Is luxury dead? The last decade led us to believe so. Even though employment was at its lowest in years and income was up, consumers didn’t have the confidence to spend. Becoming accustomed to fast fashion and cheaper alternatives added to abysmal luxury sales.
While rooted in the throes of the recession, these heritage brands felt the hurt like everyone else. Chanel had told ExecutiveStyle it would lay off around 200 employees. Tiffany saw its Christmas holiday sales fall by about 21 percent, while Ferragamo was forced to cut back new store launch by 50 percent. Louis Vuitton had to halt plans for a new flagship store in Tokyo, while Richemont saw a 12 percent drop in sales between October and December 2008. Claire Kent, a former analyst with Morgan Stanley, ascribed the fall in demand for luxury products to shoppers developing “luxury fatigue.”
Tiffany & Co. : A Comeback a Decade in the Making
A decade later, the luxury market is regaining momentum. CNBC reported that consumers are returning to the luxury goods sector thanks to modernized products from iconic brands such as Tiffany & Co., Louis Vuitton, and Sotheby’s. “Tiffany is very exciting,” CNBC quoted Oliver Chen, a managing director, and senior equity research analyst at Cowen Outperform. He continues,
“They are becoming a lot more modern. Customers are returning to Tiffany on the heels of new collections, new products, as well as new campaigns that are innovative, fun, disruptive, as well as tying back to the history of the brand.”
The company is closing out 2018 with impressive earnings and massive sales in Asia and the Americas. Also, shares increased by about 17 percent. Chen believes things will continue to look up for the luxury sector in the foreseeable future as he thinks it is “a good spot for investors to be in.”
Off-Price vs. Luxury
He opined that investors stand to benefit less from organizations such as TJX Companies, which sell goods at a steep discount. This disadvantage is due to the fact that many cost-cutting practices inhibit healthy margins.
A sought-after brand can, “leverage prices to get better returns for investors.” He adds that luxury brands like Tiffany’s are “Un-Amazonable” because they have a history, a story, and offer an experience. This opportunity will further push investors and resellers to that market. Because you can, in fact, but a price on experience.