Luxury’s ‘relentless bid’ shows no signs of stopping
On Wall Street, when buyers rush in to buy everything in a particular market, hand over fist, price be damned, it's called a "relentless bid."
Usually this happens when investors see a bull market forming and want to get in early.
It appears a relentless bid is hitting an adjacent market — high-end luxury goods.
Yahoo Finance has been writing about this phenomenon for some time now, whether it be high-end cars, watches, or even boats. There are even luxury ETFs that can capture this conspicuous consumption.
Analysts assumed inflation would tame extravagant shoppers, but so far that's not been the case. Luxury shoppers are still buying at a clip despite price hikes.
Ferrari needs more higher-priced cars
Most recently this phenomenon was seen in Ferrari’s (RACE) financial results. The Italian supercar maker reported profit jumped 13% year over year, boosted by the sales of its ultra-high end cars, and expects 2023 to be even bigger. The automaker is expecting 2023 sales to hit a record 5.7 billion euros, with margins boosted by sales of its seven-figure Daytona SP3 hypercar, and upcoming Pursangue ultra-SUV.
“These figures provide the base for an even stronger 2023, fueled by a persistently high demand for our products worldwide,” said Ferrari CEO Benedetto Vigna in a statement. “Despite a complex global macro-scenario, we look ahead with great confidence.”
Ferrari said its “mix/price variance” was slightly negative because its multi-million dollar Monza SP1 and SP2 were phased out in Q1 2022, and Ferrari didn’t have any ultra-high end, high-priced models for sale until later in the year. It seems Ferrari could have sold more higher priced cars, if it had any to sell.
Watchmakers hike prices to keep up
Watch conglomerate Swatch Group (UHR.SW), behind brands like Omega, Bregeut, and Blancpain, reported in its latest results that sales were up 25% in local currencies across all territories except China. Sales were so strong that Swatch saw the need to hike prices overseas of popular watches like the Omega Speedmaster, Seamaster, and Longines Hydroquest by 5-7%, this according to an analysis done by Jefferies.
Bloomberg reports top luxury watch brand Rolex boosted prices earlier this year in the U.K. and U.S., and last fall in Europe, to counter rising costs and forex swings. The move was seen as unusual because Rolex only adjusts prices once a year, but as supply has dwindled at retailers and demand hasn’t abated, raising prices from the brand’s perspective had no downside.
Also noteworthy is what the CEO of global watch retailer Watches of Switzerland (WOSG.L) said following the company's earnings release this week, claiming brands like Rolex, Omega, Patek Philippe and Zenith had raised prices since the beginning of the year by an average of about 4%.
LVMH sees another record year; higher-priced goods drive growth
Then there is the grandaddy of luxury, Paris-based Moët Hennessy Louis Vuitton. LVMH (MC.PA), which counts Louis Vuitton, Dior, Tiffany, and Tag Heuer watches, reported record sales and profit for 2022, and hiked its annual dividend up to 12 euros per share, a 20% jump.
LVMH, now the most valuable company listed in Europe, sees the good times rolling, despite macro economic uncertainty.
“During difficult years, whether that’s for macroeconomic or geopolitical reasons, the LVMH group takes market share and progresses, which has been the case since 2019,” LVMH CEO and controlling shareholder (and world’s richest man) Bernard Arnault said at LVMH’s earnings press conference.
The group was able to maintain the same operating margin as it did in 2022 by hiking prices in certain goods like fine wine and spirits, and seeing growth in higher-priced goods like watches and fine jewelry. The company also reported flagship luxury brand Louis Vuitton crossed the 20 million euro mark in sales for the first time last year.
LVMH says the start of the year portends another strong performance to come, and the group is bullish on 2023 as China continues its reopening.
“With the month of January having started well and despite an uncertain geopolitical and economic environment, LVMH is confident in its ability to continue the growth observed in 2022,” the company said in a statement.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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