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.

Savigny Luxury Index November 2011 | Source: Savigny Partners

LONDON, United Kingdom — As the luxury and fashion sector enters the critical holiday shopping period on the back of strong results for the first half of the year, there are growing signs that executives are worried about what the future holds for the luxury market in 2012.

Big news

• This has been another month of record results for the luxury sector, with Hermès, Richemont, Ferragamo, Burberry, Tiffany, Prada and Ports all posting outstanding numbers for their first half or third quarter period.  Buoyant growth in Asia continued to lift sales; Richemont in particular shone with revenues in the region soaring by 60 percent in its first half report.  Growth was also present in mature markets, notably in the USA where Burberry’s first half sales and Tiffany’s third quarter revenues rose by 25 percent and 17 percent respectively.  This was confirmed by recent news of a very strong Thanksgiving weekend, with US retail sales estimated at a record $52.4 billion.

• Yet worries are growing over 2012.  The global markets rebound which took place towards the end of November following news of concerted action to solve the eurozone debt crisis did not happen for the luxury sector, with our Savigny Luxury Index resuming its downward slide.  Some market participants have issued thinly veiled warnings over next year, notably Richemont and Tiffany (see below).  Retailers are keeping inventories low into the end-of-year season; we have heard reports of some of them asking leading fashion brands not to deliver too early, a shocking role-reversal mode.  Industry CEOs are hoping for the best but quietly making contingency plans.  Overall, the SLI has lost 4.9 percent over the month of November, compared to an increase of 1.8 percent in the MSCI general index.

• The long-rumoured acquisition of Italian tailor Brioni by PPR finally crystallised, evidencing the importance of the menswear segment for the sector’s growth expectations, especially in China.

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Savigny Luxury Index October 2011 | Source: Savigny Partners

LONDON, United Kingdom — The market roller coaster continues, but the luxury sector has once again outperformed the general market. While questions remain about the ability for China to sustain the growth of luxury brands, investors seem to be on side again, at least for now. Analysts remain divided about the future of the luxury sector in 2012, amid much macroeconomic uncertainty.

Big news

• Renewed confidence in the sector prompted the SLI to recover the ground it lost from the mass sell-off in September.  The SLI posted an impressive increase of 21.9 percent over the month of October, versus an increase of 7 percent in the MSCI.

• Positive newsflow has boosted the sector, with LVMH, Burberry, PPR and Coach’s quarterly results beating market expectations.  Swatch announced that September was a record month for the group and that 2011 promised to be its best year ever.

• Investor concerns over a slowdown in China were addressed as all major sector players confirmed the Chinese market’s resilience.

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Savigny Luxury Index September 2011 | Source: Savigny Partners

LONDON, United Kingdom — The seemingly unflappable luxury market continues to waver, with growing worries that China’s booming economy — the driver for much of the rapid growth of luxury brands in the past few years — is beginning to slow down. As a result, every major luxury brand has been hit, and hit hard.

Big news

• Luxury stocks suffered a steep sell-off in the last ten days of September as hedge funds moved out of the sector en masse due to growing concerns over the Chinese economy. The SLI took a real beating losing 13.6 percent over the month of September compared to only 3.8 percent for the benchmark MSCI.

• Prized assets are nevertheless still changing hands, as demonstrated by the recent sale of heritage leather goods brand Delvaux and a healthy interest in Italian tailoring brand Brioni, fronted by PPR.

• Hermès’ plan to create a controlling family holding company was cleared by French market authorities, boosting its defences against LVMH and consequently resulting in its inflated share price easing off.

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