The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — The Savigny Luxury index ("SLI") rallied over 6 percent in the month, leaving the MSCI World Index ("MSCI") in the dust, with a comparatively paltry increase of 1.3 percent. The bigger groups posted impressive first half sales growth and came out more optimistic than expected as to the outlook for 2015 and beyond.
Big news
• LVMH and Kering posted strong results for the first half of 2015 led by Louis Vuitton and Gucci respectively, following two sluggish years. The devil is in the detail though. Vuitton's growth was accompanied by price increases across the brand's products and bodes well for margins. On the other hand Gucci's sales recovery was largely due the discounting of old collections ahead of the new designer's products hitting the shelves later this year. The discounts on offer were particularly visible in China.
• Other companies similarly echoed strong performances in the first half of the year, with the laurels going to Moncler, which stunned the market with a 53 percent increase in core profit.
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• Swiss watch exports increased by 3.3 percent in June after a very difficult couple of months. Europe posted double digit growth, offsetting further declines in Hong Kong and China. Nevertheless overall sales growth was flat over the first 6 months of 2015 and some analysts believe there will be persistent softness in the market due to continued weakness in Hong Kong and China.
• The headline M&A deal is still Coty's $12.5 billion purchase of P&G beauty businesses, for which more details emerged this month. Other transactions include Unilever's purchase of skincare brand Murad and Rajesh Exports' acquisition of Valcambi, a leader in precious metals refining. The acquisition will allow Valcambi to access India, Middle East and China, and Rajesh Exports to become a fully integrated player in precious metal refining & gold jewellery making.
Going up
The feelgood factor has returned to the sector with 90 percent of the SLI components, by value, posting share price gains this month.
• Swatch gained an impressive 14.3 percent following strong sales performance in the first half, helped by a 3.6 percent sales increase at constant rates and a positive outlook for the year, despite unfavourable currency movements that caused a drop of 20 percent in net profit.
• Moncler's share price rallied over 11 percent as the company's first half profit was boosted by stellar retail sales growth, especially in Asia and North America.
• Luxottica's share price increased by almost 11 percent in the month as the company reported a 25 percent quarterly net profit increase, underpinned by a strong dollar and unseasonably hot weather.
Going down
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• Coach's share price continued to suffer from the threat to the brand's performance by the likes of Kate Spade and Michael Kors. The group, which recently acquired Stuart Weitzman in an attempt to curb its decline, lost 10 percent of its value in July.
What to watch
Hong Kong is losing ground as a luxury retail destination, with shop rents in bustling Causeway Bay forecast to decline as much as 40 percent this year. Luxury groups poured huge resources into stores in the former British colony over the past decade, believing that duty-free shopping and proximity to the mainland ensured the city would remain their star market. But sales are deflating. Chinese customers are now ignoring the island in favour of South Korea and Japan, as well as further afield in Europe where luxury goods are considerably cheaper.
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