Wednesday, February 6, 2013

Market Pulse | Dealing in All Shapes and Sizes

6 February, 2013 | by Pierre Mallevays

Market Pulse | Dealing in All Shapes and Sizes

Savigny Luxury Index January 2013 | Source: Savigny Partners

LONDON, United Kingdom — The Savigny Luxury Index (SLI) gained 2.8 percent in January, outperforming the MSCI World Index (MSCI) by a touch over 1 percent. Positive economic news coming out of China sent the SLI into a mini-rally at the beginning of the month, however mixed corporate results announcements took some of the wind out of its sails. From a mergers and acquisitions perspective though, the year has started off with a bang.

Big news

  • Corporate activity and prospects have shot through the roof in January. Swatch bought Harry Winston for US$750 million, PPR bought Christopher Kane, Herm├Ęs bought d’Annonay tannery, whilst PPR looked closer to selling Redcats. Sandro/Maje/Claudie Pierlot’s dance cards were full with seven indicative offers having been tabled for the portfolio of brands.  In addition, Interparfums, Investcorp and Luxottica have all announced an appetite for deals, Investcorp being particularly interested in Italy. Lastly, both Moleskine and Vince announced their plans to list soon.
  • Corporate results announcements painted a diverse picture. LVMH, Luxottica, Ferragamo and Burberry posted strong results and expressed confidence over 2013, whilst Richemont, Tiffany and Coach all disappointed. Richemont in particular surprised the market with its third quarter results announcement highlighting weakness in China.

Going up

  • Tiffany, despite disappointing with lower than expected holiday sales and guidance towards the lower end of expectations for 2012 EPS, rose nearly 15% on the month, buoyed by news of the Swatch/Harry Winston deal.
  • PPR was rewarded for its continued efforts in cleaning up its portfolio of companies to focus on luxury and lifestyle, resulting in a share price hike of 12.5% over the month.
  • Burberry’s share price was boosted by its upbeat third quarter results announcement, which highlighted a resumption of growth in its retail portfolio. The stock ended almost 11% up on the month.

Going down

  • Coach slipped over 8% on the back of disappointing second half results and its announcement of intentions to boost its footwear and clothing offering being interpreted as a sign of weaker prospects for its core handbags business.

What to watch

  • Valentine’s Day and Chinese New Year both take place in February, to be followed by the Chinese National Peoples Congress in March. The sector is expecting a boost.
Sector Valuation

Pierre Mallevays is a contributing editor at The Business of Fashion and founder and managing partner of Savigny Partners, a corporate advisory firm focusing on the retail and luxury goods industry.

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