Luxury brands outperform as the wealthy keep shopping
Despite the recession knocking billions off the wealth of the world's richest, people are still splashing out on luxury goods. Year to date the Julius Baer Luxury Brands Fund is up 27% in Euro terms, versus the 17% rise in the MSCI World.
Julius Baer said in a report today it predicts profit margins will remain in double digit territory for many luxury companies, despite the global economic slowdown.
Julius Baer expects this Christmas to be a bumper season for luxury brands and wealthy consumers will not reign in their spending on quality, strong brands.
Dr Scilla Huang Sun, co-author of the report and Julius Baer's head of equities, said: "Most luxury companies have strong financials and have adjusted their cost base - prices have clearly bottomed and now companies are still cautious but the worst is over."
First half results at many top luxury brands were weak, but better than expected, and despite the recent rally in world stocks, high-end retail is still outperforming by a substantial margin, said Julius Baer.
Diego Della Valle, chairman of Tod’s, the high end shoe retailer, said in the report: “I expect consumers to return to shops by Christmas… I can already feel the change in their thinking.”
The report said that the long-term investment story for luxury brands is good, driven by wealth creation in the emerging markets.
Georges Kern, chief executive of watch maker IWC, said in the report: “By 2020, there will be 350 million people in China who are in the position to buy a luxury watch.”
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