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The Insider View: Industry status and major trends: Oct 2019

by Dr. Frank Müller on November 14, 2019
Watches

Editor: Analysis from our partner The Bridge to Luxury (TBTL) on the state of the luxury industry, including watches. This is the October Luxury Industry Performance Index.

Luxury Industry Performance Index October 2019 (# 10)

TBTL’s Luxury Industry Performance Index (LIPI) is a monthly published indicator, providing a quick overview of the high-end industry’s current status and an outlook on its development over the next months. The LIPI is distributed as a free e-newsletter edited by international strategy consulting firm The Bridge To Luxury (www.thebridgetoluxury.com).

TBTL’s Luxury Industry Performance Index ( L I P I ): 101,0 (9/2019: 98,2)

Industry major status and trends

  • From its year low of 96,2 basic points in August, the LIPI has strongly bounced back to an index of 101,0 in October in breaking the important 100 threshold. As throughout 2019, the LIPI continues to mirror the global political and economic uncertainties: US-Sino trade talks, the Hong Kong situation, Brexit, the Middle East etc.
Central, November 14. Photo: Studio Incendo.
  • This frame is likely to remain the same for the time being even if there are signs of a more cautious approach of the US administration in trade policies (e.g. the recent delayed introduction of higher import duties on European cars.
  • In its October report, the IMF has revised its 2019 and 2020 estimates. For this year, the IMF expects a 3,0% global GDP growth against a 3,3% forecast in April and actual 3,8% in 2018. The projection for 2020 is 3,4% instead of 3,6%. Besides HK, Russia, Switzerland, Germany, Italy and the USA contribute over-proportionally to the global economic slowdown.
  • China’s local luxury sales remain robust due to a weaker Yuan (less travelling abroad) and a reduced sales tax in 2019.

Company snapshots

  • With a market capitalisation of more than $200bn, LVMH with its more than 70 brands has become the highest evaluated company in the Euro zone. The group is asked to offer $14.5bn by iconic jewellery brand Tiffany for its acquisition. In September, competitor Richemont (Cartier, Van Cleef & Arpels) had brought Italian jewellery brand Buccellati.
  • Richemont has agreed upon a partnership with former Lanvin designer Alber Elbaz.
  • The world’s 5th largest hotel group Huazhu Group is acquiring Deutsche Hospitality (e.g. Steigenberger) at €700m (a x17 multiple of 2019 expected EBITDA).
  • Ferretti (luxury yachts) has cancelled its plan on an IPO due to unsatisfactory offerings by investors.
  • A unique Patek Philippe Grandmaster Chime in steel has become the world’s most expensive wrist watch ever sold. The timekeeper fetched CHF31m at the charity auction “Only Watch” to fund research against duchenne muscular dystrophy,
Patek Philippe Grandmaster Chime achieved CHF 31M, the highest ever for a wristwatch at the “Only Watch” auction.
  • Kering reports +11,6% in Q3 revenues with stronger sales of all major brands despite Hong Kong business being affected.
  • PE Regent has bought German fashion label Escada from billionaire Megha Mittal.
  • French L’Oréal will take over Clarins fragrance entities such as Mugler. The divisions’ sales amounted for €340m in 2018.
  • Fashion label Boss and porcelain manufacturer Meissen have introduced a fashion line.
  • Swatch Group has announced the end of its licencing agreement for watches and jewellery with fashion label Calvin Klein.
  • Blaming Brexit uncertainties, Tesla will build its European 7.000 employees’ factory in Berlin.
  • Versace’s acknowledges lower sales in China linked to controversial HK/Macao T-shirt.
  • De Beers’ marketing budget 2019 will surpass the previous year’s one ($170m) – the highest in more than 10 years.
  • BMW warned that a global trade war would risk jobs in its USA factory. BMW is the USA’ biggest car exporter in value.
  • Porsche and Boing will partner to develop an electronic flying car.
  • Ferrari raised its 2019 forecast to €3,7bn (previously €3,5bn). The brand intends to launch more line-extensions into apparel
  • and accessory collections, entertainment offers, luxury products and services for clients (e.g. restaurants).
  • Estée Lauder is among the companies that cite ongoing unrest in Hong Kong as a reason for lower than expected revenues.

TBTL LUXURY INDUSTRY PERFORMANCE INDEX (10/2019)

Disclaimer: Deployant and The Bridge To Luxury (TBTL) believes the information in this report are accurate and complete. Information presented were obtained or derived from sources TBTL considers reliable, but neither Deployant nor TBTL makes no representations as to their accuracy or completeness.

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