Open Editor's Digest for free
Rula Khalaf, editor of the Financial Times, picks her favorite stories in this weekly newsletter.
Fashions change. For many years, the growth in the luxury industry could be summed up in two words: “China” and “handbags.” Now, it's “America” and “Bling.” Owner of Cartier Richemont, who Explosion sales He drove the stock up 15 percent on Thursday, fashioning this profitable new look.
The United States is gaining luster as a luxury goods market. This isn't an entirely new phenomenon: For many companies, sales of high-end status symbols in the region were a relative bright spot in 2024. Richemont's year-end quarterly sales indicate a startling acceleration. Boosted by a doubling of its US growth rate to 22 per cent, the group recorded a 10 per cent increase in global sales, beating consensus expectations.
This partly reflects the increased window area. The luxury fashion houses of the Old World were following suit their own American dream, Opening stores away from traditional strongholds. Moreover, the luxury had a gold-plated Trump shock. Clearly, stock market investors and their new crypto brethren have been busy with festive shopping.
This seems likely to continue. Policies expected under Trump — including maintaining preferential tax treatment for bonuses paid to private equity managers, and removing President Joe Biden's tax on stock buybacks — will leave more money in the hands of already high spenders.
What is sold matters as much as where it is. Leather goods have outperformed jewelry for much of the past decade, growing from 34 percent of sector revenue in 2008 to 46 percent in 2022, according to UBS estimates. Handbags have somehow replaced diamonds as the luxury customer's best friend.
That seems ripe for rethinking. Price inflation in some sought-after leather goods has far exceeded that of jewelry. Chanel's oversized flap bag — which in 2018 cost as much as a Cartier Love bracelet — is now 60 percent more expensive. This improves the relative value proposition of jewelry and the growth prospects of the category.
Luxury goods investors are hoping that Richemont's performance will bode well for the sector's comeback. The European STOXX luxury goods index rose 6.7 percent on Thursday.
To some extent, this may be true. There appears to be some general improvement in sentiment. Elite retailers across the board are talking more about adding floor space in the United States.
But Richemont is more exposed than most to Americans and luxury items. More than 70 percent of its revenue in the most recent quarter came from jewelry. A third of its sales will come from US consumers at home and abroad in the year ending March 2025, according to UBS estimates, compared with just over a fifth for the industry as a whole. The Cartier owner is perhaps the most shining jewel in the luxurious wreath.
