Savigny Luxury Index April 2012 | Source: Savigny Partners

LONDON, United Kingdom — The Savigny Luxury Index (SLI) continued its sluggish performance this month, ending almost flat (SLI components actually fell an average of nearly 2 percent when expressed in local currency) compared to a drop of 0.7 percent in the benchmark MSCI World Index (MSCI).  Newsflow was good overall, with strong results and two successful IPOs, but dampened somewhat by concerns about growth prospects.

Big news

• Two anticipated IPOs fared very well indeed.  Luxury casual ready-to-wear brand Brunello Cuccinelli opened at a 34 percent premium to its IPO price, valuing the company at nearly 700 million euros, or a 16.4x EBITDA multiple, and went on to increase by a further 50 percent in its first day of trading.  Luggage maker Tumi also posted a stellar performance, debuting at above its IPO price range, with a market capitalisation of $1.2 billion or a 17.2x EBITDA multiple. Tumi closed its first day of trading 47 percent up.

• Both LVMH and PPR announced strong first quarter results.  LVMH’s revenues rose 25 percent in the first three months of the year (14 percent like-for-like), driven by Asia and the US.  PPR’s luxury division saw first quarter sales increasing by nearly 18 percent on a comparable basis, driven by growth in mainland China and increased tourist spend in the US and Europe.  Both groups were confident in the outlook for 2012 but warned over difficult trading in Europe.

• Other sector participants however came out with more mixed results.  Burberry witnessed a slowdown in growth in its fourth quarter, driven in part by softness in the US.  Coach also suffered from a slowdown in growth in the US, partly due to the company’s more stringent  pricing policy.  Hugo Boss performed well but warned that the current growth momentum could not be maintained in China.

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Savigny Luxury Index March 2012 | Source: Savigny Partners

LONDON, United Kingdom — The Savigny Luxury Index (SLI) traded in a relatively narrow bandwidth this month, slipping 0.3 percent, whilst the benchmark MSCI World Index (MSCI) edged up 0.2 percent. Worries over a slowdown in China were offset by yet another string of exceptional results announcements, resulting in a status quo for the month of March.

Big news

• The sector has been awash with strong results announcements with Prada, Michael Kors and Tiffany all beating expectations.  China continued to be the main driver of growth for the sector, but recovery in the US as well as lessened fears over the Eurozone debt crisis caused confidence to return somewhat to the sector.
• Newsflow on China has nevertheless had a conflicting impact.  The country revised its growth estimates downwards to 7.5 percent for 2012, the lowest in decades, but the possibility of lower import duties boosted share prices amongst our SLI constituents.
• Corporate activity in the watch sector has resumed, with Hermès announcing it was in talks to buy Swiss high-end dial maker Nateber, only months after having bought a stake in case maker Joseph Erard.
• Trading in Ports’ shares was suspended as the company delayed its results announcement.  This, along with the resignation of Deloitte as auditor to Chinese milk formula products maker Daqing Dairy Holdings Ltd and Boshiwa International Holdings (clothing licensee for Harry Potter and Bob the Builder), has triggered heavy selling on small non-state owned Chinese companies.  We have temporarily excluded Ports from our SLI metrics this month whilst its shares are suspended.

Savigny Luxury Index February 2012 | Source: Savigny Partners

LONDON, United Kingdom — The Savigny Luxury Index (“SLI”) outperformed with a gain of 6.9 percent for the month versus 2.6 percent for the benchmark MSCI World Index (“MSCI”).  Confidence in the sector returned towards the end of the month, with many of the bigger luxury stocks posting gains after having been flat for most of February.

Big news

• Earlier in the month, China’s announcement that industrial output was slowing had sent the SLI down over 3 percent.
• The string of exceptional 2011 results announcements by the big players did little to raise the pulse of the SLI.  Much of the results had been priced into the stocks already and professional investors took their profit: Hermès, PPR and Swatch all suffered share price drops in the aftermath of their announcements but have since clawed back lost ground.

Savigny Luxury Index January 2012 | Source: Savigny Partners

LONDON, United Kingdom — It’s been a strong start to 2012 for the luxury good sector, as equity markets made significant gains in January.

Big news

• The Savigny Luxury Index (‘SLI’) outperformed the benchmark MSCI World Index (‘MSCI’) by 6 percentage points, gaining 11 percent over the month of January, relative to an increase of close to 5 percent for the MSCI.

• Investors have been exposed to continued good news.  Indeed almost all luxury groups have announced outstanding Christmas trading and 2011 year-end results driven mainly by growth in Asia excluding Japan.

• However, uncertainties have not dissipated.  Although the US market seems much better, Europe remains a concern, with sector sales highly dependent on tourist spending.

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Savigny Luxury Index December 2011 | Source: Savigny Partners

LONDON, United Kingdom — While the luxury industry entered 2012 with an overall outlook that remain uncertain, the sector remained resilient.

Big news

• The Savigny Luxury Index (SLI) lost 2.6 percent in December, whilst the general market index MSCI gained 3 percent over the period.  The cause for this divergence was a temporary sell-off in luxury stocks in mid-December.  Two factors contributed to this: the Italian sovereign debt crisis prompting an exodus from Italy-based stocks and the finalisation of Hermès’ defensive structure, which sent its share price down 7 percent in the days following the announcement.

• Despite treacherous capital market conditions, Michael Kors’ listing in New York on 15^th December was a resounding success.  Kors sold more shares than expected, achieving a valuation of close to $4 billion, or 3.8x LTM sales.  Shares jumped 25 percent on their debut and have since climbed a further 8 percent.

• In contrast, the listing of Chinese jeweller Chow Tai Fook in Hong Kong on 9^th December was received with lukewarm interest, which may be attributable to high valuation expectations.

• A Swiss court ruled that Swatch Group can cut down deliveries of watch parts to third parties from next year.  This will create supply issues for a number of watch brands and has already prompted luxury groups such as PPR and LVMH to snap up small watch component manufacturers.