News & Analysis

It's all about image. It always has been

Andrew Saks, Thursday, 10 June 2021

Bond Street, London W1. A benchmark which absolutely encapsulates luxury.

For decades, the elegant colonnades of the world's third most expensive street have adorned the high end fashion magazines, been a continual backdrop for Hollywood and home-grown movies, and are depicted on the presentation boxes of some of the world's finest luxury goods.

In three-dimensional form, away from its high-end media imagery, Bond Street is a playground for the rich and famous, the international jet-set and the local highbrow society. It is the bastion of tasteful luxury that forms the boundary between Mayfair and Piccadilly.

It is the world's tailor. The world's jeweller. It's a street which for many aspirational and upwardly mobile social climbers from around the world a love affair with London was first kindled. It reeks of class and style, and has been the enduring center of the big-hitters.

Back in the shoulder pad and power-dressing days of the 1980s, the outlandish 3 ton Lamborghini LM002 military-derived SUV was a common sight (and sound!) as people who pretty much owned their own fuel supply tooled around the back of the Burlington Arcade dressed in Patek Philipe watches and Jermyn Street pinstripes whilst collecting genuine signed and dated efforts from Sotherby's.

The 1980s are sadly long behind us, having given way to the ghastly post-industrial early 1990s and the goth scene which rejected clean-cut new romantic-influenced go-getting capitalism in favor of unkempt hair and a frown replaced the bright white, nonchalant and confident smile of the Yuppie years.

That may have been the case in the provinces, but Bond Street did not sway to popular trend and weathered the grunge years, has not been affected by the Millennial era's downplaying of status symbols and is as much of a center of excess as ever today.

Even after a massive lockdown, which banned shops from opening to their customers for most of the past 16 months, Bond Street is piling on the profit. Well-heeled people do not care about fads, therefore Bond Street headed out of the shackles of the lockdown and back into the hearts and minds of its enduring society.

Sales made once the highest end of retail shops reopened on April 12 included a £310,000 Mercury Cougar that was featured in a James Bond movie, an example of vandal...er I mean 'graffiti artist' Banksy's work costing £250,000, a £22,000 map of London as well as a huge amount of jewellery including a pair of £15,000 diamond drop earrings.

Disposable income among the super-rich has not been diminished by the attempts by many Western governments to remove it, a position that was absolutely evident from the lines of people waiting to enter Louis Vuitton, Chanel and Dior distributors as soon as the door opened.

This visual display of excess and clear indicator that for some members of society, nothing has changed in almost 100 years since the roaring (19)20s. Gatsby's candour back then was not dissimilar to that of James Bond in the 1960s nor the red-jacketed Filofax-toting 1980s hedonist. Today is just the same, but with modern technology, and that the seemingly endless array of Porsches and Range Rovers are partially electric.

 The lockdowns hit the middle classes downwards. The super-rich have actually amassed more money during the lockdowns, with some analysts estimating a 25% growth in wealth among the top 0.5% of British society over the past 16 months whilst every hard-working household in the land struggles under endless government-mandated bullying.

TV's Billion Pound Bond Street, which airs tomorrow at 9.00pm is set to display this in detail, however it will be interesting to see what the take on the markets is.

Luxury goods manufacturer Dior has a flagship store in Bond Street. Its director Christopher Watney told the mainstream news in the UK today that "All the private rooms are fully booked all week actually, so really, really pleased to see that."

The upper classes, including one young gentleman who inherited a protected lease from his father nonchalantly brushed off the rush back to the luxury goods stores often by driving there in new Aston Martins and Rolls Royces, his opinion being that people haven't had enough things to spend their money on and now by doing that and going home with a bag with Cartier on it, suddenly they are alive.

The show, which will likely display a somewhat crass overindulgence, shows a lady purchasing a Chanel bag for £5,500.

That is astonishing, is it not?

Bond Street may well be just one of the millions of commercial streets in the United Kingdom, but it is an iconic powerhouse and is a massive contributor to the British economy. In August alone, on a normal year when there is no lockdown, luxury hotels make their entire revenue for the year due to the visitors from the OPEC states who spend, spend and spend. The other 11 months is profit.

But what is investing in the stocks of luxury goods makers like?

Is their product more desirable than their corporate performance? Well, being non-necessities, luxury goods resemble high-priced discretionary goods, making them the opposite of consumer staples, or everyday products such as groceries that consumers buy because they need them. While luxury goods may sometimes be durable goods like cars, they can also be consumables like cosmetics or cigars.

Investors most often think of retail products when they think of luxury, which is exactly what Bond Street is all about and why it is only outpaced by New York's Fifth Avenue and Hong Kong's Causeway Bay - although given the communist grip on Hong Kong now imposed by mainland China, who knows how long that will last.

Examples of such retail firms with public listings may include fashion from brands such as Burberry Group (OTC:BURBY); Jimmy Choo, which is owned by Capri Holdings (NYSE:CPRI); or Stuart Weitzman and Kate Spade, which belong to Tapestry (NYSE:TPR). However, the sector spans beyond retail into travel, food and dining, and even services.

It is clear that LVMH Moet Hennessy Louis Vuitton has outperformed the S&P 500 by a wide margin in recent years, benefiting from a bull market, an expanding global economy, and increasing wealth among upper-class consumers. LVMH Moet Hennessy Louis Vuitton is the largest luxury goods manufacturer in the world by a massive margin.

What is perhaps more surprising is that Ferrari, a relatively small car manufacturer in an industry which is fiercely competed in by enormous, well-honed giants that make no mistakes, has also outperformed the S&P500 by a massive margin.

That is the company founded by emotional recluse Enzo Ferrari, whose will to win races and personal pride took precedence over cold, harsh business decisions, often leading his company to financial ruin. Over the years, Ferrari has been bought, sold, bailed out, returned to independence, invested in, gone bankrupt, then done all those things over and over again.

Its cars fell apart, but captured the minds of enthusiasts, and even today, their technology lags behind the ultra-efficient game-changers such as Tesla, Ford, Volvo, Porsche, Bentley and Rolls Royce. These firms all have kept their heritage, but also embraced new technology. Ferrari hasn't. It still makes lightweight, old-tech, loud, non-electric eight and twelve-cylinder bruisers.

But there is more to it than that. Ferrari has cleverly gone away from being just a race car manufacturer, or the definition of a true Italian thoroughbred road car. It is a brand.

Brands are where it's at these days. Names, influence, and imagery are everything.

What made you love London in the first place all those years ago when first seeing it? Was it the decadence of Bond Street that still endures today? Can you invoke memories of the scents and sounds of the day you first saw it?

That is the power of imagery. Ferrari knows this, and so does its shareholders... and shareholders today are not the upper classes lining up patiently to buy the physical product in a Bond Street boutique.

The shareholders are you, whoever you may be.

The goods may be elitist, but the stock trading is mass market. That's the real power of brands.

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