave of investments by large luxury groups in young designers?

Sector Valuation

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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.