As the Economist videographic shown below illustrates, the worldwide market for luxury goods has grown significantly over the past fifteen years. The very rich have always consumed luxury goods and continued to do so even in the depths of the current recession.
The headwinds facing the producers of luxury goods have largely been due to a pullback by “aspirational” consumers. These are individuals who are not truly wealthy but actively seek to project an image of wealth (think of the stereotype of the consumer who refinanced his home in 2006, used the cash he took out to buy a Mercedes S Class, and now finds himself deeply underwater on his property.)
Even if the recession is technically over, it seems doubtful that the “aspirational” consumer will be buying $100,000 vehicles or $500 handbags anytime soon. This is something to keep in mind when looking at historical earnings of companies that catered to this trend over the past several years.
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