Our colleagues over at Savigny Partners released their regular newsletter today, demonstrating just how tough things have been for many luxury and fashion stocks in recent months and highlighting an investment opportunity for those who believe in the long-term fundamentals of the luxury market.
The Savigny Luxury Index (SLI) has plummeted by 29% since its peak in June 2007, underperforming the overall market as measured by the performance of the FTSE All World Index. But, longtime industry watchers will recall that the luxury industry was one of the first to bounce back after the post 9/11 economic malaise.
Stocks with exposure to accessible luxury have been hit the hardest with Coach, Tods, Burberry and Tiffany seeing their Enterprise Value/EBITDA multiples crash by more than 30%. On the other hand, LVMH has fared reasonably well with its diversified portfolio of brands, while Hermes managed to score an increase in its EBITDA multiples.
Pierre Mallevays, Managing Director, writes:
"Consistent with the past, the sector has been proportionately more penalised than the overall market in the same period. We think this is unjustified in light of the positive long-term fundamentals of the luxury goods market. Undoubtedly, it is our view that the sector presents strong buying opportunities for the medium-term investor."
You can find the complete newsletter from Savigny Partners LLP here.