Luxury sector expects a strong 2019 - Savigny Luxury Index

2018 was a challenging year for some luxury players, but 2019 is poised to see growth, according to the latest Savigny Luxury Index.

With many 2018 results falling short of forecasts, luxury companies including Prada, Ferragamo and Tiffany, some who came short of analyst expectations last year, are expected to have a positive 2019.

According to the index Ferragamo is already seeing growth in same-store sales, while Tiffany is focusing on growing its e-commerce business. Hermès is continuing its strong performance thanks to demand in China, with operating profit surpassing 2 billion euros.

Galeries Lafayette’s new flagship on the Champs-Elysées is disrupting an outdated model for department store merchandising. Gone are the shops-in-shops; merchandising is now based around styles or trends, spanning gender and product categories. Customers can book an appointment with one of 300 “personal stylists” who will assist their journey through the store by using an app which allows for the uploading of preferences by the customer as well as the recording of their selections, photos of fittings and measurements, states Savigny Partners in its March Index.

In other categories the index notes the beauty sector remained hot with several transactions in March: Bain Capital acquired Maesa, a French beauty contractor and brand incubator, in a secondary buyout. Barcelona-based cosmetics group Puig made investments in emerging markets with the purchase of a minority stake in Kama Ayurveda, the leading Indian Ayurvedic brand, for some 12.5 million euros, and Colombian beauty retailer Loto del Sur. American beauty giant Glossier announced it raised 100 million dollars in a Series D founding round.

LVMH continues to soar

According to the index, brands going up in 2019 include LVMH sailing to the top of the share price growth leaderboard this month, with a gain of almost 9 percent. The stock suffered a minor blip during the month, losing almost 9 percent at the open on March 25 before recovering in what traders said was likely a “fat finger” erroneous trade.

Italian outfitter Moncler saw stellar 2018 results, reporting its figures at the end of February, gaining almost 7 percent this month. Luxury Iifestyle brand Brunello Cucinelli this month saw a share price drop of over 10 percent reflecting the challenge posed by having to satisfy unrealistic investor expectations. Prada lost over 7 percent of its value this month on the back of disappointing 2018 results, showing weakness in China.

The ongoing Brexit saga will influence the UK's luxury imports and exports

Brexit is continuing to cause turmoil on both sides of the Channel, until all the facts of its EU divorce become clear. On Friday the UK is expected to ask for a one-year extension, but the news have also reported votes for another referendum. At worst, a no-deal Brexit is estimated to cost the British luxury sector 8.9 billion dollars according to a study commissioned by Walpole, the UK’s luxury industry lobby group.

The rise of nationalism throughout Europe and the rest of the world could also develop into a major threat to the luxury industry, which has a truly global supply chain and consumer base.

Article source: Savigny Luxury Index. For more information visit www.savignypartners.com. Photo: Ferragamo Group website