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Luxury Recovery Tempered by Caution

First-half results provided further evidence of a luxury recovery, although caution over currency headwinds dampened investor enthusiasm.
Savigny Luxury Index September 2017 | Source: Savigny Partners
  • Pierre Mallevays

LONDON, United Kingdom — The Savigny Luxury Index ("SLI") gained 2.8 percent this month, a touch more than the MSCI's 2.6 percent gain. First-half results provided further evidence of the luxury sector's recovery, although caution over currency headwinds dampened investor enthusiasm.

Big news

Strong results continued to pour in from different segments of the luxury industry: at one end, leather goods primo Hermès announced record-breaking first-half results, achieving its highest operating profit ever with a margin of 34.1 percent; at another, hard luxury leader Richemont announced a sales growth of 12 percent for the first five months of its current financial year (ended March 2018).

This seemed to confirm that the luxury watch sector has finally bottomed out, although the figure was boosted by a buyback of watch inventory in order to clear up the supply chain and prevent a grey market from developing. Whilst both companies’ results echoed the good feedback from the luxury sector in general, Hermès poured cold water on investor hopes by pointing to a looming currency issue if the euro continued to strengthen.


The apparel segment has been active this month in terms of mergers and acquisitions activity. SMCP (Sandro, Maje & Claudie Pierlot) began IPO proceedings with a view to listing by the end of the year — its main shareholder, Shangdong Rui, will reduce his stake from 82 percent to 51 percent and the company will also raise 120 million euros to refinance debt.

Xavier Marie, a France-based investor, acquired an 80 percent stake in contemporary fashion brand Paule Ka from Change Capital; legendary Italian fashion brand Costume National was bought by Japanese luxury fashion brand Versatile; and Brunello Cucinelli gained control of its Hong Kong subsidiary by buying out its local partner, Enm Holdings.

In maternity wear, Seraphine sold a 68 percent stake to Bridgepoint in a management buyout, valuing the company at £22 million. Elsewhere, South Korean brands continued to attract investors this month, despite rising tensions in the region, with eyewear brand Gentle Monster receiving investment from L Catterton and Carver Korea, which owns the luxury skincare brand AHC, being bought by Unilever for 2.3 billion euros.

Paris Fashion Week saw the maiden collections of recently hired designers at Lanvin (Lapidus), Chloé (Natacha Ramsay-Levi), Givenchy (Clare Waight Keller) and Carven (Serge Ruffieux). The jury is out on Lapidus' controversial appointment at Lanvin, whilst Clare Waight Keller's signature sleek aesthetic, whilst very different from previous incumbent Riccardo Tisci, was a clear winner at Givenchy, as was Natacha Ramsay-Levi at Chloé.

Going up

  • Michael Kors continued to climb in September, gaining 13 percent on the back of better numbers and the approval of its takeover by Jimmy Choo by the shoe and accessories brand's shareholders.
  • Kering and LVMH rose by 7 and 6 percent respectively this past month, the two groups, with their diversified brand portfolios, being perceived as the best proxies for the luxury industry as a whole and thus attracting investors' interest for the sector.

Going down

  • Prada took a beating this month as the company announced a sales and profit decline of 6 and 18 percent respectively for its first half, driven by lower sales volumes and higher operating costs; the company admitted its recovery will take longer than anticipated. The stock lost just over 4 percent of its value in the month.
  • The usually bullet-proof Hermès share also took a hit, losing 4 percent in September after warning that its 2018 performance might be impacted by unfavourable currency movements.

What to watch

Doing good is becoming increasingly important for luxury brands and for their consumers. The sector had been blighted in the past by stories of cruel practices both on animals (think crocodile skin and fur) and humans (working in sweatshops or walking on the catwalks).


LVMH announced that it was investing more in improving its environmental credentials, whether it be sourcing of skins or energy efficiency measures; and LVMH and Kering jointly announced the banning of size zero models, with stricter monitoring of model health and well-being.

September also marked the first Green Carpet Fashion Awards, which took place in Milan at the end of Fashion Week. The ceremony, spearheaded by eco-fashion activist Livia Firth, gave awards for innovation in supply chain, ecological credentials and the promotion of craftsmanship.

Sector valuation


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