Sam Dickie: Fisher Funds expert on the luxury sector's economic troubles

Luxury spending has been booming over the last couple of decades, but many high-end brands have been taking a financial hit.

Gucci, Chanel, and Louis Vuitton have been seeing significant revenue falls since the Covid-19 pandemic.

Fisher Funds' Sam Dickie reveals what could be behind the downturn.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
So luxury brands and luxury spending as a category have
been booming for the last twenty five plus years. But Gucci, Chanel,
Louis Vuitton, brands like that, they've pushed product prices coming
out of COVID, and that's really starting to come home
to roost now. Apparently Sam Dickey from Fisher Funds is
with us to explain.

Speaker 2 (00:14):
Hey, Sam good isn't here, okay, so give us a.

Speaker 1 (00:16):
Little bit of context about what's been going on here
with a luxury sector.

Speaker 2 (00:20):
It's been a home run for the past sort of
twenty five years. So luxury as a sector has grown
sort of twice as fast as global retail sales, and
companies like Hermes, Ferrari, Louis Vauton, and Montclear they're up
sort of ten twenty thirty fold over the past twenty
five years, miles more than the stock market. And the
customer base is inherently significantly more resilient than the average consumer.

(00:45):
So the other thing is when you think about the
motor around these companies. You and I have talked about
brand motes before, being tough Heather through the lens of
companies like Nike. They these companies have been around for
you know, in Ume's case, sort of one hundred and
eighty seven years, sort of, and they're seeped in hand
crafted quality. They have long waiting lists. They're some of
the most recognizable brands on earth, so they really do

(01:06):
have sort of wide motes around their businesses. And the
final thing is, in this kind of ultra fast moving world,
as an investor, you want to know what a company's
going to look like in ten years, and most people
couldn't tell you what the average tech company will look
like in ten years. They might look completely different or
they might be non existent, But in fifty years from now,
wealthy consumers will still want scarce, ultra high quality, handcrafted

(01:30):
leave the handbags.

Speaker 1 (01:32):
So how hard did these guys drive the prices during
and after COVID?

Speaker 2 (01:38):
Very hard. They really did gouge, so they kind of
had the perfect storm conditions to gouge. So there was
boutique closures. There was tons of liquidity given low interest
rates and luxury. By the way, like art is a
bit of a kind of a liquidity proxy. When there's
lots of cash flowing around, people will buy art, people
buy handbags. There was the provad general inflation, which they

(02:01):
had behind, and of course there's the limited supply, which
is like pricing power on steroids for these guys. So
the Chanel classic sort of jumbo flat bag. I don't
know much about these bags, by the way, I do
know the companies. So they jump from sort of less
than six thousand dollars in twenty nineteen to well over
eleven thousand dollars and twenty twenty five, so they sort

(02:24):
of doubled in six years. So contuc channel were really gouging.
Multiple price rises per year became the norm. Like Louis
Vuitton raised prices three times and seven months at one stage.
Normally they raised prices once a year, So they really
did gouge their customers.

Speaker 1 (02:40):
Now what's happening as a result, what's going on with
the revenue now?

Speaker 2 (02:44):
Yeah, so that this gouging or overruning is coming home
to roosts, like you said, and so that they're facing
their sort of harshest reality checks since the two thousand
and eight financial crisis. So the luxury market is sort
of shrinking about nine percent right now. But companies like
sort of cur which owns multiple brands, but Gucci's the
most recognizable, they've been shrinking by as much as twenty percent,

(03:06):
especially in China. Because China has been a very small
part of the luxury market way back pre GFC. They're
now a huge part of the luxury market. And the
China luxury buying is really quite sentiment driven, quite liquidity driven,
and the all important properly market in China has been
a horror show for the last couple of years, which

(03:27):
drives consumer sentiment. So we already seeing these guys going
through their winter of discontent.

Speaker 1 (03:34):
Yeah, well, chicken's coming home to roost. What does it
mean to investors?

Speaker 2 (03:39):
Well, this is a strong market. Nothing's changed as a
strong market that the customer base is very resilient and
these brands, you know, especially someone likes one hundred and
eighty seven years old, is among the most recognizable in
the world. But it's just a reminder that when you
gouge your customer, the chickens really do come home to roost.
So we'll have to see how this plays out for

(03:59):
the next quarter or two, but right now they're deep
in the winter of discontent.

Speaker 1 (04:04):
Yeah, that's fascinating stuff.

Speaker 2 (04:06):
Sam.

Speaker 1 (04:06):
Thanks for talking us through it, mate, And you know,
go and brush up on your handbags because I feel
like there are people in your life who would appreciate that.
That's Sam Dickey, Fish of Funds.

Speaker 2 (04:13):
For more from Heather Duplessy Allen Drive, Listen live to
news talks. It'd be from four pm weekdays, or follow
the podcast on iHeartRadio