PARIS — Rather than face an industry downturn, luxury companies should see their earnings outpace many consumer and retail stocks, lifted by fast growth in emerging markets and improving exchange rates.
“We are sticking to our scenario of a gradual reversion to sustainable long-term organic growth of 7 to 8 percent for the industry” in the second half of 2008 and into 2009, HSBC said in a research report issued Monday.
“Optimistic does not mean blindly bullish,” Paris-based analysts Antoine Belge and Erwan Rambourg caution, also downgrading the stocks of Bulgari and Tod’s.
Still, they stressed that valuations in the sector “fail to reflect the fact that fast-growing client groups from Asia, Eastern Europe and the Middle East should alone add at least 6 percent to the sector’s top-line growth.”
HSBC estimates that these nationalities account for 30 percent of global sales, and should generate continued sales growth of about 20 percent annually in 2008 and 2009.
Resilience in the U.S. and Europe is seen linked to employment figures more than the housing market and gasoline prices.
“In contrast to previous slowdowns, we have so far observed that luxury goods appear not to be the first thing that U.S. and European consumers have stopped buying,” the report says, while noting that an expected rise in U.S. unemployment would have a negative impact on luxury consumption.
Meanwhile, HSBC contends the watch segment will be more vulnerable if “wealth effects” deteriorate and that larger groups will fare better than smaller companies.
HSBC has “overweight” ratings on Coach Inc., Christian Dior SA, PPR SA and Burberry Group plc.
Meanwhile, another report from New York’s Luxury Institute said luxury players should go on the offensive to combat the economic slowdown.
“There are a lot of brands around the world right now, which, instead of going on the offensive — that is, innovating new product, making news and delivering great service — are cutting back and trimming down as if the world was coming to an end,” said Milton Pedraza, chief executive officer of the institute, which on Monday released its 2009 Luxury Brand Status Index survey for women’s fashion in Europe.
The study, which ranked 20 of the most prestigious brands, according to feedback from 752 women ages 21 or older from the U.K., Germany, France and Italy with a minimum income of 60,000 euros, or $85,620, or 70,000 pounds, or $123,760 a year, was topped by classic European names Hermès, Chanel and Yves Saint Laurent, which ranked first, second and third, respectively. Hermès topped the poll in France and Italy, Yves Saint Laurent in Germany and Alexander McQueen in the U.K.
The survey also found that some labels, though ranking highly for the product itself, suffered due to the kind of service they offered. “One question we asked was, ‘Does it make you feel special?’ And that’s where a lot of brands don’t score highly,” said Pedraza. “Quality? Great. Unique and exclusive? Some brands are, but not all. The difference is how unique and exclusive a brand makes you feel across the full experience.”
In tougher times, especially, the level of service offered, both past and present, increases in importance. “It’s one of the things that was definitely neglected during the boon period and it’s coming back to haunt companies now,” Pedraza continued.
In Europe, in particular, where consumers, Pedraza believes, settle for “really lousy service,” he sees an opportunity for brands, which should look at high-end hotels for lessons on how to give hospitable experiences and services, thanks to highly trained staff.
“Everybody should be treated well, but some customers, by virtue of what they buy or what they could buy, should get special treatment,” he said. “Invest money now during the downturn on customer service and you’ll be far more resilient.”
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast