Tuesday, July 11, 2017

Valuing Compagnie Financiere Richemont Through 'The Cult Of The Luxury Brand,' Part 1

In a previous article, I described how Paul Husband and Radha Chadha's book The Cult of the Luxury Brand offers us a model for estimating the growth of luxury goods companies in Asia.

That model, the “Spread of Luxury” model, describes how countries advance through several stages of luxury goods consumption. Each stage corresponds to not only a different level of economic development, but also a different level of consumption. Those stages range from “Start of Money,” in which few consumers purchase luxury goods, to “Way of Life,” in which a country’s luxury market is fully saturated. According to Chadha and Husband, the "Way of Life" stage is the end stage for Asian markets as they become fully developed.

In my most recent pair of articles, I used that model to estimate the future growth of luxury goods company LVMH group. Having done so, I will now apply that model to Compagnie Financiere Richemont, another of the world's largest personal luxury goods companies and the owner of such brands as Cartier, Dunhill, and Piaget. 

To do this, we first need to calculate where Richemont's customers come from. This requires us to apply global trends in personal luxury goods sales to the company's sales around the world. Once we have done so, the next step is to predict the company's growth by forecasting the development of its per capita sales in each region. (Read More)

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