Luxury Is Feeling No Pain

I read an interesting article in The Wall Street Journal yesterday titled, "Luxury Is Feeling No Pain."  Here’s a brief summary:

The Louis Vuitton French luxury group (LVMH) and the UK apparel designer Burberry report their products are "flying off the shelves" (C16) despite the financial crunch that many retailers are feeling.  LVMH saw revenue grow 15% in the third quarter, which was the fastest pace in years for the company.  Handbags, watches, and jewelry were the most popular sellers.  Similarly, Burberry’s first-half sales were up by 25%.

The U.S. market for luxury goods is second in size only to Europe, and a growing trend for luxury brands is being noted around the world.  Emerging markets like China, India, and Russia are showing demand for Burberry and LVMH goods, and the companies have responded with new stores in these locations.  Chinese shoppers are now accounting for over 7% of Louis Vuitton sales.

While these other markets may cushion a blow to luxury retailers if the U.S. economy suffers a major downturn, financial commentators expect the price tags of luxury stocks to fall sharply since the sector is currently trading at an average of 22 times 2007 earnings.   

Click Here For The Wall Street Journal

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