LVMH, PPR and Richemont, luxury’s biggest three conglomerates, are reporting strong earnings despite low demand for high-end goods, Europe’s debt crisis and China’s slowdown. How can that be? Increased consumer interest in hard luxury.
As the global recession hits again, analysts are shocked at the growth and earnings of the big three luxury providers over the past year. These luxury companies are bucking the trend of companies reducing their expectations or finding ways to reduce their costs in order to remain viable.
In fact, these companies are showing surprising resilience to the ebbs and flows of the global economy and the demands of consumers for top end products.
LVMH, Richemont, and PPR comprise the largest luxury conglomerates in operation today. While their names may not be familiar to you, many of their products are.
Currently, LVMH is the largest luxury brand provider. LMVH is the parent company for such brands as Louis Vitton, Hennessy, Donna Karan, TAG Heuer, Zenith, Celine, Parfums Christian Dior, and Marc Jacobs. For 2012, sales of LMVH companies have grown by as much as 12 percent, helping boost operating earnings by 20 percent over 2011.
Richemont is second among the big three. Richemont has seen growth in 2012 of 29 percent. Brands associated with Richemont include Montblanc International, Chloe, Cartier, and Alfred Dunhill. Sales of high end watches and ink pens have remained steady despite the decline in other sectors of the global economy.
The smallest of the big three is PPR. Despite its size, PPR has created a portfolio of companies which are proving to be equally resilient as Richemont and LVMH.
For 2012, PPR has experienced 17 percent growth, surpassing analyst expectations for the conglomerate. The growth in sales is attributed to its diverse brands such as Gucci, Stella McCartney, Alexander McQueen, Yves Saint Laurent, Puma, and Cobra Golf.
PPR also runs a full host of online shopping venues, including The Sportsman’s Guide and The Golfwarehouse, directed at North American and European shoppers. These internet ventures increased PPR’s profit for 2012 too.
When looking at luxury’s big three , a common theme holds the group together – diversification. Each company has expanded beyond one product. Richemont has holds in jewelry and office supply markets. PPR has holds in clothing and athletics, while LMVH has holds in jewelry, liquor, and clothing.
When one part of the equation lagged behind, these companies not only waited out the economic slowdown, but wisely moved into the new markets in Asia. With the growth of the upper middle class in Asia as luxury consumers, the demand for high end clothing and sports equipment rose considerably. Selling in the Asian luxury market payed off for the big three.
With record profits in 2012, what will 2013 bring for luxury’s big three? Time will tell, but prosperity is definitely on their map.
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