Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

How the other half lives: luxury companies thrive

Economy Jul 29, 2022 01:21PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Rachel Koffsky, International Senior Specialist at Christie's Handbags & Accessories, poses with a piece titled "A rare, matte white himalaya niloticus crocodile Birkin 25 with palladium hardware, Hermes, 2013" which is on display as part of "
 
RENA
+2.19%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DGE
+0.41%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
STT
-0.46%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BLK
-2.42%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ICAG
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
UL
-1.95%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Richa Naidu, Lucy Raitano and Mimosa Spencer

LONDON/PARIS (Reuters) - While millions are fretting whether they can afford another $1,000 on energy this year, others are still splashing out on $10,000 Hermes handbags as soaring prices leave wealthier people relatively unscathed.

A string of consumer companies, from spirits group Diageo (LON:DGE) to Birkin bag maker Hermes, have this week reported they're making money from their most expensive products and expect to continue to do so, despite a cost of living crisis that shows no signs of abating.

Sharply higher interest rates, surging inflation and a prolonged energy crisis are leading to the conclusion that the global economy is headed towards recession.

But millions of wealthier consumers are still sitting on a cushion of savings built up during the COVID-19 pandemic and keen to treat themselves after two years of restrictions.

Hermes reported a record quarterly profit margin on Friday, as sales rose sharply amid strong growth in Europe and the United States, and a rebound in China in June.

Chairman Axel Dumas said he saw no sign of a slowdown in any region, even though the company has raised prices 4% this year.

Carmaker Renault (EPA:RENA) also said its turnaround strategy of focusing on selling fewer but more profitable cars was paying off, and upgraded its forecast for full-year margins. The most expensive Renault cars can cost over $100,000.

"The surprising resilience of European consumers can also be seen in the strong results of luxury brands owner, Louis Vuitton, particularly in their fashion and leather goods, such as Fendi and Christian Dior," Rebecca Chesworth, senior equities strategist at investor State Street (NYSE:STT) SPDR ETFs, said.

"Consumers enjoying travel reopening have been boosting sales of wines and spirits."

COME FLY WITH ME

Many consumers are bracing for the economy to deteriorate rapidly this winter.

In Britain, for example, a price cap on typical household energy bills is expected to jump from 1,277 pounds ($1,552)earlier this year to more than 3,500 pounds by October, while the cost of food has leapt by 10% year-on-year.

That will plunge hundreds of thousands into financial jeopardy, unable to spend on anything but the absolute basics.

Food and personal goods companies such as Nestle and Unilever (NYSE:UL) have been locked in hard negotiations with retailers since late last year, with supermarkets reluctant to raise prices of basic necessities and risk alienating shoppers struggling to get by.

"Not all companies can (raise prices), only companies that have pricing power that are doing relatively well - that have the dominant positions in their respective sectors - will be able to do that," BlackRock (NYSE:BLK) Investment Institute's global chief investment strategist Wei Li told Reuters. "Focusing on the quality players within the sector is important."

While wealthier consumers' savings are still being eroded by inflation, they currently seem focused on enjoying the freedoms that have returned with the easing of COVID-19 restrictions.

British Airways-owner IAG (LON:ICAG) on Friday returned to profit for the first time since the pandemic, as more people flew around Europe between April and June.

"Commentary suggesting forward bookings show no sign of weakness supports the argument that pent up demand for travel still far outweighs the impact of a cost-of-living crisis," Matt Britzman, equity analyst at Hargreaves Lansdown, said.

IAG sales, on trips mostly booked out of Britain, Spain and the United States, more than quadrupled to 9.35 billion euros ($9.55 billion) in the first half of the year versus last year.

"We've had fast growth in the recovery (in travel retail) as you see travel pick up," Diageo CEO Ivan Menezes told analysts on Thursday after the Don Julio tequila and Johnnie Walker whisky maker beat full-year sales expectations.

To be sure, Menezes cautioned: "To get back to where we were, it's probably another two years, maybe a bit longer."

Europe's lenders this week also offered some positive surprises on profits, but investors are watching for signs a weaker economy, surging inflation and the war in Ukraine could hit their prospects.

Euro zone inflation rose to another record high in July and its peak could still be months away, keeping pressure on the European Central Bank to opt for another big interest rate increase in September.

For now, however, French bank BNP Paribas (OTC:BNPQY) reported better than expected quarterly profit on Friday, after bad loan provisions dipped and business remained buoyant in both investment and retail banking.

($1 = 0.8211 pounds)

($1 = 0.9792 euros)

 

 

How the other half lives: luxury companies thrive
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
nick cage
nick cage Jul 29, 2022 12:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I mean, look who backed Biden. It wasn't the working class. Biden just thows them crumbs
G D
G D Jul 29, 2022 12:17PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You work like hell so they can enjoy heaven on earth.
Dennis Chuck
Dennis Chuck Jul 29, 2022 9:09AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Like i said earlier, the rich will NEVER understand what is high costs of living!
nick cage
nick cage Jul 29, 2022 9:09AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Biden did give the 1% 80 billion so ya they are going to have more money. His climate package is another handout. look at the bill. The Gettys will be able to buy another diamond dress. pay to corrupt the government
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email