The Notebook: Victoria Scholar on why the allure of luxury bags could bolster designer marques
Where the City’s movers and shakers get a few things off their chest. Today, it’s Victoria Scholar of Interactive Investor
Don’t discount the allure of luxury bags – or the stocks of their makers
LVMH reported rather dismal results this month. The luxury goods giant, which owns brands like Louis Vuitton and Dior, announced third quarter revenue growth of nine per cent hitting € 19.96bn, a sharp drop from 17 per cent in the previous period.
Its largest division, fashion and leather goods saw sales increase by nine per cent, missing analysts’ expectations while its wines and spirits division also struggled with a drop in revenue.
LVMH shares hit a record high in April thanks to China’s post-Covid rebound. But over the last six months the stock has tumbled around 25 per cent amid slower sales from the US and Europe as well as China’s bumpy recovery. The strength of the euro also hurt its performance in the US. LVMH’s share price slide was part of the reason why the company lost its crown as Europe’s most valuable company.
Novo Nordisk overtook it also thanks to its miracle weight loss drug and stellar share price performance off the back.
All this pointed to the idea that the blockbuster period for luxury could be starting to fade. However, despite all the recent doom and gloom, the sector was offered a glimmer of hope this week thanks to remarkably upbeat results from LVMH’s luxury rival, Hermes.
The Birkin bagmaker reported third quarter sales of €3.37bn, up 15.6 per cent at constant exchange rates, surpassing analysts’ expectations. Sales in the Americas outperformed, soaring by around 20 per cent. There were also strong sales in Europe as well as in China.
The French brand appears to be defying the economic headwinds thanks to price hikes which so far don’t appear to be weighing on demand. Unlike most goods where demand softens as prices rise, the luxurious allure of a Hermes bag – some cost over $10,000 – only seems to improve as prices increase.
Some ultra-wealthy individuals have also been turning to the luxury goods market as a source of alternative investments with prices going up and up.
So perhaps all is not lost for luxury stocks after all, particularly given that high-end consumers are much more shielded than most from cost of living pressures while brands are able to pass on inflation cost pressures to consumers without majorly denting demand.
Outsourcing your love life
Tinder is getting friends and family involved to try to enhance users’ dating experiences on its app. The Tinder Matchmaker feature allows others to get access to users’ accounts for 24 hours so they can flag dates they believe could be suitable. Tinder says this will make dating ‘a team sport’.
The new feature will begin in 15 countries including the UK and the US with plans to ultimately go global. However, some have flagged potential privacy concerns with the rollout.
Is the tide turning in the bond market?
With bond yields hitting multi-year highs lately, price action could finally be overdone, with the market potentially poised for a comeback. At least that’s according to two top investors, Bill Ackman and Bill Gross, who have got rid of their bond shorts in a sign that the sell-off in bonds could be coming to an end. Ackman said he has unwound his bets against US government bonds while Gross says he is buying short-dated interest rate futures ahead of a possible recession by the end of the year.
Bullish on bitcoin
The bitcoin bulls are back in the driving seat with an impressive surge in the cryptocurrency this week. Bitcoin surpassed $35,000, hitting the highest level since May 2022. The notoriously volatile asset is up over 100 per cent so far in 2023 with the latest rebound driven by hopes a US Bitcoin ETF could secure regulatory approval. It also comes ahead of the Bitcoin halving next year, which tends to push it up in value. Morgan Stanley said the “crypto winter may be in the past and that crypto spring is likely on the horizon”.
On the Money
Forgive me for plugging a podcast hosted my one of my colleagues, but a must-listen for private investors that like to buy funds and investment trusts is Interactive Investor’s ‘On the Money’ podcast. Each weekly episode focuses on a range of topics – whether that’s industry or regulatory news, or broader themes within investing, personal finance, and pensions.
On The Money recently celebrated its 50th episode, in which host Kyle Caldwell interviewed one of Interactive Investor’s private investors – reflecting on their investment journey and sharing the lessons they have learned over the years. The episode also delved into their portfolio strategy as they approach retirement. The conversation helps bring these investment topics to life, as well as helping to inspire and inform listeners.