SLI Year in Review – Two Shocks and Many Uncertainties
Savigny Luxury Index full year 2015 performance
Global markets and our own Savigny Luxury Index (“SLI”) saw the world through rose-tinted glasses till about Easter, when a string of poor corporate results sent equity markets spinning. The SLI bobbed up and down till the end of summer in the face of currency concerns and unbalanced price architecture, signs of a Chinese slowdown and continued worries about Greece, before being hammered in August by the double blow of China’s currency devaluation and stockmarket collapse.
The Savigny Luxury Index lurched from crisis to crisis throughout the year, ending up bruised but not battered at the same level as the beginning of 2014. This was in sharp contrast to the MSCI World Index (‘MSCI’), which gained 16 percent over 2014. It has been a tough year for the luxury sector, which has been hammered by the slowdown of China, unrest in the Ukraine, protests in Hong Kong and currency headwinds. These macroeconomic and geopolitical issues underlined yet again the importance of China and of tourism and travel retail to the luxury sector.
Opening to Cosmetics
We revisited our SLI to decide whether or not to include some cosmetics companies, a sector which we had largely ignored in previous years on the grounds that the category was essentially sold wholesale and was prone to discounting. We looked at a number of beauty groups but only three really stood out in terms of size and focus: L’Oréal, Coty and Estée Lauder.
2012 was the arena of a fierce wrestling match between largely positive corporate results and hesitant economic news. A nail-biting five rounds were fought over which no clear winner was declared until the last round: the SLI won three rounds to two, rising 24 percent over the year, outperforming the MSCI by almost 12 percentage points.
What’s next for fashion flash-sale sites?
With contributions from Ceci Guicciardi, Brand & Commercial
A recession-proof proposition
The emergence of members-only, online flash-sale discounters in the early 2000’s leveraged the traditional need for luxury and premium brands to discretely dispose of excess stock, by capitalising on the opportunities presented by a fledgling e-commerce landscape. The business model was based on a simple proposition: to make high-end goods available at rock-bottom prices online, in an innovative digital declension of the traditional designer end-of-season sample sale.
A tale of two halves
The Savigny Luxury Index (‘SLI’) outperformed the MSCI World Index (‘MSCI’) by 16 percentage points despite a string of severe beatings over the year. It gained close to 8% over the year, relative to a decline of almost 8% for the MSCI. Stripping out the effects of the Prada IPO in June, which mechanically boosted our index through the introduction of a large number of new shares, the SLI still ended the year up 3%. The past year has been a game of two halves for the SLI. The first half, with the exception of the Japan earthquake, was a period of relative stability and growth with our index significantly outperforming the overall market. In the second half however all hell broke loose in a period of uncertainty and strong volatility.
Burberry: from plough horse to thoroughbred?
14 years ago, Burberry was all but put out to pasture, suffering from a dusty image and its logo being pasted on cake tins, doilies and aprons. Rose-Marie Bravo was put in the saddle and took Burberry for a ride down Chav lane to the gates of the luxury racecourse. Despite doing a great job in fixing Burberry over her 9-year tenure, setting the foundations for her successor and consistently beating market expectations, the jury was still out as to whether Burberry could ever become a thoroughbred luxury brand.
Luxury fashion – getting the business model right
Luxury fashion is a very exciting business which can generate substantial returns if you get the formula right. Not only is there the ability to charge up to ten times the cost of manufacturing a garment and the potential to build a global business; apparel can be the beginning of a page-turning blockbuster, accessories and leather goods are the next chapter, fragrances and eyewear licenses the well-oiled plot.
Savigny Partners Index performance January 2010 to date – not quite out of the woods yet
Key themes of the Noughties
Savigny Luxury Index – a look back at the Noughties
M&A activity in the sector
Fragrances – the essence of a good brand?
Japan falls from grace as brands turn to China
Ports Design to join SLI!
Sustainability and the Luxury Industry
Luxury for Hire
Experiential luxury – life beyond bling
Sector review / Sector valuation
M&A activity in the sector in 2007
Challenges of the Spa Market
India – A Field of Dreams
Luxury Brands and the Internet – From Laggards to Leaders?
Savigny Luxury Index
It’s the currency, again!
Quarterly Sector Review
Savigny Luxury Index
Japan – A Maturing Market, China’s Luxury Market, Private Equity and Luxury Goods
Savigny Luxury Index vs. FTSE All World
M&A Activity in the Sector