19 days ago • 2 mins
What’s going on here?
Swiss luxury group Richemont reported results that could make investors look the other way on Friday.
What does this mean?
Smoked salmon is a stretch for most households these days, so it’s no surprise that luxury wares are out of the budget. Cartier-owner Richemont knows that all too well: tarnishing sales led to a lower-than-expected €10.2 billion ($10.8 billion) in revenue in the six months up to the end of September. That meant profit for the period landed at €2.65 billion ($2.8 billion), more than €200 million ($213 million) below analysts’ forecast. It checks out, then, that Richemont’s shares dipped by 6% after the results.
Why should I care?
For markets: Europe’s empty streets.
Europe’s streets are dotted with the most famous designers’ flagship stores, so much so that investors believe the luxury sector is the region’s equivalent to tech stocks in the US. That’s up for debate now, though: Europeans are steering clear and China’s wavering recovery means the country’s shoppers – usually reliable fanatics for expensive fabrics with prices to match – are testing their restraint. And with Americans’ pandemic savings running low, it’s hard to find an audience for outfits worth a month’s rent.
The bigger picture: Fashion changes, but style endures.
Luxury brands have plenty to cushion them, though – besides a stockroom of cashmere scarves. Fledgling designers have little chance of success without a reservoir of cash and a Rolodex of connections, so established names rule the roost. Plus, with a clientele that happily swipes on four-figure accessories, companies can easily add another few hundred onto price tags. What’s more, when the economy gets back on its feet, pent-up luxury fiends will likely head toward their favorite stores to celebrate. For investors into the finer things, this is essentially a sample sale: Richemont, LVMH, and Estée Lauder’s stocks have slimmed by 28%, 21%, and 43% respectively over the last six months.
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