Luxury Fashion is back with demand building and the pandemic easing. From a recent fashion report from ReportLinker:
The luxury fashion market size was valued at USD 110.64 billion in 2020 and is expected to reach USD 153.97 billion by 2026 growing at a CAGR (Compound annual growth rate) of 5.66%.
The following factors are likely to contribute to the growth of the luxury fashion market
• Leveraging augmented reality
• Growing inclination towards sustainable products
• Internet shaping purchasing behaviour
• Increasing acceptance by millennials & Gen Z population
• Growing high net worth individuals
• Growth in travel & tourism
This shouldn’t be at all surprising. The pandemic slowed down the personal luxury market however the demand never went away. It was forcefully bottled up and suppressed but as things open up, we will see spending dramatically increase. This pent-up demand will likely lead to violent upward spending on luxury goods. New customers are buying and existing customers are buying more. Luckily for premium luxury brands, they are somewhat inflation-proof. If a consumer has already decided to spend $500 or more on a handbag, is increasing the price by 5-10% going to slow down spending? I do not think that is the case.
The numbers:
Global consumer spending on personal luxury goods, including the latest sneaker trend or design collaboration, is forecast to spike by 29% this year, to 283 billion euros ($325 billion). That’s a return to 2019 levels and a turnaround from the gloom of the 2020 pandemic lockdowns that shuttered stores and halted international travel.
U.S. consumers have at least temporarily supplanted the Chinese as the biggest spenders, accounting for one-third of all sales this year, compared with about 23% by Chinese shoppers, who were on par with Europeans. That trend is expected to invert by 2025, with nearly half of all spending by Chinese consumers, just over 20% by Americans and 18% by Europeans.
US shoppers outspend Chinese to restore luxury market
Revolve Group (NYSE: RVLV): Revenue was up 62% over the prior year:
Revolve Group Announces Third Quarter 2021 Financial Results
Capri Holdings Limited (NYSE: CPRI): The Parent of Versace, Michael Kors, and Jimmy Choo, Revenue was up 17% over the prior year:
CAPRI HOLDINGS LIMITED ANNOUNCES THIRD QUARTER FISCAL 2021 RESULTS
Tapestry, Inc. (NYSE: TPR): The Parent of Coach, Kate Spade, and Stuart Weitzman, Revenue was up 26% over the prior year:
TAPESTRY, INC. REPORTS FISCAL 2022 FIRST QUARTER RESULTS
Revolve is the biggest position in my portfolio. It provides travel, live events, high-end fashion, data, and tech all-in-one. I kind of view it as if Instagram and Amazon had a baby. Revolve’s business model is designed to not miss trends, giving it a massive edge over other luxury fashion companies.
I view Tapestry as greatly undervalued. I invested heavily in this company because of its increased penetration in China, digital sales/growth, and re-branding towards millennials and Gen Z consumers. If the company continues to execute, I have no doubt the stock will soar past all-time highs before 2026. I have so much confidence in this happening, once it does hit a new record-high I will buy and ship any item under $500 on Coaches website to one random subscriber of this blog completely free as a thank you.
Sometimes the market provides you with a very easy opportunity to make money. In a sports comparison, this would be like bunting against the shift. The defense is giving you a free base hit, so take it. Increased consumer spending on luxury fashion is one of the easiest consumer trends to predict after the pandemic. I will gladly take advantage of what the market gives me. Thank you!
Invest in Myself 