With the ongoing turmoil in stock markets and uncertainty generated by the ongoing trade spat between the US and China, investors cannot be faulted for thinking that consumer sentiment will take a big hit. Many luxury brands which sell high-end apparel, shoes and handbags have braced themselves for a slowdown in the next 12 to 18 months as a result of the trade friction.
However, here are two luxury retailers which have performed very well year-to-date (YTD).
Cortina Holdings Ltd (SGX: C41), or Cortina for short, was founded in 1995 and its business involves the distribution of jewellery, precious stones, watches, clocks, and silverware. Cortina has boutiques in malls such as Marina Square, Raffles City and Paragon and sells a variety of luxury watches from famous brands such as Rolex, Patek Philippe, Cartier and Breitling.
The group’s share price has soared from S$0.95 at the start of the year to $1.38 – up 45% YTD. The group’s 9-month 2019 (9M 2019) earnings showed a 2% year-on-year rise in revenue, but profit attributable to shareholders rose by an impressive 46% year-on-year due to strong demand for luxury watches.
The group paid out a final dividend of 2.0 Singapore cents per share and a special dividend of 2.5 Singapore cents per share for fiscal year 2018, bringing its total dividend to 4.5 Singapore cents per share. The historical dividend yield for Cortina stands at 3.2%.
The Hour Glass Ltd
The other luxury retailer which performed well is The Hour Glass Ltd (SGX: AGS). Its share price has risen by 20.6% YTD – from S$0.63 to S$0.76. The Hour Glass, or THG for short, is also a luxury watch retailer with a combined network of 40 boutiques in Singapore and the Asia-Pacific region. THG is a distributor of famous watch brands such as Rolex, Hublot, Audemars Piguet, and IWC Schaffhausen.
In 9M 2019, THG reported a 5% year-on-year increase in revenue but enjoyed a spectacular rise of 45% year-on-year in net profit attributable to shareholders. For THG’s first-half 2019 earnings press release, managing director Michael Tay had commented that there was “some uplift in the global specialist luxury watch market due to improved consumer sentiment”. This bodes well for THG’s business moving forward.
THG paid out a final dividend of 2 Singapore cents per share for FY 2018. The group’s historical yield is 2.6%.
What does this mean for investors?
The robust business and share price performances of these two luxury watch retailers seem to imply there is continued appetite for luxury goods, despite the ongoing trade tensions. Investors can rest assured that there is always sustained demand for luxury goods but that this sector can be volatile and cyclical by nature. When considering whether to invest in these two luxury watch retailers, investors should remember to also assess the risks to the business and broader industry.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.