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What's going on?
Frances Kering, the luxury conglomerate that controls famous brands like Gucci and Yves Saint Laurent, saw its shares strut their way to all-time highs on Wednesday as it reported its third quarter earnings and predicted that 2017 would prove a record year.
What does this mean?
Kerings flagship brand Gucci came through again with the strongest sales growth for the company, up 43% versus the year before with help in particular from consumers in China. While sales from other fashion-forward Kering brands like Puma and Yves Saint Laurent werent as strong, overall revenue for Kering in the third quarter still grew by 23% compared to a year ago.
Investors were evidently encouraged by the good news shares in Kering jumped by almost 10% on Wednesday!
Why should I care?
For markets: Things are noticeably improving for luxury firms.
The global luxury sector is back on the up as global economic growth improves, tourists return to Europe after last years terrorist attacks and Chinese consumer spending on luxury goods increases after it fell rapidly in the wake of an earlier crackdown on corruption. LVMH, another luxury retailer, recently reported better than expected earnings in the third quarter; its shares are now up 40% versus the beginning of the year (luxurious indeed!).
The bigger picture: Ecommerce cant touch luxury, at least for now…
The rise of ecommerce competition has spelled trouble for a lot of retailers, but maybe not as much for luxury brands like Kering. For one, the exclusivity of their products doesnt just allow luxury brands to charge higher prices, it also lets them better leverage their customers loyalty, forcing customers to their own websites to buy their stuff (instead of offering it to them on a general third-party platform like Amazon). A whole swathe of luxury retailers like LVMH, Swatch and Richemont have categorically refused to sell their luxury goods on Amazon in the interests of protecting their brands and businesses and it doesnt seem to have stopped people from buying their stuff!
Originally posted as part of the Finimize daily email.
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