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Avoiding the Bumps: No Slowdown Ahead For Booming Luxury

The luxury engine just keeps purring and industry executives and analysts haven't been this upbeat about the upscale market since the Nineties.

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Other "booming" categories at Chanel include watches, up 42 percent this year, as well as handbags, perfume and skin care, like its new antiaging "Micro Solutions" range, Montenay said.

There are concerns down the road, however. Higher fuel prices will eventually feed into shipping costs, heating bills and raw material costs, threatening inflation. But this is at least two years away, executives said, and spending is expected to remain strong in the meantime.

Bernard Fornas, Cartier president and ceo, said he was "confident and prudent at the same time" because there is so much "potential volatility."

"We don't know about what will happen with the dollar; we don't know about terrorism; we don't know about natural disasters," he said. "Volatility today is the name of the game.

"Most markets are performing," he continued. "The U.S. is good, Japan is recovering, and Europe is resisting." Fornas reported brisk sales across all categories, with watch sales a standout. "There is a lot of cash around the world right now, and it's not only cash from mature countries, but emerging ones, too."

The global cash glut is helping drive increased tourism worldwide, despite the terrorist attacks this summer in London.

"Arguably, the sector is quite sensitive to currency fluctuations as they have a large impact on travel flows," said Jacques-Franck Dossin, luxury analyst at Goldman Sachs in London. "We estimate that travel purchase account for close to 40 percent of sales in the luxury goods sector."

Dossin said he expects the strongest growth will continue to come from Asia, followed by America.

"The good news since December last year has been the recovery in local demand in Japan," Dossin said. "We expect high single-digit sales growth this year in Japan. After very sluggish trends in the last few years, demand in Europe seems to be picking up at last, be it at a moderate low single-digit pace."

Antoine Belge, luxury analyst at HSBC in Paris, said "luxury firms are finding pockets of wealth to tap into," such as Las Vegas and Florida, he added.
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