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Luxury goods and currency impact
Deborah Aitken and Maja Rakic
Bloomberg Intelligence analysts
Currency, cost base, tourism determine
luxury goods prospects
Foreign-exchange movements have dictated luxury-goods makers’
share-price performance this year. Euro-reporting peers, reliant on
a weaker euro, largely performed best.
Many long-established peers have high sales exposures outside
Europe, though report and have significant costs in euros.
By contrast, dollar-reporting peers were out of favor because
of negative currency translation effects and reduced spending
by tourists to the U.S. Given a slower Hong Kong market, Asian
jewelers underperformed too.
Chinese tourists luxury spend is at threat from yuan devaluation
China’s devaluation of the yuan and investor concern about
further weakening will hurt luxury goods sales as products
overseas become more expensive for Chinese tourists.
Mainland travelers represent 10% of global tourism and
more than 25% of spending on luxury goods, with 70% of
these goods purchased abroad, according to Bain data.
The yuan’s appreciation against the euro and yen in the past
year has boosted luxury goods sales in Europe and Japan,
while a strong dollar hurt tourist spending in the U.S.
Luxury goods fortunes hinge on weak euro, firm dollar,
Hong Kong
The performances of global luxury goods manufacturers’ share
prices have been tied to currency moves this year.
The top-third performers in Bloomberg Intelligence’s 38-member
group are from Italian and French peers, which all report in euros
and have high euro costs, though their sales exposures are largely
outside Europe.
Yoox leads, up 75% year-to-date, then Moncler, rising 56%.
Companies with high exposures to the U.S. dollar and Hong Kong
have been penalized, with Michael Kors down 37% and Luk Fook
off 25%.
Luxottica, Ferragamo, LVMH may see sales boost
on euro’s decline
Euro-reporting luxury companies with a significant portion of
their sales outside the euro zone may get a revenue and profit
boost in 2015.
A depreciating euro means a positive foreign-exchange impact on
non-domestic sales. Most high-end luxury companies manufacture
at home, so costs are lower.
With strong gross profits, export prices don’t have to be raised,
making them more competitive. Luxottica (80% of revenue),
Ferragamo (73%), LVMH (70%) and Kering (68%) are EU
luxury-goods makers with high overseas sales.
Weak euro boosts Kering to Prada as dollar deters trips to U.S.
Luxury goods companies with high European sales are benefiting
from a weaker euro. The single-currency is luring greater numbers
of foreign, particularly Asian, tourists to the region.
Chinese travelers, the biggest spenders on high-end goods,
prefer France and Germany. The two countries welcomed three
millionChinese visitors in 2014, rising a further 40% in 1Q.
Chinese tourists to the U.S. grew 32% in 1Q, though Tiffany and
Ralph Lauren said spending fell since 3Q14, with a stronger dollar.
Dollar catch-22 for Michael Kors, Ralph Lauren on fewer tourists
Michael Kors sales are the least-exposed of U.S. luxury peers to
currency volatility. In times of dollar strength, its 78% North American
sales exposure helps reduce currency translation impacts.
Tumi and Ralph Lauren also have dollar-skewed sales mixes.
Even so, during current dollar strength, exposure must be
weighed against fewer U.S. tourists and their lower spending.
U.S. visitors in December included 1.5 million Canadians,
down 7% year-on-year and 280,000 Japanese, declining 12%.
Bloomberg Intelligence offers valuable industry and company data,
interactive charting and written analysis with government and credit
insights from a team of independent experts, giving trading and
investment professionals deep insight into where crucial industries
stand today and where they may be heading next.

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Luxury goods and currency impact

  • 1. Luxury goods and currency impact Deborah Aitken and Maja Rakic Bloomberg Intelligence analysts
  • 2. Currency, cost base, tourism determine luxury goods prospects
  • 3. Foreign-exchange movements have dictated luxury-goods makers’ share-price performance this year. Euro-reporting peers, reliant on a weaker euro, largely performed best. Many long-established peers have high sales exposures outside Europe, though report and have significant costs in euros.
  • 4. By contrast, dollar-reporting peers were out of favor because of negative currency translation effects and reduced spending by tourists to the U.S. Given a slower Hong Kong market, Asian jewelers underperformed too.
  • 5. Chinese tourists luxury spend is at threat from yuan devaluation
  • 6. China’s devaluation of the yuan and investor concern about further weakening will hurt luxury goods sales as products overseas become more expensive for Chinese tourists. Mainland travelers represent 10% of global tourism and more than 25% of spending on luxury goods, with 70% of these goods purchased abroad, according to Bain data.
  • 7. The yuan’s appreciation against the euro and yen in the past year has boosted luxury goods sales in Europe and Japan, while a strong dollar hurt tourist spending in the U.S.
  • 8. Luxury goods fortunes hinge on weak euro, firm dollar, Hong Kong
  • 9. The performances of global luxury goods manufacturers’ share prices have been tied to currency moves this year. The top-third performers in Bloomberg Intelligence’s 38-member group are from Italian and French peers, which all report in euros and have high euro costs, though their sales exposures are largely outside Europe. Yoox leads, up 75% year-to-date, then Moncler, rising 56%. Companies with high exposures to the U.S. dollar and Hong Kong have been penalized, with Michael Kors down 37% and Luk Fook off 25%.
  • 10.
  • 11. Luxottica, Ferragamo, LVMH may see sales boost on euro’s decline
  • 12. Euro-reporting luxury companies with a significant portion of their sales outside the euro zone may get a revenue and profit boost in 2015. A depreciating euro means a positive foreign-exchange impact on non-domestic sales. Most high-end luxury companies manufacture at home, so costs are lower. With strong gross profits, export prices don’t have to be raised, making them more competitive. Luxottica (80% of revenue), Ferragamo (73%), LVMH (70%) and Kering (68%) are EU luxury-goods makers with high overseas sales.
  • 13. Weak euro boosts Kering to Prada as dollar deters trips to U.S.
  • 14. Luxury goods companies with high European sales are benefiting from a weaker euro. The single-currency is luring greater numbers of foreign, particularly Asian, tourists to the region.
  • 15. Chinese travelers, the biggest spenders on high-end goods, prefer France and Germany. The two countries welcomed three millionChinese visitors in 2014, rising a further 40% in 1Q. Chinese tourists to the U.S. grew 32% in 1Q, though Tiffany and Ralph Lauren said spending fell since 3Q14, with a stronger dollar.
  • 16. Dollar catch-22 for Michael Kors, Ralph Lauren on fewer tourists
  • 17. Michael Kors sales are the least-exposed of U.S. luxury peers to currency volatility. In times of dollar strength, its 78% North American sales exposure helps reduce currency translation impacts.
  • 18. Tumi and Ralph Lauren also have dollar-skewed sales mixes. Even so, during current dollar strength, exposure must be weighed against fewer U.S. tourists and their lower spending. U.S. visitors in December included 1.5 million Canadians, down 7% year-on-year and 280,000 Japanese, declining 12%.
  • 19. Bloomberg Intelligence offers valuable industry and company data, interactive charting and written analysis with government and credit insights from a team of independent experts, giving trading and investment professionals deep insight into where crucial industries stand today and where they may be heading next.