Week 51: Luxury is booming
Luxury is booming
Participate in one of the biggest growth sectors in the most successfull companies of this branch
Luxury is booming In the chic boutiques in Paris the cash is ringing. Christmas is coming. Whether expansive handbags, jewellery or champagne rising global wealth leads to enormous growth rates in the luxury industry. The luxury industry is able to convert itself under current circumstances. So the demand from China and India is pretty stable despite the economic slowdown. Geopolitical risks must be recalled but this economic sector seems to be robust. Exklusivity is trend and the proportion of the global middle class is rising. Especially in countries like China and India luxury goods are popolar as status symbols. With the coming Millenials which are already responsible for 30% of the market volume the requirements of the distribution channels will change. The importance of the online presence / online commerce will rise. Also therefore we considered factors like online-innovations, exclusivity and market position in choosing the best companies.
LVMH Moet Hennessy Louis Vuitton SE: The listed LVMH Moët Hennessy – Louis Vuitton SE is the global leader of the luxury industry with rights on about 70 different brands which are sold in over 3940 stores. Since 2018 the streetwear superstar designer Virgil Abloh has been engaged. The stock prices are rising since over 5 years.
Hermes International: Beside Prada Hermes is one of the biggest luxury companies which is largely owned by the founding family. Because of the excellent market position and global reputation this is a peculiarity even in the high-price segment. The most popular product is the Birkin Bag, which isn't available for "usual" clients, is obtaining prices around 10000 USD on the second-hand market. Also other handbags and silk scarfs are collected and even seen as investments. Even if the family controls the company it is als listed on the stock exchange so that private investors are able to buy stocks. Many experts believe that Hermes is the best global luxury brand.
Kering SA: Kering is one of the biggest global designer, producer and distributor of luxury- and sport articles. The most famous brands are Gucci and Yves Saint Laurent. The company has access to a sales network of around 1400 shops worldwide.
Further interesting brands in this area:
Prada Spa (1913:HK), Burberry Group PLC (BRBY:LN), Christian Dior SE (CDI:FP), Tiffany & Co (TIF:US)
Needless to say also such great companies are affected from volatility on the stock market. The risk of a direct investment could be reduced by implementing low european barriers (59% and 69%) and Autocalls in the structure of a traditional Barrier Reverse Convertible.The guaranteed Coupons exceed the expected average dividend ratio of LVMH (1.51%) Hermes (0.68%) and Kering (1.81%) significantly.
18M Barrier Reverse Convertible in CHF/EUR/USD
| Currency | CHF | EUR | USD |
| Denomination | CHF 1'000.-- | EUR 1'000 | USD 1'000 |
| Maturity | 18 months (early redemption possible) | ||
| Underlying (Worst Of) | LVMH Moet Hennessy Louis Vuitton SE (MC FP) Hermes International (RMS FP) Kering SA (KER FP) |
||
| Coupon guaranteed with EU Barrier 59% |
4.84% p.a. | 5.22% p.a. | 7.32% p.a. |
| Coupon guaranteed with EU Barrier 69% |
8.16% p.a. | 8.60% p.a. | 10.61% p.a. |
| Autocall | Autocall after 6 months at 100% | ||
| Observation | Quarterly | ||
| Indication | 17.12.2019 | ||
| Size | [CCY] 1'000'000;-- | ||
| Issuer | Rating A- minimum | ||
| Issue Price | 100% | ||
We are happy to customize the relevant components exactly to your personal preferences. Please imagine that the indications can change day by day.
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Text und analysis by Florian Franz
Partner at Carat Solutions AG