When a plane ticket from Beijing to Milan costs the same as a Prada bag
While investors in luxury stocks have become currency experts in recent months, they should also study jet-fuel prices.
While investors in luxury stocks have become currency experts in recent months, they should also study jet-fuel prices. The collapse in the euro versus the dollar has boosted Italian and French companies such as Salvatore Ferragamo (up 45 per cent this year) and hurt dollar earners such as Ralph Lauren (down 30 per cent).
But forex moves are also disrupting travel patterns. Chinese shoppers to Japan and France jumped 70 and 22 per cent year on year respectively in the third quarter – Prada reported that Japanese sales grew eight per cent in 2014. The problem with mobility is the likes of Louis Vuitton charge up to 60 per cent more in Asia than in France. With a ticket from Beijing to Milan the same price as the average Prada handbag, cheaper flights will only make this problem worse, according to analysts from Deutsche Bank.
According to research by the Boston Consulting Group, published by CNBC, between 2002 and 2012, median luxury handbag prices for seven brands increased at an annual rate of 14 percent, significantly outpacing the overall inflation growth rate of 2.5 percent. Meanwhile, sales growth of personal luxury goods is trailing that of other high-end categories, with Boston Consulting forecasting a slowdown in growth over the next three years.
Disclosure: The author is not responsible for the views expressed in the article. The text has been written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.