Savigny Luxury Index
Saved by the Bell
After a difficult month, the Savigny Luxury index (“SLI”) rebounded strongly on the last day of September, ending 1 percent up, whilst the MSCI World Index (“MSCI”) could not quite manage the same and finished down 3.5 percent.
After a difficult month, the Savigny Luxury index (“SLI”) rebounded strongly on the last day of September, ending 1% up, whilst the MSCI World Index (“MSCI”) could not quite manage the same and finished down 3.5%. A Mexican wave of mini-rallies in stock markets around the globe, starting with the US provided the silver lining to an otherwise grey cloud of doubt over the outlook for the sector.
• The only sector-positive news came from Richemont, which announced better-than-expected sales growth in July and August, underpinned by continued spending of Chinese tourists, notably in Europe and Japan. Nevertheless, Swiss watch exports were down 1.6% in nominal terms (4.1% real) in August, with the pinch being particularly felt in the affordable segment.
• LVMH hired a senior executive from Apple to head its digital operations, bucking the trend of luxury executives defecting to Apple. Burberry, the clear sector leader in digital, premiered its Spring Summer 2016 collection through the first ever Snapchat show. Whilst overall luxury sales growth is trending down towards 5% annually, luxury online sales are growing closer to 30%.
• There was some corporate activity: Eurazeo invested Eur20 million in a Eur33 million fundraising round by second-hand luxury goods online retailer Vestiaire Collective; Luxury furniture designer and perfumer Clive Christian sold a majority stake in his company to a consortium of investors led by Brian Souter and Ann Gloag; Hong Kong-based Global Brands Group bought premium jeans label Joe’s Jeans inc for US$13 million. Finally, founder of Net-a-Porter Nathalie Massenet left the group recently merged with Yoox, amid rumours of dissent with Yoox’s CEO.
• Ralph Lauren topped the league table this month with a share price increase of 6.3%, driven by the hiring of Steven Larsson as CEO. Steven has been credited with the phenomenal growth of Old Navy.
• Richemont’s share price increased by 4.6% as the company beat sales forecasts for the first half.
• Tiffany carried over its losses from August, ending 6% down on the month. The stock has lost almost a third of its value since the beginning of the year.
• Prada continued its downward trend since mid-March, ending 5.4% lower this month. The company is suffering from its recent bout of retail expansion (260 Directly Operated Stores opened since 2011), which makes it more operationally geared than its peers.
What to watch
Is the performance of the SLI at the end of this month a dead cat bounce, or should we put our rally hats on in the hopes of a better outlook in Asia? Whilst Richemont’s results ignited some hope that the Chinese consumer was still spending, the likelihood is that the spending was prompted more by weak currencies in Europe and Japan than strong fundamentals in China. Investors will be looking in the detail of future results announcements for more clues.