The luxury segment still has appeal for PE funds, writes Deloitte

The luxury segment still has appeal for PE funds, writes Deloitte

The high-end segment is still appealing for investment funds: better if strong in the digital area and specific capacities in the clothing and accessories’ sub-segments. According to a survey conducted by Deloitte, the luxury segment is dynamic, resilient, and ready to bet on its future. 7 out of 10 funds are ready to make investments: the same ratio as one year ago, but now with the current pandemic.

The scenario

The scenario emerging from the Global Fashion & Luxury Private Equity and Investors Survey 2020 report, shows that the investors that answered the survey’s questions expect an average decrease of revenue between -21% and -30%. Personal luxury goods’ sales (clothing, accessories, watched and jewelry, cosmetics and perfumes) should still maintain an average growth rate of +1.9% between 2019 and 2025. With regards to the geographic view, Asia and the Middle East are destined to regain ground more quickly. Latin America and Europe will move more slowly. Specifically, the Old Continent will lose roughly 30%-40% in sales, with a recovery setting in no sooner than 12-18 months. On the opposite side are retail and hospitality, expected to have the worst performances. Clothing, watches and jewelry, yatches and private jets will remain stables.

Investing in the luxury segment still has appeal

Even with the non-reassuring scenario, the luxury segment is still one of the more appealing segments for investors. Why? Because of its liquidity and profitability. 70% of Deloitte’s respondents claimed to be ready to make acquisitions or investments. Most eyes seem to focus on clothing and accessories, as they are considered more attractive than the rest. Since the Covid-19 pandemic will further accelerate the digitalization process of companies (including but not limited to Big Data, Artificial Intelligence and Internet of Things), digital luxury is destined to attract capital.

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