Hermes, LVMH and Christian Dior

With great price inelasticity characteristics, the luxury bags are not only a fabulous gift but also an ideal investment that would boost our investment returns. Just as with diamonds, the Hermes and Diors would form a great friendship bond with most women.

The luxury goods industry is likely to see a revival back to single-digit growth based on estimates by Bain and Company and Statista.

On the whole, the industry has been resilient to most market shocks through the past 5 years.

We have touched on 3 brands that are known to not have any price discount, it shows their positioning as the best of the breed- Hermes, LVMH and Dior.

Based on the valuation, we feel Dior is trading at a reasonable price and it is showing good growth momentum based on the latest FY figures. For Hermes and LVMH, we have to be patient and wait for the right price rather than making an impulse buy.

For the coming Valentine's Day, you could look into gifting a Dior share instead of the bag to your loved one. Hope it sits well with this gesture.

Here is the link to the Full Article:

https://thebigfatwhale.com/investing-in-...ag-brands/

The unique thing about Dior and Hermes bags are that they appreciate in prices too (think of the luxury watch segment).

They operate at the same model where to get hold of the one vintage series, you need to buy other models or is a big name person. And unlike luxury watches which uses distributors, some of these luxury bags control this segment of the supply chain by having their own shops

(12-02-2022, 03:17 PM)TheBigFatWhale Wrote: With great price inelasticity characteristics, the luxury bags are not only a fabulous gift but also an ideal investment that would boost our investment returns. Just as with diamonds, the Hermes and Diors would form a great friendship bond with most women.

The luxury goods industry is likely to see a revival back to single-digit growth based on estimates by Bain and Company and Statista.

On the whole, the industry has been resilient to most market shocks through the past 5 years.

We have touched on 3 brands that are known to not have any price discount, it shows their positioning as the best of the breed- Hermes, LVMH and Dior.

Based on the valuation, we feel Dior is trading at a reasonable price and it is showing good growth momentum based on the latest FY figures. For Hermes and LVMH, we have to be patient and wait for the right price rather than making an impulse buy.

For the coming Valentine's Day, you could look into gifting a Dior share instead of the bag to your loved one. Hope it sits well with this gesture.

Here is the link to the Full Article:

https://thebigfatwhale.com/investing-in-...ag-brands/

The sector is doing well for past years post covid correction and I reckon its already at its peak. as you can see their stocks has already doubled post covid. Risk of downside in case of any recession or economic slowdown with FED and other CBs tightening is much higher now, and one would likely be buying too high even for

Luxury brands demand heritage. So it is sexy to have the family owning the company for generations (even though the wolf of Cashmere didn't really started all these brands...)

LVMH’s Arnault trying to head off succession battle

Through a series of moves over the past year, many of which have escaped public attention, Arnault has laid the groundwork he hopes will prevent such an outcome for his own family empire. At the heart of the plan is a new holding company, control of which is split equally among his five children. It already has power to influence major decisions affecting the luxury goods group. This is the vehicle the patriarch hopes will prevent divisions among his heirs and ensure LVMH Moet Hennessy Louis Vuitton SE will remain under family control for decades to come.

https://www.businesstimes.com.sg/working...ion-battle

As a consumer, I can totally understand when someone ask "what's the point of luxury goods?". But as an investor, I can totally understand when a luxury goods buyer answers "That's the point."

It is interesting for an insider to warn of "luxury fatigue". Bernard Arnault will probably not say such a thing in public since so much of his wealth is tied to LVMH stock. But he will probably be doing something. Luxury is anti-fragile but that is only reserved for the best in class.

Forget China, Chanel exec warns of luxury fatigue risk

China had been the growth driver for the luxury industry in recent years, and certain luxury firms had become overly dependant on it, Grangie said. But he pointed to “a third factor that is much more worrying and explains why this crisis could last longer,” calling it a sort of “luxury fatigue”.

