After Tough Holiday, Market Faces Another Nervous Year

PARIS — If the Grinch stole Christmas for luxury, he’s going to keep doing so for the foreseeable future.Analysts share a grim view of...

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Many luxury firms recently democratized their prices, often offering logo products and small accessories at the "aspirational end" of the consumer base, according to Dossin. "We were under the impression that logo products were in larger numbers than usual at Fendi, Gucci and Prada," he wrote. "Some of the most expensive product categories suffered from consumers trading down to cheaper items, for example, from bags to apparel."

Gucci’s recent policy of introducing such hyper-exclusive products as custom-made shoes and handbags was a strategy viewed favorably by Dossin. But he noted that it came at a time "when consumers were willing to reduce their average purchase."

Consumers may also have traded down to cheaper brands. Colonna said "disappointing" Tiffany numbers last week and "impressive Coach and Signet numbers at the low end of the market" are evidence of that.

Despite the Grinch-y nature of the season, there were some bright spots.

Dossin estimated that the Louis Vuitton brand had a "very strong" performance at Christmas, aided by new flagships in Japan, new products like its Tambour watch line and strong tourism in China, where it operates 10 stores.

According to Dossin, other holiday winners include large brands like Christian Dior and Cartier and smaller ones including Marc Jacobs and Sergio Rossi. "Brands losing momentum seem to include Gucci, Prada and Bulgari — with strong wholesale in October and November, but weak retail in December — for the larger brands, and Donna Karan, Céline and Loewe for the smaller brands."

Colonna gave the tip to Burberry, LVMH and Luxottica, his top stock picks. Merrill Lynch maintains its neutral stance on Bulgari, Richemont and Swatch based on the unlikelihood of a recovery in the watch industry in the first half.
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