Europe’s Fashion Powerhouses Pack Economic Punch

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Sept. 23 (Bloomberg) -- Allegra Perry, luxury goods managing director at Cantor Fitzgerald, talks with Francine Lacqua about the economic impact of Europe’s luxury goods makers. She speaks on Bloomberg Television’s “The Pulse.”

Importance that the luxury sector has with the economy.

This is one of the biggest killers that they can have strong foundations on because they are growing so much.


It is one of the strong fundamentals of the european economy.

I think it is about one third of global luxury sales made in europe.

About 70 billion according to some estimates.

The definition of luxury is up to different opinions.

I think that is a big number.

Let's not forget about 50%-60% of those sales generated in europe.

That brings more money to the economy.

The economy has been pretty consistently strong over the last year.

Ultimately, i think there are strong fundamentals there.

It is always going to be a very good pillar for the european economy to lean on.

Is there country that are more dependent on fashion than others?

Lvmh and -- on most of the fashion houses in france.

France is the most important when it comes down to luxury sales generated in those markets because of the number of brands originating in that market.

Of course, london is also important as far as generating luxury traffic and sales.

As is milan in italy.

Those are the top three cities in europe and they have the highest hotel occupancy rates.

Ultimately, on any street in any major city that has luxury fashion stores, you're going to find pretty much the same shopping experience.

You could be on rodeo drive, or a street in paris and you wouldn't know you're in a different city.

They are very similar and the experience is always relatively double.

-- global.

Who is getting it right?

There are so many names.

How do you pick the right one?

It is a difficult sector in that sense.

It is a sector which has strong fundamentals and it is big but it is not that in the context of global gdp.

It is difficult in selecting which one is going to do better over the long term.

I think over a ten-year timeframe you could argue they will all do well if they have the right formula.

I think the brands that have done better are ones that have strong heritage to fall back on and that have the most control whether it is production, distribution or communication.

Those are the brands that i think have gotten to where they have gotten to because of those elements.

If you look at louis vuitton, it is the biggest brand and not a surprise considering it has the most control over those factors.

I think there is a lot of other winners in the space.

What distinguishes the sector is that it is well protected, it has high barriers to entry.

You do well when you have heritage behind you.

There are a number of brands that fit the bill.

While it is all different positioning, there is a reason to be optimistic about a number of different brands.

Some of the other ones you like, talk to me about consolidation.

We talk a lot about prada but they are standalone.

Is there a danger they will be bought out?

Are there has been a trend of consolidation.

Late 90's a huge flurry, the establishment of bigger conglomerates.

Then there was a quiet.

-- a quiet period.

There is appetite and there is strong balance sheets after years of strong cash flow generation.

There are just not that many brands up for sale.

The ones that remain independent are expensive but they are not looking to be sold.

They are happy to stay independent.

If the conglomerates have their way, they would be making bigger acquisitions.

What we are likely going to see is more small to medium size.

Lvmh but a majority stake in kirkwood on friday.

It is not a huge brand, only founded in 2004, but has huge potential.

We are going to see things like that where they can get in early , put a lot of investment in buying the brand and grow on a global scale.

The other thing that has been key is vertical integration.

Especially in the watch and jewelry side, a number of acquisitions to increase capacity and industrial capabilities.

Deregulation will affect supply dynamics.

We have seen tanneries being bought, precious skin companies.

A lot of areas where the companies can enhance their business.

Supply is ultimately being constrained.

Ray quickly, you mentioned that shoes are booming.

Is there one particular thing that is doing better than others?

Part of this is a scale discussion.

Handbags are huge.

They have been a big story of luxury for a number of years.

More recently, shoes have been outperforming and jewelry has been outperforming.

Different things influencing those dynamics.

I think shoes are more of a male-dominated category.

That has to do with china.

Jewelry as well, huge growth of china particularly for the high- end of jewelry.

For the first time, we have seen jewelry outperform watches.

Thank you so much for all of that knowledge.

Coming up, struggling smartphone maker blackberry is hoping

This text has been automatically generated. It may not be 100% accurate.


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