Savigny Luxury Index

January 2012

Caution thrown to the wind

 

Big news

• The New Year started on the front foot as equity markets made significant gains in January.  The Savigny Luxury Index (‘SLI’) outperformed the MSCI World Index (‘MSCI’) by 6 percentage points, gaining 11% over the month of January, relative to an increase of close to 5% for the MSCI.
•  Investors have been exposed to continued good news.  Indeed almost all luxury groups have announced outstanding Christmas trading and 2011 year-end results driven mainly by growth in Asia ex. Japan.
• However, uncertainties have not dissipated.  Although the US market seems much better, Europe remains a concern, with sector sales highly dependent on tourist spending. 

 Going up

• Ferragamo has recovered its lost ground: its share price gaining almost 20% during January after the company reported a 26% increase in full-year 2011 sales.
• Coach’s share price rose by almost 17% after it posted higher than expected sales for the holiday quarter.  The US leathergoods behemoth got a lift from male shoppers, who are becoming a key growth segment for the brand.

 Going down

• Tiffany’s share price fell due to worse than expected holiday sales in America and Europe, two of its most important markets.  The group’s sales in the Americas for November and December were up just 2% compared with 2010, whilst sales at its iconic Fifth Avenue store fell by 1% despite strong tourist spending. 

 What to watch

• Watch and jewellery groups Swatch and Richemont had a stellar year in 2011, riding on sustained appetite for luxury watches, particularly in Asia.  Their January share price increase is well under the SLI average, reflecting some concerns about the likelihood of repeating last year’s performance in 2012. 

  Sector Valuation