This year has been a wild ride for the luxury industry. At the start year, expectations were that the industry would heavily underperform the post-pandemic boom years. Expectations were that sales growth, particularly to “aspirational” consumers, would normalize.
These grim expectations showed up in a seven percent decline in the FSW High Frequency All Luxury Index in the first month of the year. Yet, stronger than initially expected forecasts for global economic growth helped power the index up by almost 30 percent from the early year trough by mid-March. Yet, mixed Q1 and Q2 earnings reports since then have dragged the index down almost 20 percent since the spring-time peak. Just after the start of Q3, our luxury index is up about 5 percent for the year as compared to the S&P 500, which is up around 20 percent. Luxury has gone from a global sectoral leader to laggard.
Of the 16 luxury firms included in our index, 7 have had double digit returns this year but most of those have smaller cap weights. The biggest performers on the year comprise Ferrari (+30 percent on the year), Richemont (+28 percent), Ralph Lauren (+27 percent), Tapestry (+19 percent), and Hermès (+17 percent). Yet outside of Hermès, which has a 17 percent weighting in the index, all of these groups have weights of about 5 percent or less.
Luxury firms with larger cap weights have underperformed. The index’s largest constituent, LVMH (with a 30 percent weight) has gained under 4 percent on the year while L’Oréal (17 percent weight) and Christian Dior (10 percent weight) are down around 1.5 and 6 percent on the year, respectively. Though their weights are small, it is worth noting that Capri, Burberry, and Hugo Boss are all down around 30 percent year-to-date.