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‘Quiet Luxury’ Investments Yield Noisy Profits

by Blake Herzog

During these inflationary times, luxury stocks are a more alluring investment opportunity than ever.

Long seen as a good hedge against inflation with their high margins and affluent, dedicated fan base, high-end corporations selling everything from cars to watches to apparel have attracted investors from across the spectrum.

The rise and staying power of “quiet luxury’s” understated elegance, premium quality and timeless design in fashion and interior design is shifting the fortunes of publicly traded corporations that produce goods that fall in line with the trend. In some cases they’re outperforming their “loud luxury” counterparts in the stock market as well as the retail market.

How Wey Fook of DBS Bank in Singapore released a report at the beginning of this year touting the success of Hermès, LVMH and lesser-known but extremely high-end watchmakers Breguet, Blancpain and Jaeger-LeCoultre as investments, with his index of quiet luxury brands outperforming the overall luxury sector by 23% in 2023.

Given the popularity of low-key extravagances, “This bifurcation of performance is expected to stay,” Fook says.

According to the report, the most competitive firms in the quiet luxury landscape are those with “moat-like qualities” that protect them from turbulence in the economy: Enduring brand heritage, allure of exclusivity, exceptional craftsmanship, deep-seated customer loyalty and continuous innovation.

Investment Potential

Investing in quiet luxury fashion brands presents an opportunity for investors looking to diversify their portfolios with high-growth potential stocks. The limited production runs and high price points contribute to their exclusivity and brand value, fostering a high level of consumer loyalty.

A demographic shift plays a crucial role in the rise of quiet luxury brands. Millennials and Generation Z, now major consumer groups, prioritize experiences and values over brand names. They seek products that reflect their personal style and values rather than those that merely display a logo. Quiet luxury brands offer the sophistication and exclusivity that resonate with these younger, affluent consumers.

Additionally, many quiet luxury brands are privately owned or part of larger luxury conglomerates like LVMH or Kering. Investing in these conglomerates provides exposure to the quiet luxury segment while mitigating risks through diversification across multiple luxury brands.

Key Considerations for Investors

When considering investment in quiet luxury fashion brands, it’s essential to evaluate the brand’s market positioning, financial health and growth strategy. Look for brands with a strong online presence, as e-commerce continues to be a critical growth driver.

Assess the brand’s commitment to sustainability, as this is increasingly important to consumers and can drive long-term value.

Consider the competitive landscape and the brand’s ability to innovate and adapt to changing consumer preferences. Brands that can balance tradition with modernity are likely to thrive in the evolving luxury market.

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