Great news for luxury brands in Europe as the weakening Euro is attracting inbound tourists (i) to European destinations and (ii) into luxury stores. The down side (apart from the issue with the Swiss watch exports which is suffering) is beared by the countries where the tourists heading to Europe to buy up luxury reside.Are these other markets potentially losing some of their luxury client revenue as they are now seen as too expensive versus Europe? It doesn't appear so as "Deutsche Bank estimates the weaker Euro against the Dollar and the Yen would add 2 to 4 percent to its sales forecast for the global luxury goods industry". In line with this, Bulgari, Valentino and Longchamp believe they will benefit from the weaker Euro which “makes their sales abroad more lucrative and chips away at their cost base”.
An Analyst at Bernstein commented that "the Euro weakness is a great thing for luxury goods companies. In fact, their costs are typically in Euros, and their revenues are split between U.S. dollars, Yen and Euros." We find this interesting as it doesn't appear to be a case of "robbing Peter to pay Paul". From this article we must believe that luxury consumers will spend more overall in Europe. It will be tough come budget time for some of the markets that have reduced sales due to Europe being a more attractive destination. We will wait and see if proof is in the torte!
Image Credit: http://wallstreetpit.com/
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