In the age of social media, fashion trends come and go at an alarming rate. However, one trend that has managed to break through the noise and capture the attention of both consumers and investors is the concept of “quiet luxury.” This trend focuses on understated displays of opulence, moving away from the loud and flashy fashion statements of the past. Popular shows like HBO series “Succession” have also contributed to the rise of quiet luxury, making it a lasting trend rather than a passing fad.
The allure of luxury stocks lies not only in their association with exclusivity and high quality but also in their potential as a hedge against inflation. Luxury brands often maintain higher pricing, which is less affected by changes in economic conditions. Consequently, investors have started to take notice of the quiet luxury movement, cherry-picking companies that embody the essence of this trend.
According to data from DBS Bank, companies such as Hermes, Miu Miu, Brunello Cucinelli, Richemont, and Swatch Group have outperformed their “loud” counterparts in 2023. These companies focus on understated elegance and timeless quality, resonating with consumers who prefer subtlety in their luxury consumption.
DBS Bank categorizes companies as “quiet luxury” if they are understated, focused on high quality, and maintain exclusivity and scarcity. Alongside Hermes and Swatch Group, Moncler, LVMH Moët Hennessy Louis Vuitton, Brunello Cucinelli, and Ermenegildo Zegna are among the top picks of the bank. It is worth noting that investors are not looking at these companies as part of a short-term trend; instead, they are considering them with a much longer-term view.
Markus Hansen, a portfolio manager at Vontobel Quality Growth Boutique, emphasizes the importance of heritage and a long-term perspective. Consumers and investors alike are tired of the big logo trends and are seeking higher quality products from established fashion houses. This shift in perspective favors companies that have a rich heritage and a reputation for taking a long-term view.
While China has been a strong market for luxury goods, the post-pandemic recovery and lackluster domestic demand have led luxury brands to broaden their horizons. Mature markets like South Korea and Japan are experiencing a growing demand for luxury goods. Additionally, India, with its large population and growing wealth, presents a significant opportunity for luxury brands. A Goldman Sachs report predicts that around 100 million people in India will become “affluent” by 2027.
This changing landscape has influenced the performance of luxury stocks. Brands associated with quiet luxury have gained traction, causing brands like Gucci and Burberry to decline in global rankings. Analysts from Bank of America Securities believe that brands should focus on fashion content and newness to re-engage customers and drive traffic. As a result, they suggest that companies aligned with quiet luxury, such as LVMH and Hermes, are better positioned for success compared to Gucci-owner Kering and Burberry.
Quiet luxury has emerged as both a fashion trend and an investment strategy. The shift towards understated elegance and timeless quality has captured the attention of consumers and investors alike. Luxury stocks associated with quiet luxury have outperformed their louder counterparts, with companies like Hermes and Swatch Group leading the way. As the appetite for luxury goods continues to evolve, fashion brands are adapting to cater to new markets, with a particular focus on Asia. The rise of quiet luxury is not a passing trend but rather a reflection of changing consumer preferences, providing a lucrative opportunity for both fashion enthusiasts and investors.
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