VIENNA, AUSTRIA – NOVEMBER 25, 2022: Karin Teigl wears Hermès yellow leather mini Kelly, Baum & Vergarten green leather jacket, Lumina beige cropped turtleneck sweater and vintage check green-yellow pants can be seen.
Jeremy Mohler | Getty Images
This trend revolves around understated, subtle expressions of luxury, and popular shows like the HBO series “Succession” have also helped fuel its popularity.
Gone are the days of loud and flashy displays of wealth in fashion, now it’s all about delicacy and minimalism.
But this trend is not only gaining traction in the fashion world, but even investors are starting to take notice.
Luxury stocks have long been considered by some as an effective hedge against inflation. This primarily has to do with high pricing, which does little to deter the sector’s wealthy customer base, and profit margins that are much higher than many other consumer discretionary products such as televisions and phones. .
Essentially, the sector’s fundamentals haven’t changed dramatically in decades, but as the quiet luxury movement takes hold, investors are starting to cherry-pick stocks that primarily meet these criteria. .
Some companies and their brands encapsulate what experts say is the essence of quiet luxury, and data from DBS Bank, Southeast Asia’s largest lender, shows that such names will grow in 2023. It shows that you can outperform your “noisy” competitors.
According to DBS, top companies benefiting from this new wave include Hermès, Prada’s Miu Miu, Brunello Cucinelli, Compagnie Financière Richemont and Swatch Group.
Quiet Luxury will surpass Loud Luxury in 2023.
DBS
Hou Wei Fook, chief investment officer at DBS Bank, said: “The quiet luxury movement highlights consumers’ growing preference for subtlety in luxury consumption, and is a testament to understated elegance and a timely touch. “Companies that focus on superior quality will resonate with consumers and benefit from this trend.”
“Thus, in 2023, quiet luxury companies outperformed their noisy peers by 23 percentage points. Continued changes in the dynamics of this industry will maintain this performance dichotomy. We hope it will be helpful.”
According to DBS, companies that focus on discreetness and high quality while maintaining exclusivity and scarcity fall into the category of “quiet luxury”.
The bank’s top picks include Hermès, Moncler, LVMH Moët Hennessy Louis Vuitton, Richemont, Swatch, Brunello Cucinelli, and Ermenegildo Zegna.
Unlike previous viral trends, investors are taking a longer-term view of these companies.
“There’s an element of ‘I’m tired of big logos,'” said Markus Hansen, portfolio manager at Vontobel Quality Growth Boutique, adding that consumers and investors are now looking for higher-quality products. He pointed out that he was looking for it.
“Going back to the legacy of these homes, that’s the most successful homes…and it’s homes that we invest in that have a very long-term view,” he told CNBC. Ta.
In Asia-Pacific, China’s uneven post-pandemic recovery and weak domestic demand may be changing the demand story for luxury goods.
Chinese consumers’ appetite for luxury goods may not be completely dead, but luxury brands are broadening their horizons to cater to other large markets in Asia.
In Asia, demand for luxury goods is increasing in mature markets like South Korea and Japan, Hansen said.
He added: “India is the last big market, not only in terms of population but also in terms of growing wealth of its people.”
A recent report from Goldman Sachs predicts that around 100 million people in India will become ‘high net worth’ by 2027. The US investment bank defines it as people with an annual income of more than $10,000. Currently, 60 million people in the world’s fifth-largest economy earn more than $10,000, the report said.
Last year, quiet luxury stocks were pushed into portfolios and brands considered “too loud” were pushed down.
As a result, Kering-owned Gucci and Burberry have been pushed to the bottom of the world’s luxury stock rankings, according to a Bank of America Securities survey.
“We believe brands will need to refocus on fashion content and novelty to re-engage customers and drive traffic throughout the year,” said Ashley Wallace, research analyst at BofA. , noted that companies oriented towards quiet luxury are in a good position this year.
BofA said it prefers companies like LVMH and Hermès to Gucci owners Kering and Burberry.