Latest / Best of Business / Sam Dickie: Fisher Funds expert on the luxury sector's economic troubles

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Sam Dickie: Fisher Funds expert on the luxury sector's economic troubles · Best of Business

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  Speaker 2: So, luxury brands and luxury spending as a category have
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  Speaker 2: been booming for the last twenty five plus years. But Gucci, Chanelle,
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  Speaker 2: Louis Vuitton brands like that they've pushed product prices coming
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  Speaker 2: out of COVID, and that's really starting to come home
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  Speaker 2: to roost now. Apparently Sam Dickey from Fisher Funds is
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  Speaker 2: with us to explain. Hey, Sam good isn't here, okay,
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  Speaker 2: so give us a little bit of context about what's
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  Speaker 2: been going on here with a luxury sector.
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  Speaker 3: It's been a home run for the past sort of
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  Speaker 3: twenty five years. So luxury as a sector has grown
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  Speaker 3: sort of twice as fast as global retail sales, and
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  Speaker 3: companies like Hermes, Ferrari, Louis Vuitton, and Montclear they're up
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  Speaker 3: sort of ten twenty thirty fold over the past twenty
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  Speaker 3: five years, miles more than the stock market, and the
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  Speaker 3: customer base is inherently significantly more resilient than the average consumer.
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  Speaker 3: So the other thing is, when you think about the
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  Speaker 3: motor around these companies, you and I have talked about
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  Speaker 3: brand motes before being tough. They're through the lens of
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  Speaker 3: companies like Nike. They these companies have been around for
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  Speaker 3: you know, in Ume's case, sort of one hundred and
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  Speaker 3: eighty seven years, and they're steeped in hand crafted quality.
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  Speaker 3: They they have long waiting lists. They're some of the
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  Speaker 3: most recognizable brands on Earth, so they really do have
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  Speaker 3: sort of wide motes around their businesses. And the final
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  Speaker 3: thing is, in this kind of ultra fast moving world,
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  Speaker 3: as an investor, you want to know what a company's
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  Speaker 3: going to look like in ten years, and most people
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  Speaker 3: couldn't tell you what the average tech company will look
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  Speaker 3: like in ten years. They might look completely different or
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  Speaker 3: they might be non existent. But in fifty years from now,
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  Speaker 3: wealthy consumers will still want scarce, ultra high quality, handcrafted
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  Speaker 3: leave the handbags.
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  Speaker 2: So how hard did these guys drive the prices during
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  Speaker 2: and after COVID?
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  Speaker 3: Very hard. They really did gouge, So they kind of
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  Speaker 3: had the perfect storm conditions to gouge. So there was
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  Speaker 3: boutique closures. There was tons of liquidity given low interest
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  Speaker 3: rates and luxury. By the way, like art is is
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  Speaker 3: a bit of a kind of a liquidity proxy. When
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  Speaker 3: there's lots of cash flowing around. People will buy art,
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  Speaker 3: people buy handbags. There was the prevailing general inflation which
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  Speaker 3: they had behind, and of course there's the limited supply,
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  Speaker 3: which is like pricing power on steroids for these guys.
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  Speaker 3: So the Chanel classic sort of jumbo flat bag. I
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  Speaker 3: don't know much about these bags, by the way, I
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  Speaker 3: do know the companies. So they jumped from sort of
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  Speaker 3: less than six thousand dollars in twenty nineteen to well
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  Speaker 3: over eleven thousand dollars and twenty twenty five, so they
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  Speaker 3: sort of doubled in six years. So contuctionnel were really gouging.
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  Speaker 3: Multiple price rises per year became the norm. Like Louis
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  Speaker 3: Vuitton raised prices three times and seven months at one stage.
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  Speaker 3: Normally they raised prices once a year. So they really
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  Speaker 3: did gouge their customers.
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  Speaker 2: Now what's happening as a result, what's going on with
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  Speaker 2: the revenue now?
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  Speaker 3: Yeah, so that this gouging or overruning is coming home
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  Speaker 3: to roosts, like you said, and so that they're facing
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  Speaker 3: these sort of harshest reality check since the two thousand
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  Speaker 3: and eight financial crisis. So the luxury market is sort
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  Speaker 3: of shrinking about nine percent right now. But companies like
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  Speaker 3: sort of Curring, which owns multiple brands, but Gucci's the
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  Speaker 3: most recognizable. They've been shrinking by as much as twenty percent,
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  Speaker 3: especially in China. Because China has been a very small
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  Speaker 3: part of the luxury market way back pre GFC. They're
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  Speaker 3: now a huge part of the luxury market. And the
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  Speaker 3: China luxury buying is really quite sentiment driven, quite liquidity driven,
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  Speaker 3: and the all important property market in China has been
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  Speaker 3: a horror show over the last couple of years, which
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  Speaker 3: drives consumer sentiment. So we are already seeing these guys going
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  Speaker 3: through their winter of discontent.
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  Speaker 2: Yeah, well, chicken's coming home to roost. What does it
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  Speaker 2: mean to investors?
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  Speaker 3: Well, this is a strong market. Nothing's changed as a
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  Speaker 3: strong market that the customer base is very resilient, and
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  Speaker 3: these brands, you know, especially someone likes one hundred and
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  Speaker 3: eighty seven years old, is among the most recognizable in
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  Speaker 3: the world. But it's just a reminder that when you
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  Speaker 3: gouge your customer, the chickens really do come home to roost.
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  Speaker 3: So we'll have to see how this plays out for
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  Speaker 3: next quarter or two, but right now they're deep in
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  Speaker 3: the winter of discontent.
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  Speaker 2: Yeah, that's fascinating stuff.
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  Speaker 3: Sam.
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  Speaker 2: Thanks for talking us through it, mate, And you know,
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  Speaker 2: go and brush up on your handbags because I feel
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  Speaker 2: like there are people in your life who would appreciate that.
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  Speaker 2: That's Sam Dickey, Fish of Funds.
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