Who’s who in luxury
The bigger players dominate luxury-goods sales. Revenue at LVMH (Paris: MC) rose by 44% year-on-year to € 64.2bn in 2021, and by 20% compared to 2019, before the pandemic (excluding the impact of its acquisition of Tiffany, sales were up 36%). LVMH has around 75 individual brands (“maisons”) covering a wide range of businesses and is the all-in- one way to invest in the luxury boom through a single stock. Its share-price performance (see chart) is testament to that.
Sales at the smaller Swiss group Richemont (Zürich: CFR) – which is also diversified among brands, but more concentrated in watches and jewellery including Cartier – fell from €14.2bn to €13.1bn, but a 30% rise in fourth- quarter sales showed a recovery was underway. The third of the conglomerate-style businesses is Kering (Paris: KER), whose flagship brand is Gucci. It’s roughly the same size as Richemont and saw sales rise 12% in the third quarter. All three are controlled by founders who have made huge fortunes in the luxury sector.
Fashion brand Burberry (LSE: BRBY) expects adjusted operating profit to the end of March to be 35% higher than the £396m reported for 2021. Italy’s Prada (Hong Kong: 1913) recently reported fullyear revenues of € 3.6bn, up 8% from before Covid-19 dented demand. Other notable listed industry leaders include designer eyewear-maker EssilorLuxottica (Paris: EL), Tommy Hilfiger-owner PVH (NYSE: PVH), Ralph Lauren (NYSE: RL), Hermès (Paris: RMS) and fast-growing skiwear maker Moncler (Milan: MONC).
Meanwhile, premium drinks groups Diageo (LSE: DGE), Pernod Ricard (Paris: RI) and Rémy Cointreau (Paris: RCO) will be toasting the trend for consumers to sip higher- quality tipples. For watch enthusiasts, Rolex and Patek Philippe are both private. However, Swatch (Zürich: UHR) owns the Omega and Tissot brands and offers more focused exposure to that theme that the big conglomerates.
London-based FarFetch (NYSE: FTCH) has benefited from the increase in online sales as well as the growing influence younger consumers are having on the industry. The company has been on a buying spree in the last few years, snapping up streetwear brands New Guards Group and Stadium Goods. FarFetch grew revenues by a blistering 64% in the year to the end of December, to $1.7bn. The shares, however, have failed to keep up, and FarFetch remains lossmaking. It’s one for the brave.
If you would rather spread your bets, there, the Amundi S&P Global Luxury ETF (Euronext: GLUX) follows the S&P Global Luxury Index (note this also includes car marques such as Mercedes-Benz).
Among the actively managed options, there’s the Pictet Premium Brands fund which has taken advantage of recent stockmarket volatility “to add high conviction names with strong pricing power at relatively attractive levels”. The fund has returned an annualised 18.5% over the last three years, and it charges a 1.1% ongoing fee. Alternatively, the GAM Multistock Luxury Brands Equity has returned an annualised 13.6% over the past three years, and charges a 1.25% fee.