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The Insider View: Industry status and major Trends

by Dr. Frank Müller on September 18, 2019

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

Luxury Industry Performance Index September 2019 (# 9)

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.

LIPI September 2019: 96,2 (08/2019: 99,0)

INDUSTRY STATUS AND MAJOR TRENDS:

  • For a second consecutive month the LIPI has fallen and is now at its 2019 year low of 96,2 points. Even if protests cease in Hong Kong, Brexit scenarios become more predictable and Sino-US trade discussions yield positive results, the luxury industry’s outlook will remain uncertain for the next 12 months.

  • Germany’s and the UK’s economies are expected to fall into recession soon. Expressed concerns about a globally slowing down economy may already have self-fulling prophetical impacts on the mood sensitive luxury industry. Such a concern is also seen to relate to tourism. In Q1 of 2019, Chinese outbound tourism to the top 20 countries grew by +6% only (+23% full 2018, Gavekal Dragonomics). The Renminbi is relatively weak, and have some -10% against the US$, some -5% against the Yen and some -4% against the Euro since May. And thus, international Chinese travel and spending is not expected to rise in the near future.
  • From the investors’ point of view, however, luxury shares remain attractive. Taking the S&P 500 index as benchmark, the YTD’s performances have so far been strongly correlated. The structure of market capitalisation of stock listed luxury companies do not indicate major shifts: YTD Kering, Hermès and LVMH together gained +2,8% of total market capitalisation (beauty +2,3%) at the expense of watches & jewellery (-2,3%), fashion (-1,9%) and cars (-1,0%).

COMPANY SNAPSHOTS:

  • Marriott has cut its 2019 outlook of revenues per available room down to 1-2%.
  • Audi will join Daimler and BMW in an alliance to create innovative driving assistance systems while mother company
  • Volkswagen continues to cooperate with Ford on highly automated driving functions.
  • Estée Lauder does not see any slowdown in China and expects full-year revenues (June 2020) to rise between 7-8%.
  • Prada increased sales +2% in by 2019 to €1,57bn at current fx, yet being flat at constant rates. EBITDA €491m.
  • Dior stopped its newest Sauvage campaign due to strong criticism about racist content.
  • Capri Holdings announce a Q1 +11,9% revenue growth and a share repurchase programme of US$500m.
  • Q2 yty revenues of Salvatore Ferragamo rose by 2,6% after the first three months’ sales grew by +2,2%.
  • At constant exchange rates, Tiffany’s first half year materialised a decline in sales of -1% while net earnings plunged -9%.
  • Alibaba Group acquires e-commerce platform Kaola for US$2bn.
  • Porsche has presented its first zero-emissions sports car Taycan with a leather-free interior to push ecological rebranding.
Porsche Taycan, zero emmissions sports car.
  • LV intends to give jobs to an additional 1.500 manufacturing staff in France by 2022 to cope with strong demand.
  • According to the UN Alliance of Sustainable Fashion, the industry generates 8% of the global carbon emissions.
  • 32 fashion brands initiated the Fashion Pact, a legally non-binding comittment to increase the industry’s sustainability.
  • Thebe Magugu is the first African designer to win the LVMH Prize for young fashion designers.

UP-COMING EVENTS:

  • Monaco Yacht Show, September 25-28, 2019, Monaco
  • Silmo, September 27-30, 2019, Paris
  • Luxe Pack, September 30 – October 2, 2019, Monaco
  • Paris Fashion Week, September 23 – October 1, 2019, Paris

TBTL LUXURY INDUSTRY PERFORMANCE INDEX (09/2019)

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 TBTL makes no representations as to their accuracy or completeness.

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