“There’s this feeling hitting mature markets in which customers are starting to ask what’s the point of this industry,” Grangie told Le Temps.

Grangie said “2025 and 2026 will be complicated years” for the luxury industry.

https://www.businesstimes.com.sg/compani...tigue-risk

(29-10-2024, 08:42 AM)weijian Wrote: As a consumer, I can totally understand when someone ask "what's the point of luxury goods?". But as an investor, I can totally understand when a luxury goods buyer answers "That's the point."

Not easy to understand unless you speak to people in the business. Met the head of clienteling (the business of giving the white gloved experience to their top segments) of Chanel; just a handful (hundreds) of these clients in SEA drive a significant portion of their top line revenue.

As for China, it is what it is and all the international brands are suffering.

(29-10-2024, 08:49 AM)LionFlyer Wrote:

(29-10-2024, 08:42 AM)weijian Wrote: As a consumer, I can totally understand when someone ask "what's the point of luxury goods?". But as an investor, I can totally understand when a luxury goods buyer answers "That's the point."

Not easy to understand unless you speak to people in the business. Met the head of clienteling (the business of giving the white gloved experience to their top segments) of Chanel; just a handful (hundreds) of these clients in SEA drive a significant portion of their top line revenue.

As for China, it is what it is and all the international brands are suffering.

hi LionFlyer,

It seems to me that we have a VB insider in the luxury business supply chain/marketing department

Can I assume that the handful of clients are the real HNWIs? They probably get the best coveted/limited edition models of new product launches and with discounts some more?

I could imagine in an alternate universe, your friend had personally sent a dozen of  limited edition handbags to Rosmah (Najib's wife) at their official residence for her to choose from.

The HNWIs then flash their products in social settings or social media. And the masses are naturally attracted to these products as a form of signaling. End of the day, the real money is made from the masses. The white gloved treatment for a select few is just a marketing cost.

(31-10-2024, 03:47 PM)weijian Wrote: Can I assume that the handful of clients are the real HNWIs? They probably get the best coveted/limited edition models of new product launches and with discounts some more?

HNWI can be as much as 50% - 60% of their revenue. Access to products (limited) is just a part of the experience. It is an experiential thing, and it includes access to exclusive events, sometimes cross-marketing with other similar premium products, across different platforms.

The issue isn't really luxury fatigue (my own opinion) but a change in consumer patterns especially with new generation of wealthy consumers. Things like quiet lux, new/old lux, sustainability means brands need to up their game, while still trying to keep the heritage that is inherent in their brand identity..

ESSEC business school here in Singapore has a professional certification in luxury mgmt, if you are interested to understand how the business works.
https://www.essec.edu/en/program/profess...anagement/

there is also a masters program but that is usually for people in the business https://www.essec.edu/en/program/executi...nnovation/

When customers are not buying 5-figure leather products, the maisons will sell them 3-figure sticky notes/card holders instead.

Brands have to ensure that their presence is continuously kept on the mindshare of their customers. While spending fluctuates with consumer confidence, the entire luxury strategy is relatively robust over the long run. And the longer it survives, the greater the heritage and accumulated brand equity. And that in turn again allows it to strive even longer. There is some sort of virtuous cycle ongoing. This is truly anti-fragile in Taleb's terms.

Luxury labels bulk up on lower-priced goods to appeal to middle-class shoppers

Kering label Gucci’s decor and lifestyle gifts this season include a US$440 pet leash and a box of sticky notes covered with the brand logo, priced at US$200.

Louis Vuitton, which belongs to LVMH, offers a US$360 card holder and a US$395 canvas and metal Monogram Double Spin bracelet for US$395 on the gifts section of its e-commerce site.

Instead, brands can gain attention through marketing campaigns as well as expanded product categories, along with the shift towards more affordable product categories.

“Still very high quality, but just cheaper in terms of price points,” Reyl added.

https://www.businesstimes.com.sg/compani...s-shoppers