Sparkling outlook for the luxury industry

28th March 2018
-IAM, News

Erika Mesmer, Client Relationship Manager

Basel World, the annual internationally trade show for watch and jewellery industry just took place. Although the number of exhibitors has significantly been reduced this year compared to last years, the quality and reputation of the remaining participants stays extremely high.

Beyond presenting the latest watch models, the newest technological developments and the trendiest sparking pieces of jewellery, the fair is a good moment to reflect on how the luxury industry is currently doing.

The luxury industry is a vast sector, including a diversity of items such as watches, jewellery, leather goods but also spirits. It appeals to many different types of people and demand can be qualified as ranging from aspirational consumption of affordable luxury good to the very high end exclusive and selective objects.

In the last years the industry suffered some setbacks, mainly due to a slowdown of demand in China. Many manufactures continued however during this period to invest and innovate in order to prepare for the next upswing.

2017 was positive year in general for equity markets, saw luxury companies posting outstanding performance. Performance that confirms that when the economy in general is strong, demand for luxury goods is even stronger as consumers are more willing to indulge themselves.

In our portfolios we like luxury companies which are world leaders in their segment, such as LVMH, Pernod Ricard or Diageo in Europe or Swatch and Richemont in Switzerland. These companies hold many different brands, appealing to many different types of customers. Although the luxury segment is quite cyclical and depends on the general mood, it strongly benefits from positive perspectives.

Currently the worldwide economic environment is positive, with growth registered in all regions. Demand for example is back in China (both mainland and Hong Kong), other emerging markets follow the same trend and tax cuts in the US are likely to improve consumer sentiment. Exports of these companies continue to be strong in the beginning of 2018 and even if comparative figures will become less positive throughout the year (due to a continued improvement throughout 2017), we are convinced that the environment for companies active in the luxury industry remains positive.