Global Luxury Brands Keep Their Appeal Amidst Crisis

Written by: Jane Tindall
May 8, 2013

The appeal of global luxury brands has been little faded by the current economic crisis and analysts have been upgrading their recommendations for stocks in the sector from ‘hold’ to ‘buy’, The Times reported last week.

Global luxury stocks have surged recently on the back of investor optimism over strong company earnings and rising demand from consumers in emerging markets, such as China, which accounts for about 40 percent of global demand for luxury items. Analysts believe that China will remain a strong market in the medium term and expect the luxury brands sector to continue to outperform the stock market as a whole. Equity investors could capitalise on this trend by tapping into recent rises in upmarket stocks, The Times suggested, citing expert opinion.

**Burberry Share Price Almost Doubles in Three Years**
One of the stocks in the luxury goods sector which has been drawing investors’ interest is British luxury retailer Burberry (LON:BRBY). With domestic sales accounting for less than 10 percent of total sales, the fashion brand has been enjoying growing demand in North and South America as well as Asia, especially China, which has been Burberry’s key market in recent years. Robust demand and stable earnings have pushed the company’s share price higher in recent years. As of 11:01 GMT on Wednesday, May 8, the Burberry share price in London was 0.81 percent up at 1,363.00p. The stock has gained 93 percent over three years.

In its last week’s article The Times quoted Sam Hart of stockbroker Charles Stanley as saying that while Burberry’s long-term prospects remained good, he rated the shares a ‘hold’ due to their high valuation of about 20 times earnings.
**LVMH Stock “Should Outperform”**
France-based LVMH (EPA:MC) was created through the merger of luxury leather goods maker Louis Vuitton and Moët Hennessy, the owner of Moët & Chandon champagne and Hennessy cognac. Seeking to strengthen its portfolio of luxury brands and products, LVMG has recently stepped up acquisitions, with its latest addition being jewellery maker Bulgari. Citing “the quality of its brands and its superior financial firepower,” Nicla Di Palma, an analyst at stockbroker Brewin Dolphin, has said that LVMH “should outperform”.

The LVMH share price has risen 71 per cent over three years and investment bank Merrill Lynch is positive about the company’s prospects. As of 12:03 CEST on May 8, shares in LVMH traded 0.19 percent up at €133.70 in Paris.
**Richemont Share Price Also Reflects Investors’ Optimism**
Richemont (VTX:SFR), the Swiss company behind jewellery brands Cartier and Van Cleef & Arpels, upmarket pens maker Montblanc and fashion house Chloé, has also seen its stock value climbing on high profits and investors’ optimism.

!m[Burberry, LVMH and Richemont Share Prices Nearly Double Over Three Years](/uploads/story/2142/thumbs/pic1_inline.png)
As of 12:33 CEST on May 8, the Richemont share price on the Swiss Exchange was CHF79.550 – 1.14 percent up on its previous day’s closing level. Over three years, the stock has added 80 percent and Rodolpe Ozun of Merrill Lynch has rated it a definite ‘buy’.
“We expect luxury goods stocks to do well in 2013, with consumption from emerging-markets tourists helping to boost sales, though the road to recovery is likely to remain bumpy,” Ozun has said, as quoted by The Times. “All the stocks in the sector could beat the market, though there are likely to be wide variations in performance. We’re bullish but selective. Richemont is one of our two top picks and we also rate the shares of both Burberry and LVMH as a buy.”

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