The Savigny Luxury Index grew 2 percent in January, as the luxury business shows further signs of recovery. A number of brands ended 2017 with sales growth, with LVMH, Richemont and Swatch all reporting significant increases. Luxury is poised for growth in the United States thanks to new tax cuts, but index author Savigny Partners cautions that economic and geopolitical movements such as currency shifts and tensions could have a negative affect on the market.
“The U.S. tax reform is boosting the overall mood,” said Ludovic Granchamp, partner at Savigny Partners, London. “If you pay $1 million in taxes and you suddenly have only half to pay, $500,000, you feel like investing more but also spending more, and as buying luxury is a bit of both, happy days ahead.”
A measurement of stock performance of about 20 publicly traded luxury companies, the Savigny Luxury Index outperformed the MSCI in January, which only rose 1.5 percent in the same timeframe.
From the beginning of the month to Jan. 31, companies such as Richemont, Kering, Swatch and Estée Lauder saw their share prices grow between 1 and 7 percent.
Prada Group shares saw the biggest bump, growing 12.9 percent. Savigny attributes this to improved trading in China, a key market for Prada. A comparably late adopter of ecommerce, Prada has also launched an online store in China.
Major groups including LVMH, Richemont and Swatch have all noticed a rebound in demand in China Along with Prada, another big mover was Ralph Lauren, whose stock price grew 10.2 percent, as investors and brokers anticipated the release of its results in February.
Driven by an increased emphasis on digital and social marketing campaigns, U.S. fashion brand Ralph Lauren reported better-than-expected financial results for third quarter of the 2018 fiscal year.
Kering’s Saint Laurent is also working with JD.com to build an ecommerce presence in China. While many luxury companies gained stock value as they entered 2018, on the opposite end were Burberry and Mulberry, whichC lost 11.9 percent and 5.8 percent of their respective share values. Following the announcement of Brexit, the devalued pound led shoppers to buy luxury in the United Kingdom, as the exchange offered a discount on goods.
China’s spectacular growth in luxury consumption recently is primarily driven by Chinese women buying ready-to-wear fashion, jewelry and cosmetics, according to Bain & Company.
Bain’s “2017 China Luxury Market Study,” China’s luxury consumption is outstanding and outpaces much of the world. In addition to the value of Chinese consumers traveling outside of Asia, Bain’s report also notes that Chinese domestic spending has outpaced overseas purchases in the last yea.
After luxury hit a rough patch the last few years, it is likely hitting its stride again with a 5 percent growth this year, according to a new report by Altagamma and Bain & Company. According to the “Altagamma Worldwide Market Monitor 2017″ report, the luxury market grew to 1.2 trillion euros, $1.4 trillion at current exchange, in 2017 across both goods and service.