Their ‘brand health index’ comprises six different components that they systematically update
From their research specific series:
- The ‘Promotion Index’ – the lesser the extent of promotions and the lower the discount, the better: Promotion Patterns Analysis in soft Luxury Goods
- What’s hot, and what’s not: the lower the discount and the lower the off-price presence, the better
- The Social Media Boxing Ring: the higher the social actions/post, the better
- ‘Desirability & Exclusivity’: the higher the desirability, the better
- ‘Full price / Off price’ – the higher the ratio of full price DOS / off-price outlets, the better
- ‘Retail as % of Sales’ – the higher, the better.
Their proprietary ‘brand health index’ explains 76% of the valuation variance in the luxury sector
They correlate their ‘brand health index’ with the 12-month forward PE. Their proprietary ‘brand health index’ explains 76% of the valuation variance in the luxury sector when they include both the European and the American names. They use a weighted average ‘brand health index’ to position the conglomerates in the correlation.
They focus on outliers in the correlation to highlight investment opportunities
When they analyse the outliers in the ‘brand health index’ correlation to PEF, they see that:
- Hermès (and Cucinelli) appear too expensive, LVMH stands out as compellingly valued
- Kering, Prada and the Americans appear marginally more interesting than Burberry and most mid-caps.
They use their ‘brand health index’ in conjunction with their proprietary 9ST 2.0 methodology (The Nine Structural Tests (9ST) 2.0: How it all comes together) to zero in on long-term investment opportunities.
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