How ‘quiet luxury’ is patiently taking over investors’ portfolios

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VIENNA, AUSTRIA – November 25, 2022: Karin Teigl is seen wearing a Hermès Kelly, Baum & Pferdgarten yellow leather jacket, a Lumina beige cropped turtleneck sweater and yellow green checked pants.

Jeremy Moeller | Getty Images

Quiet luxury was one of last year’s biggest viral fashion trends on social media – but unlike other short-lived fads on TikTok or Instagram, this one has made its way into the fans’ folds. investment and have shown real results.

So what is “quiet luxury”?

The trend is around subtle, subtle displays of opulence and popular shows like the HBO series “Succession” have also played a part in increasing its popularity.

Gone are the days of loud, flashy displays of wealth in fashion – it’s now all about subtlety and minimalism.

But the trend has not only caught on in the fashion world, even investors are starting to take notice.

Brand promotion

Luxury stocks have long been viewed by some as an effective hedge against inflation. This is largely due to the sector’s high prices which rarely hinder its affluent customer base and much higher margins than many other consumer discretionary products, such as televisions or telephones.

In fact, the fundamentals of the sector haven’t changed much over the decades but as the quiet movement takes hold, investors are starting to pick names that mostly check those boxes.

Some companies and their labels have embraced what experts say is the heart of quiet luxury, with data from Southeast Asia’s biggest lender DBS Bank showing that these names have outperformed their “top” peers in 2023.

Some of the major companies have benefited from this new wave HermesMiu Miu by Prada, Brunello Cucinelli, Compagnie Financière Richemont and The Swatch Groupaccording to DBS.

Quiet Luxury will outperform Loud Luxury in 2023.

DBS

“With the quiet luxury movement underpinning consumers’ growing preference for luxury consumption, companies that focus on unique elegance and timeless quality will resonate with consumers, to benefit from this trend,” said Hou Wey Fook, chief investment officer at DBS Bank.

“Thus, in 2023, quiet luxury companies performed 23% better than their high-end peers.

According to DBS, a company falls under its category of “quiet luxury” if it is proven low and focuses on high quality, while maintaining exclusivity and scarcity.

Among some of the bank’s best selections Hermes, Moncler, LVMH Moët Hennessy Louis VuittonRichemont, Swatch, Brunello Cucinelli and Ermenegildo Zegna.

Go long for quiet luxury

Unlike viral trends that come and go, investors are looking at these companies with a much longer view.

“There’s this element of: ‘I’m tired of the big brand stuff,'” says Markus Hansen, portfolio manager at Vontobel Quality Growth Boutique, noting that customers and investors now want higher quality product.

“It comes back to the heritage of those houses, the most successful…

Consumers are still willing to pay for their favorite brands, says Zalora

In Asia-Pacific, the demand statement for luxury goods could be moving due to China’s uneven post-pandemic recovery and weak domestic demand.

While Chinese consumers’ appetite for luxury goods may not have completely dried up, luxury brands are expanding their horizons to cater to other large markets in Asia.

In Asia, mature markets like South Korea and Japan are seeing a growing demand for luxury goods, Hansen said.

He said: “India is the last big market, not only in terms of population, but in terms of the wealth of the people.

A recent Goldman Sachs report predicted that around 100 million people in India will become “affluent” by 2027 – defined by the US investment bank as those earning annual incomes greater than maximum of $10,000. Currently, 60 million people in the world’s fifth largest economy earn more than $10,000, the report said.

High luxury that is not in vogue

Quiet luxury stocks were built in droves last year, pushing down brands that were considered too “high-end.”

As a result, Keringowned by Gucci & Burberry pushed lower in a global ranking of luxury stocks, Bank of America Securities research showed.

“We believe brands should year-round focus on fashion content and innovation to drive repeat customer acquisition and traffic,” BofA research analyst Ashley Wallace notes. that companies focused on quiet luxury are in a better position this year.

BofA said it preferred companies like LVMH and Hermes to own Gucci Kering and Burberry.

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