Valuing Kering Through 'The Cult Of The Luxury Brand,' Part 2

In a recent article written for the investing site Seeking Alpha, I described how The Cult of the Luxury Brand, Radha Chadha and Paul Husband’s book on the luxury industry in Asia, could be used to predict the industry’s growth on that continent.

Since then, I have been using a model from that book, the "Spread of Luxury" model, to calculate the future growth of luxury conglomerates such as LVMH group and Compagnie Financière Richemont. LVMH, the owner of such brands as Louis Vuitton, Bulgari, and Marc Jacobs, is the world’s largest luxury goods company. I projected that the company would grow at around 4.6% per year for the next 33 years for a total annualized return of 5.24% taking into account dividends and changes in valuation. Similarly, I calculated that Richemont, the owner of such brands as Cartier, Dunhill, and Piaget, would grow at around 5.13% annually, for a total annual return of 5.76%.

Having calculated the future growth of LVMH and Richemont, I will now do the same with Kering SA. Along with LVMH and Richemont, Kering is the third of the three major luxury conglomerates profiled in Chadha and Husband’s book. Kering is also roughly tied with Richemont for the position of the world’s second largest luxury conglomerate. In my last article, I laid the groundwork for these calculations by estimating Kering's sales to customers from each of its major sales regions. In this one, I calculate how those sales will evolve and contribute to Kering's overall growth over the next several decades. (Read More)