As a family that invests on a global basis, coupled with investment advice from Jynwel Capital, we strive to add value across industries—including energy and resources, consumer and media, real estate and hospitality—that share our long-term sustainable mindset. In the wake of acquiring Myla and backing an investment consortium to purchase the Park Lane Hotel in 2013, we expanded our focus to the luxury vertical of the retail sector. This is an area that has rebounded strongly after incurring market shrinkage during the depths of recent recessions in Europe and the United States.
We maintain a favorable outlook on the overall luxury market, which is buoying a slight pullback in certain Asian markets, by seizing fresh opportunities in the Americas. Products, such as the latest high-end car models and personal accessories, are now generating steady sales growth among affluent, mature purchasers in new cities including Houston and Seattle. As noted in the 13th edition of the Bain & Co. Luxury Study, there is an emerging opportunity to capitalize on consumers’ “appetite for 360-degree luxury experiences.”
Here are three factors that have helped shape our 2015 outlook:
The United States is solidifying its position as the world’s top luxury market.
Fueled by robust financial market performance and a strengthening labor market, there has been a multi-year surge in American wealth, which is best detailed in a recent Credit Suisse report on global wealth. The study projects that the United States will remain the undisputed leader in aggregate wealth and will reach $114 Trillion (USD) in net wealth by 2019. The early implication for luxury brands has been a steady rise in product sales and lifestyle experiences driven by previously pent-up demand. When you couple this increased domestic spending with the existing propensity of foreign tourists to purchase luxury goods at more favorable exchange rates, the case for America’s strong position becomes clear.
Expect “steady” global luxury market growth for the near term.
The global market for luxury goods and services has almost tripled in size during the past two decades, reports Bain & Co. in its recent study. This aggressive growth trajectory is now tapering a bit as global economic realities collide with a maturing market. Industry experts and investors should now count on a steadier growth rate in the mid-to-high single digits at constant currency. Nonetheless, this near $1 Trillion (USD) market still poses significant opportunities, even within a period of modest growth.
Despite strong valuations, watch for luxury brand acquisitions and buyouts.
Even as luxury market growth pulls back and company valuations hit upwards of 18 times EBITDA in some cases, there are more buyers than brands “in play” right now. A recent Reuters analysis concluded that firms in China, Hong Kong and the Middle East have created a block of active buyers focused on many of Europe’s most well-known luxury brands. In our view, it is only a matter of time before a similarly strong emphasis shifts to American brands as well.
Looking ahead to the duration of 2015, the luxury sector and the brands that comprise its various segments will remain a focus of ours around the world.
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