LONDON, United Kingdom — China's appetite for luxury goods is still strong and featured prominently in this month's results announcements from major luxury players. Kering posted record 2018 profits on the back of a 29 percent increase in sales for the year, with chief executive François-Henri Pinault stating, "In terms of the momentum with Chinese clients, it's very strong."

Hermès' organic sales growth topped 10 percent in 2018, as the group remained impervious to any slowdown in China. The same sentiment was echoed by Moncler, which confirmed that trading in China was strong through the beginning of 2019, and by Estée Lauder in its quarterly results, which prompted the beauty group to upgrade its forecasts for the full year.

In other news, Italian fashion label Marco De Vincenzo, — whose eponymous founder is also head designer of leather goods at Fendi — sold a 35 percent stake to Marco Panzeri, a private Italian investor with holdings in fashion. Marco De Vincenzo received investment from LVMH in 2014 (the luxury group will retain a 45 percent stake in the business).

Elsewhere, JAB Holdings, the Reimann family’s investment vehicle, announced plans to increase its stake in Coty from 40 to 60 percent with a share tender offer worth $1.7 billion. The management team of Italy-based luxury leather goods manufacturer Bottega Manifatturiera Borse SpA bought out the company from German mid-market private equity group Halder.

The Savigny Luxury Index (SLI) continued its ascent in February, ending the month just over 7 percent up, whilst the Morgan Stanley Capital International index (MSCI) gained 3 percent. Nevertheless, the SLI has not recovered the ground lost since its peak last June: our index is still 8 percent in the red, versus a flat performance for the MSCI over the same period.

SLI versus MSCI

SLI Graph February 2019 | Source: Courtesy

Going Up

• Estée Lauder gained 15 percent in February on the back of strong quarterly results, prompting the beauty group to upgrade its forecasts for the current financial year.
• Richemont appears to be one of the prime beneficiaries of the China relief rally this month. The jewellery and watch group gained almost 12 percent, with sharp rises in its share price coinciding with the announcement of Hermès and Kering results.
• Kering gained almost 10 percent this month due to yet another set of market-pleasing results.

Going Down

• Tapestry fell short of market expectations, with its first quarterly earnings miss in two years owing to weak sales at Kate Spade. The group cut its full-year forecast, investors cut their losses and the share ended the month 10 percent down.
• Safilo was back out of favour this month, losing 7 percent of its value. This is likely in part due to LVMH announcing the construction of a second eyewear production facility with its partner Marcolin.

What to Watch

The industry's ethics are under increasing scrutiny, a shift that is bolstered by the current reality of trial by social media. This season, Coach stopped using fur and Victoria Beckham Ltd banned exotic skins from its collections. LVMH also announced it would boost measures to ensure responsibly sourced crocodile skins, having faced criticism by PETA for its supply practices in the past.

There have nevertheless been a series of blunders in recent months, from Dolce & Gabbana's insulting "eating with chopsticks" videos to Prada and Gucci's blackface fiascos and, most recently, Burberry's "noose" hoodie. In response to backlash, Prada set up a diversity council to "elevate voices of colour within the company and fashion industry at large."

Sector Valuation

SLI Table February 2019 | Source: Courtesy