The multi-billion dollar luxury goods business is dominated by European companies. Luxury makers survived the pandemic last year better than other retailers and are emerging stronger this year. While in the past developed countries mostly were the market for luxury products that is no longer the case. China and other emerging markets are a huge source of revenue for the purveyors of these goods. Unlike consumer staples or other regular items, pricing power of luxury goods is strong since the only people that can afford to buy these goods have the capacity to bear the price increases. Moreover because these are “Veblen goods”, ever-higher prices for a product may also bring more prestige and satisfaction to buyers. For example, such consumers may feel that a $100K handbag is better than say a $50K handbag since a $100K is a rarity even among these consumers. Another point to remember is that buyers of luxury products are more likely to be insensitive to economic conditions as ordinary folks.
So how to profit from the growth of luxury companies?
One way to profit is to invest in the stocks of publicly-traded luxury firms. The four biggest European luxury companies that are public are LVMH, Kering, Hermes and Richemont.
1.LVMH:
France-based LVMH Moët Hennessy Louis Vuitton (LVMUY) reported strong sales in first quarter of this year. Its markets rose in the first quarter to become one of the most valuable companies in Europe. It owns over 75 brands including Bulgari and owns one of the top spots in benchmark CAC-40 index.
2.Kering:
Kering (PPRUY) is the owner of Gucci brand and is also based in France. It also owns the Yves Saint Laurent and Bottega Veneta brands and is a member of the CAC-40.
3.Hermes:
Hermes International S.C.A (HESAY) is another CAC-40 constituent and sells everything from fragrances to clothes to handbags and other items.
4.Richemont:
Switzerland-based Compagnie Financière Richemont SA (CFRUY) owns brands such as Cartier, Chole, etc. The company sells apparels, watches, jewelry and other luxury goods.
Disclosure: No Positions
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