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- 4 Aug 2010
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The Savigny Luxury Index Review - July 2010

Pierre Mallevays, former Head of M&A at LVMH and Managing Partner of Savigny Partners LLP, a London-based boutique advisory firm, analyses market trajectories and valuations of benchmark firms through the firm’s signature index.


SLI performance January 2010 to date – not quite out of the woods yet



A mood of cautious optimism in Q1…

The Savigny Luxury Index posted a solid overall gain of 22.4% since the beginning of the year, outperforming the MSCI World index by 19 percentage points. The overall sentiment was that the sector is on the rebound, with Bain forecasting a four percent rise in sales for the sector for 2010. Q1 results posted by our universe of companies showed both strong sales and profit growth. Nevertheless the overriding message was one of cautious optimism with some of the sales growth in Q1 being attributed to retailers restocking depleted inventories. Some concerns were raised as to whether LVMH powerful Q1 growth, which sent its share to a 10-year high, would be sustainable for the whole year.


… consolidated into very strong prospects for the sector

Signs of improved prospects for the sector continued to come out of company and sector announcements. Swiss watch exports posted a healthy increase in June, and Hermès lifted its full year sales growth target on the back of surprisingly strong Q2 figures released on 20 July (27% growth for the quarter or 20% at constant exchange rates). The overall view is that more good news is to come, underpinned by strong demand in emerging markets, especially China, and by the recovery of demand in the USA, which should continue to prop up wholesale channels. LVMH recently released half year results confirmed the trend, beating estimates with a 16% growth for the first semester.


Has the Aegean brew poisoned the equity well?

The Greek sovereign debt crisis which unfolded at the end of April sent global markets into turmoil. The SLI was not immune and went into a tumble, losing eight percent of its value from end-April to mid-May. The respite of the rescue package announced at the beginning of May was short-lived, with the fear of Aegean contagion to other markets such as Spain and Portugal resulting in another dip in early June. Whilst July saw both a strong recovery in the MSCI World index (+ 4.8%) and the SLI (+ 9.6%), there are lots of frayed nerves as a result of this macro-economic uncertainty. The luxury sector is setting sail again but the Aegean tidal wave continues to rock the fragile boat of recovery – the sails have been hoisted but will the boat capsize?


Source: Reuters
1. Share prices as at 1 August 2010
2. Sales growth: year-on-year change using latest annuals and consensus estimates for current year
3. P/E multiples: historical based on either Dec. 09 or Mar. 10 EPS; current based on Dec. 10 or Mar. 11 EPS depending on company year-end


Pierre Mallevays


Savigny Partners LLP
53 Haymarket, London SW1Y 4RP
Tel +44 20 7993 3121

Click here to download the Sector Review in PDF