The Lapse of Luxury

December is finally here, which for many of us means the holiday season… and the mad rush to complete your holiday shopping. If you’re an institutional investor, I hope your list includes stock in Swiss watches or French fashion companies, as pockets of value are appearing in the European luxury sector.

Luxury stocks have had a very disappointing 2014 thus far, and the third quarter didn’t help matters. The sector underperformed globally thanks to a variety of factors, including the impact of protests around early October’s Golden Week holiday in greater China and Hong Kong. The situation in Hong Kong, the world’s biggest market for Swiss watches, provoked Luca Solca, a luxury analyst at Exane BNP Paribas, to declare in November that “there seems to be a perfect storm closing in on the luxury goods sector.”

The good news is that North American investors – the largest investor base in the Luxury Group*, with 38.4% of institutional shares – see reason for optimism.

George Evans, CIO of US-based OppenheimerFunds (a top holder and top buyer in The Luxury Group), is “optimistic about the long-term growth in demand for luxury goods from the emerging market consumer. Given that the customers are located elsewhere, recent slowing in the Eurozone has little impact on this trend, and some of the fears around a broader slowdown in demand from the emerging world have proved unfounded, especially in China.”

Here’s hoping that Mr. Evans is right. ‘Tis the season for tidings of comfort and joy, and the luxury goods sector could sure use a little bit of both.

Ipreo’s Sector Reports examine equity investment and capital flows in and out of select sectors within Europe on a quarterly basis. To read the full report for the Luxury Goods sector – and other sectors and regions within Europe – visit Ipreo Ink.

*Ipreo focused its analyses on a specific group of stocks, which we believe provide a fair representation of Europe’s traditional luxury goods companies (clothing, cosmetics and jewelry). These include: (1) Burberry; (2) Christian Dior; (3) Compagnie Financiere Richemont SA; (4) Hermès International; (5) Hugo Boss AG; (6) Kering; (7) L’Oreal; (8) Luxottica; (9) LVMH Moet Hennessy Louis Vuitton SA; (10) Pandora A/S; (11) Prada; (12) Safilo; (13) The Swatch Group ; and (14) Tod’s.


Ipreo’s Sector Reports examine equity investment and capital flows in and out of select sectors within Europe on a quarterly basis. To read the full report for the Luxury Goods sector – and other sectors and regions within Europe – visit Ipreo Ink.