- The personal luxury goods market has grown at over 1.3 times the rate of global GDP since 1996
- Rising wealth among Asian and female consumers globally is fueling growth
- The industry has evolved into a winner-takes-all business
The personal luxury segment probably doesn’t come to mind when one thinks of resilient areas of the equity market. The industry has unquestionably faced significant near-term challenges amid the global pandemic. But the picture looks brighter for stronger brands. For example, when Hermès reopened its Guangzhou store in China this past April after months of lockdown, first-day sales hit a record high of $2.7 million.
There is also room for optimism more generally, as structural growth in the luxury industry has tended to offset bouts of setbacks and the associated re-rating of stocks. We explore seven themes that may help indicate how the industry will emerge from the economic downturn.
1. Luxury has outpaced the broader market
As economies around the world have become more consumption driven, personal spending has grown to be a greater portion of global GDP. The luxury goods segment, which represents a small subset of discretionary spending, has witnessed outsized growth relative to other consumer-related segments.
The personal luxury goods market has grown at over 1.3 times the rate of global GDP since 1996,1 and in that span, luxury goods stocks have produced attractive long-term returns with few difficult periods. Since 2005, the S&P Global Luxury Index has delivered a greater total return than the MSCI World and S&P 500 indexes.