LONDON/PARIS (Reuters) – Millions are worried about whether they will be able to afford another $1,000 of energy this year, but the 10,000 is expected to rise as higher prices leave the wealthy relatively unscathed. Some are splashing out on dollar Hermès handbags.
A range of consumer goods companies, from spirits group Diageo to Birkin bag maker Hermès, reported this week that they were profiting from their most expensive products, despite the cost of living crisis showing no signs of abating. We expect it to continue to be profitable. .
With interest rates soaring, inflation soaring, and the energy crisis lingering, we’ve come to the conclusion that the global economy is headed for recession.
But millions of high net worth consumers are sitting on cushions of savings accumulated during the COVID-19 pandemic, eager to treat themselves after two years of restrictions.
Hermès reported a record quarterly profit margin on Friday as sales surged amid strong growth in Europe and the US and a recovery in China in June.
Chairman Axel Dumas said there were no signs of a slowdown in any region, despite the company raising prices by 4% this year.
Automaker Renault also said it had revised up its full-year profit margin forecast after a turnaround strategy to focus on selling more profitable cars, even if sales were lower. The most expensive Renault cars can exceed $100,000.
“European consumers’ amazing resilience is driven by luxury brand owners Louis Vuitton, particularly fashion and fashion brands such as Fendi and Christian Dior,” said Rebecca Chesworth, senior equity strategist at investor State Street SPDR. We can also see the strong performance in leather products.” ETF said.
“Consumers enjoying the resumption of travel are seeing increased sales of wine and spirits.”
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Many consumers are preparing for a sharp downturn in the economy this winter.
In the UK, for example, the general household energy bill cap is expected to jump from £1,277 earlier this year to more than £3,500 by October, and food costs are up 10% year-on-year.
It plunges hundreds of thousands of people into financial crisis, leaving them unable to spend on anything but the absolute basics.
Food and personal care companies such as Nestle and Unilever have been in tough negotiations with retailers since late last year.
“Not all companies can [raise prices]Companies with relatively strong pricing power and dominant positions in their respective sectors, Wei Li, global chief investment strategist at BlackRock Investment Institute, told Reuters. only said it can do it. “It’s important to focus on quality players in the sector.”
Wealthy consumers’ savings are still being eroded by inflation, but they now seem focused on enjoying the freedoms that have returned with the easing of COVID-19 restrictions.
IAG, which owns British Airways, turned a profit on Friday for the first time since the pandemic as more people flew across Europe from April to June.
Hargreaves Lansdowne equity analyst Matt Blitzman said: “Comments suggesting no signs of weakness in futures contracts underscore the argument that travel demand is far outweighing the impact of the cost of living crisis. backed up,” he said.
IAG’s turnover more than quadrupled in the first half compared to last year to €9.35 billion, mainly from travel booked from the UK, Spain and the US.
“We experienced rapid growth during the recovery period. [in travel retail] Diageo Chief Executive Ivan Menezes told analysts on Thursday after the Don Julio Tequila and Johnnie Walker whiskey makers beat full-year sales expectations.
Indeed, Menezes warned:
European lenders also showed positive surprises on gains this week, but investors are watching signs of a weakening economy, rising inflation and war in Ukraine could hurt their outlook. doing.
Eurozone inflation hit a record high in July and its peak may still be months away, putting pressure on the European Central Bank to opt for another big rate hike in September. increase.
But for now, French bank BNP Paribas reported a better-than-expected quarterly profit on Friday.
(Reporting by Richa Naidu and Lucy Raitano, London; Reporting by Mimosa Spencer, Paris; Additional reporting by Kate Holton; Editing by Mark Potter)
