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Luxury Brands Whisper

Luxury Brands Whisper
 

Research Question: Are luxury brands expecting and prepared for a breakout year in 2014?

Companies Covered: Louis Vuitton (EPA:MC, OTC:LVMUY), Burberry (LON:BRBY), Hermes (EPA:RMS), Kering (EPA:KER), Tiffany (TIF), Michael Kors (KORS), Coach (COH)

Report Available: February 13, 2014

 

Blueshift’s initial research shows a surge of wealth in the U.S.’s upper-class and increased online spending boosting sales of luxury goods, but China’s crackdown on gifts and corruption coupled with high taxes are cutting luxury goods spending in a key market.

 

Observations

  1. The U.S. is seeing a growing chasm between the upper and lower class, in conjunction with a squeeze on the middle class. This upper class is gaining income as the economy improves. For example, the number of New Jersey’s wealthiest households has doubled over the last decade and the households with an income over $200,000 has increased 12% when comparing 2007-2009 to 2010-2012.
  2. Strong online personalized high-end luxury goods sales are set to carry the luxury market in 2014. This online push is already coming to fruition, and helped Burberry see revenues rise 14% for its Q3. Tiffany is also benefitting from the increased U.S. spending, seeing revenues increase 6% in the U.S. On the other hand, Coach, a more middle-ground retailer, experienced lower revenue in its Q2 and a 9% drop in North American earnings based on weak women’s bag and accessories sales compared to a year ago.
  3. An upswing in disposable income spending and demand for luxury cruises was detailed in Blueshift’s January 2014 Wave Season report, which found rising bookings for 2014’s wave season, with four of six travel agents reporting year-to-year booking increases ranging from 10% to 25%. Specifically, the luxury cruise market has been an area of particular strength..
  4. China, a once robust market for luxury goods, saw its wealthy citizens cut spending 15% during 2013. This diminishing spending is directly related to the government’s crackdown on corruption and gifting, and high taxes on luxury goods, which is affecting the sales of luxury goods in one of the worlds largest markets. China’s decreased spending is a point of concern for many luxury good companies, specifically Louis Vuitton, which put a large stake in growing its business in China, and will now have to change its strategies for growth.

 

To assess whether luxury brands will have a breakout year in 2014, Blueshift will gather data and issue a market research report from independent sources in the following areas: luxury goods retailers in the US, luxury goods retailers in China, supply chain, consumers, and industry specialists.

 

 

To see other ideas Blueshift Research is currently working on, please click here.