Wealth creation benefits everyone. But when those who have do better than those who do not, luxury stocks — you would think — should outperform. Investors, however, should be focusing on a different sort of inequality. In the context of slowing luxury spending globally, the sector’s companies are increasingly divided between the haves and the have-nots. 

Hermès and Kering are a case in point. In a sector that has so far posted an organic revenue decline of 2 per cent, according to Luca Solca at Bernstein, Hermès defied the slowdown with an 11.3 per cent rise in third-quarter sales. Kering’s were down 16 per cent, with the flagship Gucci brand down a quarter. Following multiple profit warnings, the group led by Fran?ois-Henri Pinault now expects full-year operating profits of €2.5bn — down almost half compared with last year. Such diverging fortunes are reflected in stock market valuations, with Hermes trading at almost three times Kering’s forward price/earnings multiple. 

In part, this highlights the two companies’ different customer bases. With handbags costing tens of thousands of pounds, Hermès caters to the really wealthy, rather than the merely very well-off. These tend to fare better in a slowdown. Gucci’s streetwear phase, meanwhile, attracted a whole host of younger and potentially less affluent customers. Gucci’s troubles may also reflect a more complex brand DNA. Known for its over-the-top designs, it is more prone to fashion risk when the zeitgeist turns against it.