The luxury goods sector lacks direction
Many moving parts need to be factored in when investing in luxury goods stocks today, as the
sector faces both a structural transition and cyclical headwinds. Investors are pursuing various
strategies in this context:
1) The prudent are seeking places to hide and focus on low volatility names (Trading Meets Fundamentals (1): Hiding Away);
2) the optimists/speculators are looking for bashed down low valuation stocks;
3) the ST negatives/LT positives are after currently disappointing high quality names at low valuations;
4) those who want to stand out from the average are focusing primarily on self-help stories.
Burberry may be better prepared to face its challenges
Burberry is about to announce a productivity plan, but its main issue - we think - is that the brand is getting boring to its core Chinese constituency. A new senior organisation and fresh blood in the creative department could help to address this. Promote Christopher Bailey to full time CEO? Hugo Boss by contrast is a question mark: who will be CEO and what will be the new strategy? In flux for the moment. Swatch seems prepared to sit out the demand decline, and would only be bailed out by a rebound in watch demand and wholesale restocking: this is the highest risk proposition.