Growth in Europe is set to lag behind that of the U.S. and Asia, but industry experts believe certain sectors — including luxury goods and discounted merchandise from the likes of Primark or Tesco — will flourish.

The London-based Bernstein Research believes many of Europe’s luxury labels are poised for an upswing in sales and profits. “Recovery is gaining traction in the luxury goods sector,” it said in a recent outlook report.

The report added that big jewelry companies, such as Compagnie Financière Richemont, parent of Cartier, are headed for smoother waters and rebuilding their margins faster than expected. “Markets may be underestimating the speed of the revenue bounce-back and its positive profit impact,” Bernstein said.

Philippe Mougenot, president of Chanel’s watch and jewelry division, would agree: “Altogether, I’m relatively confident for 2010. The sector did see some stabilization in the second half. As far as we’re concerned, we had a very good end-of-year,” he said. “I’m also hopeful that the wholesale network has seen a period of destocking through the course of the year that should [motivate] a return to purchasing.”

John Hooks, deputy chairman of Armani Group, is quietly upbeat, too. “At the moment, there are good signs. It’s going to gradually get a bit better,” he said, adding that strong brands should be concentrating on grabbing market share in large, established markets such as the U.S., Germany and the U.K. “The main challenge is to sell more where we already are — to get more sales per square foot. Stores want reliable suppliers.”

Guy Salter, deputy chairman of Walpole, which represents and promotes the British luxury industry, is more cautious in his outlook. “There is a definite feeling of opportunity and a return to investment,” he said. “But budgets are less than they once were, and there is a huge amount of caution about becoming overextended — or too bullish.”

Overall, the ready-to-wear, retail and textiles industries, will likely take longer to recover. “I think the situation will slowly improve,” said François-Marie Grau, general secretary of the French Women’s Ready-to-Wear Federation. “We don’t expect to really start to bounce back till the end of 2010, but this could drag on though next year and even into 2012.”

Matteo Marzotto, who has stakes in the Italian silk manufacturer Ratti and the French brand Vionnet, pointed out that Italian textile companies were hit by a strong slowdown at the end of 2008 and in 2009, and “have been working with stocks, as customer demand waned.” Marzotto said he does not expect a pickup in 2010 because demand will remain weak throughout the year.

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