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Speaker 1: So luxury brands and luxury spending as a category have

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Speaker 1: been booming for the last twenty five plus years. But Gucci, Chanel,

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Speaker 1: Louis Vuitton, brands like that, they've pushed product prices coming

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Speaker 1: out of COVID, and that's really starting to come home

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Speaker 1: to roost now. Apparently Sam Dickey from Fisher Funds is

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Speaker 1: with us to explain.

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Speaker 2: Hey, Sam good isn't here, okay, so give us a.

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Speaker 1: Little bit of context about what's been going on here

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Speaker 1: with a luxury sector.

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Speaker 2: It's been a home run for the past sort of

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Speaker 2: twenty five years. So luxury as a sector has grown

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Speaker 2: sort of twice as fast as global retail sales, and

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Speaker 2: companies like Hermes, Ferrari, Louis Vauton, and Montclear they're up

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Speaker 2: sort of ten twenty thirty fold over the past twenty

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Speaker 2: five years, miles more than the stock market. And the

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Speaker 2: customer base is inherently significantly more resilient than the average consumer.

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Speaker 2: So the other thing is when you think about the

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Speaker 2: motor around these companies. You and I have talked about

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Speaker 2: brand motes before, being tough Heather through the lens of

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Speaker 2: companies like Nike. They these companies have been around for

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Speaker 2: you know, in Ume's case, sort of one hundred and

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Speaker 2: eighty seven years, sort of, and they're seeped in hand

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Speaker 2: crafted quality. They have long waiting lists. They're some of

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Speaker 2: the most recognizable brands on earth, so they really do

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Speaker 2: have sort of wide motes around their businesses. And the

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Speaker 2: final thing is, in this kind of ultra fast moving world,

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Speaker 2: as an investor, you want to know what a company's

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Speaker 2: going to look like in ten years, and most people

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Speaker 2: couldn't tell you what the average tech company will look

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Speaker 2: like in ten years. They might look completely different or

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Speaker 2: they might be non existent, But in fifty years from now,

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Speaker 2: wealthy consumers will still want scarce, ultra high quality, handcrafted

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Speaker 2: leave the handbags.

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Speaker 1: So how hard did these guys drive the prices during

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Speaker 1: and after COVID?

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Speaker 2: Very hard. They really did gouge, so they kind of

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Speaker 2: had the perfect storm conditions to gouge. So there was

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Speaker 2: boutique closures. There was tons of liquidity given low interest

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Speaker 2: rates and luxury. By the way, like art is a

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Speaker 2: bit of a kind of a liquidity proxy. When there's

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Speaker 2: lots of cash flowing around, people will buy art, people

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Speaker 2: buy handbags. There was the provad general inflation, which they

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Speaker 2: had behind, and of course there's the limited supply, which

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Speaker 2: is like pricing power on steroids for these guys. So

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Speaker 2: the Chanel classic sort of jumbo flat bag. I don't

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Speaker 2: know much about these bags, by the way, I do

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Speaker 2: know the companies. So they jump from sort of less

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Speaker 2: than six thousand dollars in twenty nineteen to well over

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Speaker 2: eleven thousand dollars and twenty twenty five, so they sort

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Speaker 2: of doubled in six years. So contuc channel were really gouging.

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Speaker 2: Multiple price rises per year became the norm. Like Louis

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Speaker 2: Vuitton raised prices three times and seven months at one stage.

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Speaker 2: Normally they raised prices once a year, So they really

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Speaker 2: did gouge their customers.

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Speaker 1: Now what's happening as a result, what's going on with

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Speaker 1: the revenue now?

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Speaker 2: Yeah, so that this gouging or overruning is coming home

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Speaker 2: to roosts, like you said, and so that they're facing

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Speaker 2: their sort of harshest reality checks since the two thousand

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Speaker 2: and eight financial crisis. So the luxury market is sort

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Speaker 2: of shrinking about nine percent right now. But companies like

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Speaker 2: sort of cur which owns multiple brands, but Gucci's the

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Speaker 2: most recognizable, they've been shrinking by as much as twenty percent,

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Speaker 2: especially in China. Because China has been a very small

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Speaker 2: part of the luxury market way back pre GFC. They're

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Speaker 2: now a huge part of the luxury market. And the

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Speaker 2: China luxury buying is really quite sentiment driven, quite liquidity driven,

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Speaker 2: and the all important properly market in China has been

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Speaker 2: a horror show for the last couple of years, which

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Speaker 2: drives consumer sentiment. So we already seeing these guys going

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Speaker 2: through their winter of discontent.

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Speaker 1: Yeah, well, chicken's coming home to roost. What does it

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Speaker 1: mean to investors?

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Speaker 2: Well, this is a strong market. Nothing's changed as a

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Speaker 2: strong market that the customer base is very resilient and

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Speaker 2: these brands, you know, especially someone likes one hundred and

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Speaker 2: eighty seven years old, is among the most recognizable in

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Speaker 2: the world. But it's just a reminder that when you

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Speaker 2: gouge your customer, the chickens really do come home to roost.

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Speaker 2: So we'll have to see how this plays out for

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Speaker 2: the next quarter or two, but right now they're deep

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Speaker 2: in the winter of discontent.

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Speaker 1: Yeah, that's fascinating stuff.

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Speaker 2: Sam.

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Speaker 1: Thanks for talking us through it, mate, And you know,

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Speaker 1: go and brush up on your handbags because I feel

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Speaker 1: like there are people in your life who would appreciate that.

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Speaker 1: That's Sam Dickey, Fish of Funds.

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Speaker 2: For more from Heather Duplessy Allen Drive, Listen live to

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