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Neelie
Verlinden

Market Analyst
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The luxury industry: Winning on the stock-exchange

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02/24/2018 | 05:39pm CEST

For the French luxury industry, 2017 remains like an exceptional vintage. Speaking of vintage, the LVMH group knows what we’re talking about. The world’s biggest conglomerate of luxury products owns – among others – the famous Château D’Yquem, the producer of prestigious bottles of sweet wine.



Thanks to its market progression, the company led by Bernard Arnault recently became the number one capitalization of the CAC 40 with a valuation of more than 120 billion euros.

Kering also shined brightly on the stock exchange and generated the second best performance of the Parisian index, thus materializing a historic course of 87%. The new entity (previously PPR) refocuses its activities on becoming purely a luxury player. The Puma business will soon be handed over to the shareholders. In 2018, all of Kering’s turnover will be generated in the luxury segment, compared to 17% only ten years ago. With a valuation that’s 16% higher in 2017, Hermes could be added to this list of companies who are the big winners of the current market conditions. 

The turnovers are breaking record after record. The sales of LVMH and its 70 luxury brands exceeded 42 billion euros for a net result of 5 billion. Thanks to an explosion of activity at Gucci (+44%) and Yves Saint Laurent (+20%), Kering generates 15,9 billion euros of turnover and an operational profit of 2,9 billion. Chairman François-Henri Pinault even speaks of phenomenal figures.

There are several reasons for this success of the luxury industry. For several years now, the sector goes through a true industrial transformation and the emergence of Asia in general and China in particular benefits the global market. The excellent results of these ‘high end’ brands find their origins not only in a very positive global climate but also in the creative force of these companies and their ability to keep reinventing themselves continuously.   

In terms of quality, all the players indeed intensify their efforts regarding their creations (creative strategies) which, added to the know-how, allow them to boost a market that’s essentially driven by the offer. 

Moreover, millennial customers (mainly people in their thirties) and their search for new, unique experiences – and products – contribute to an increasing demand for luxury goods. The industry naturally remains dependent on a growing global number of wealthy people, a market that’s estimated at 400 million consumers in 2020. 

The Chinese travel a lot and consume as much abroad as they do in their own country. Knowing that currently, only 5% of Chinese people own a passport, it’s only legitimate to imagine the potential leverage here. As CEO François-Henri Pinault put it, this story is far from being over.

Logically – and thanks to a reassuring global economic climate –  the success of the recent years should continue in 2018 and hence provide the occasion to congratulate the entire luxury industry once again. 

Translated from the original article


Neelie Verlinden
© 4-traders.com 2018
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