Luxury goods rebound strongly from global recession (News Feature)

By Andrew McCathie Aug 4, 2010, 16:14 GMT

Berlin - Glamour goods are back in fashion.

Whether it has been jewellery, cars, diamonds, handbags, champagne or watches, the world's leading luxury goods makers have bounced back from depths of recession to report surging profits and sales on the back of a rebounding world economy and expanding markets in China.

The latest sign of a revival in the luxury goods business came on Wednesday when the world's biggest watchmaker Swatch Group AG reported a 54.5-per-cent jump in first-half net profit.

The Switzerland-based group, whose products include top-end brands such as Blancpain and Breguet watches, said net profit climbed to a forecast-beating 465 million Swiss francs (447.5 million dollars). This compared with 301 million francs in the year earlier.

First-half sales jumped 22 per cent to 3.03 billion francs, in part reflecting a strong pickup in the premium end of the global watch market.

Despite a strong Swiss franc, Swiss watch exports jumped by 19.7 per cent during the first six months of 2010, the federation of the Swiss watch industry said.

And Swatch's impressive earnings were only in line with the string of other results reported by major high-end goods makers.

This includes Italian luxury jeweller Bulgari and French luxury-goods group Hermes International, which doubled its full-year sales growth target after posting a 27-per-cent jump in second-quarter sales.

Rome-based Bulgari swung back into the black during the second quarter to report a net profit of 600,000 euros after posting a 11.2 million-euro net loss a year earlier.

The world's biggest luxury goods group Paris-based LVMH, which counts among its stable of brands Givenchy fashion, Louis Vuitton luggage and Dom Perignon champagne, said last month that first half profit leapt by 53 per cent to 1.05 billion euros.

'The group approaches the end of the year with confidence,' said LMVH Chairman Bernard Arnault releasing the results.

LVMH said revenue at its beverage division which includes Veuve Clicquot champagne jumped by 21 per cent in the first six months of the year.

The major diamond producer, De Beers said last month that first-half sales of unpolished and uncut stones soared 84 per cent to 2.6 billion dollars, underpinned by growing demand from Asia's fast-paced economies.

A year ago luxury goods makers were battling to emerge from has been dubbed the Great Recession.

As the economic downturn took hold premium carmakers watched their key markets in Europe and the United States sales and profits plunge as the global financial firestorm sent the auto industry into a tailspin.

But a batch of second-quarter reports from top luxury motor vehicle groups such as Germany's BMW, Mercedes Benz and Audi have shown the industry pulling away from the crisis.

Leading premium carmaker BMW reported on Tuesday a surge in second-quarter profit after a strong pickup in demand for luxury autos in the key US and Chinese markets.

Munich-based BMW said net profit in the three months to the end of June jumped to 834 million euros from 121 million euros in the same period last year.

'A significant rise in sales in key markets along with a high-value model mix are the fundamental reasons for the strong second quarter,' said BMW chief Norbert Reithofer.

In line with earnings reports from rivals such as Mercedes-Benz and Audi, BMW said revenue climbed by 18.3 per cent to about 15.3 billion euros.

Daimler, the maker of Mercedes-Benz cars, said last month it was raising its 2010 operating profit target.

This came after sales of the group's Mercedes-Benz saloons climbed by 19 per cent to 342,500 vehicles to record its strongest second quarter ever.

Many of the luxury goods groups were also cautiously optimistic about the outlook for the coming six months.

'We expect a strong result for the second half of 2010 in terms of both sales and profit,' the family-run Swatch group said releasing its latest results.

But considering concerns about the prospect of slowing global economic growth other groups such as de Beers were more wary in setting out their business outlook.

'We look to the remainder of 2010 with caution and measured optimism,' de Beers said.