Family ownership underpins performance in the luxury sector
Family ownership is a big factor in the success of the luxury consumer sector, which has rebounded sharply since the credit crisis, according to a leading analyst, writes Marc Smith.
Scilla Huang Sun, the lead fund manager for Julius Baer's luxury brands fund, said: "Luxury brands that have a majority owner like a family are likely to have a long-term strategy in place, which is vital to their success."
"It takes many years to build a luxury brand, but it can be destroyed very quickly. Owners with a long-term strategy in place are probably more likely to focus on their brand and ensure it is well managed."
Her fund is up 17% since its launch in January 2008, and is up 18% year to date, compared with the 7% rise in the MSCI World Index.
Privately owned family businesses and family-controlled firms make up around 23% of Huang Sun's luxury fund. Out of the top five holdings in the fund, four are family businesses: LVMH, controlled by the Arnault family; the Swatch Group, the Hyak family; Richemont, the Rupert family; and Hermes.
All of these companies have recorded strong results in the first half of 2010, with net profit up year-on-year 81% and 53% at Swatch and LVMH respectively.
Huang Sun reckons the upward trend in profits and sales growth will continue for the luxury sector.
"The number of potential luxury buyers will more than double by 2020," she said, citing a Euromonitor study based on the number of affluent households with annual incomes of $150,000, or more.
Much of that growth will come from Russia and China, said Huang Sun.
"Asian consumers in particular are happy to pay premium prices for Western brands which they hold in high regard," she said.