Institutional Investor's Alpha Magazine - October 2008 - (Page 31)

LUXURY MARKETS In a Down Market, Ultra Luxury Businesses Still Have Upper Hand Although the economic slowdown is hitting the luxury industry at the entry and midmarket price points, the top end remains largely unaffected By Marilen Cawad for the ﬁrst half of this year – have occurred for the likes of LVMH Moët Hennessy-Louis Vuitton, Hermès and Richemont, whose well-heeled customers have been shrugging off economic blues. LVMH, the French company that owns Louis Vuitton, Fendi, TAG Heuer and Dom Pérignon, reported ﬁrst-half revenue of €7.8 billion ($12 billion), an increase of 5 percent compared with the same period last year. The company said it recorded ﬁrsthalf organic growth of 12 percent, while operating proﬁt increased 8 percent. Hermès International, maker of Birkin handbags and silk scarves, saw its net income in the ﬁrst six months of 2008 rise 5.3 percent, to €134.9 million. First-half sales rose to €813.2 million, an increase of 17.9 percent at costant exchange rates. Growth at current exchange rates was 12.8 percent. The French luxury goods company’s sales in the Americas increased 24 percent. Richemont, the Geneva-based maker of Cartier jewelry and Vacheron Constantin watches, also reported an increase in revenue. From April through August of this year, sales were up 11 percent. But Johann Rupert, the group’s chairman, says his company is not completely immune from a slowdown. “Products and brands positioned at the entry and midmarket price points in the luxury goods industry are experiencing difﬁcult market conditions today,” Rupert says. “However, to date, the top end of the luxury market – where Richemont‘s Maisons are predominantly positioned – has not been affected.” Terry Betteridge, who runs 111-year old Betteridge Jewelers, holds a collection of ﬁne timepieces, Clockwise from top: Platinum, emerald and diamond brooch; platinum, emerald cut aquamarine and diamond ring; and Patek Philippe pocket watch. All from the Betteridge collection. C onsumer conﬁdence in the economy continues to erode amid concerns about jobs and slowing business activity. Retailers have been reporting disappointing sales, prompting them to offer deep discounts and promotions to lure bargain shoppers back into their stores. Ultra-luxury brands, however, have not had to resort to such tactics. Despite a roiling ﬁnancial crisis in the US, no markdowns and no steep decline in sales – at least, October 2008 • This Sponsored Report was prepared by the Special Projects Department of Alpha.

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2008

Institutional Investor's Alpha Magazine - October 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Process of Evolution The Good Guys: Israel's Champion Interview: Fast Lessons for Hard Times Cover Story: Industry Under Siege The New Hedge Fund Economics Good-Bye, Easy Money Caging the Shorts Strategies: Bottom Fishing Profile: Cult of Personalities Research Center: Alpha Awards: Eye of the Storm Alpha Bytes: Funneling the Chatter Unhedged: Commentary: Attention, Hedge Fund Shoppers

Institutional Investor's Alpha Magazine - October 2008

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