Luxury Institute News

August 27, 2014

In the Loop, At the Half With Betty Liu

Betty Liu
Bloomberg Radio
August 27, 2014

Milton Pedraza’s segment is featured at: 9:35-15:11

March 17, 2014

Wall Street Shares Wealth, for Better or Worse

By: Martha C. White
NBC News
March 15, 2014

The $26.7 billion in bonuses that Wall Street hauled in last year will help fill city and state tax coffers, and certainly boost retailers when bankers sport Patek Phillipe wristwatches and slip into Maseratis. But all that green is a double-edged sword for New York City.

Wall Street bonuses grew by 15 percent in 2013, to an average of $164,530, according to the New York State Comptroller’s office. Milton Pedraza, CEO of research firm the Luxury Institute, estimated that Wall Streeters spend between half and three-quarters of their bonuses, then save or invest the rest, and about half the amount they spend is funneled into the local economy.

Because they spend an incredible amount of money in their jobs, “I think that spills over in their personal life,” said David Friedman, president of research and consulting company Wealth-X.

Click the link to read the entire article:

January 11, 2014

Tiffany results signal caution among luxury shoppers

By Jonathan Berr
CBS News
January 10, 2014

Shares of Tiffany & Co., whose name has been synonymous with luxury since before the Civil War, fell Friday after the second-largest luxury retailer said its earnings would be less than analysts had expected.

The New York-based company expects to earn $3.65 to $3.75 per share in the fiscal year ended January 31. While that forecast is unchanged from a previous forecast, it was below the $3.79 that analysts surveyed by Bloomberg News had forecast.

This is the latest sign of the uneven performance of many retailers during the holiday season despite the improving performance of the U.S. consumers. Wealthy consumers appear to be less enthused about buying goods and services than many experts predicted.

Click the link to read the entire article which includes a quote from Milton Pedraza, CEO of Luxury Institute:

Spread the wealth, share!

August 15, 2013

Bespoke Jewelry, Made With You in Mind

By Shivani Vora,
The New York Times
August 14, 2013

Temple St. Clair, a NoHo jewelry designer, has built her reputation on ready-made yellow gold amulets, which usually cost from $2,000 to $10,000 at places like Saks and Bloomingdale’s.

But when she acquired a 10-carat Burmese sapphire earlier this year on a buying trip to Asia, she knew just the client who would want to commission her to transform the rare stone into something unique. It was a woman in her 40s living in TriBeCa who already owned many of Ms. St. Clair’s signature pendants, and had a generous husband who wanted to buy her a gift to mark their 20th wedding anniversary.

After several weeks of discussion with the couple, which involved sending multiple sketches and three-dimensional molds, Ms. St. Clair created a ring for a fee, she said, of approximately $350,000. “I have always been focused on finished pieces, but personalization is a natural evolution of my brand,” she said.

Click the link to read the entire article which includes multiple quotes from Milton Pedraza, CEO of Luxury Institute:

July 16, 2013

The Luxury Institute survey says Graff Diamonds and Tiffany are stand out brands

By Diamond World News Service
Diamond World
July 15, 2013

A survey conducted in the U.S. by New York based – The Luxury Institute, revealed names of Graff Diamonds and Tiffany & Co. as being ‘stand-out brands’ for the most affluent shoppers in the U.S., reports say. The survey was conducted online in April this year, with 500 consumers who had a net worth of at least $5 million.

Graff Diamonds featured as the most prestigious jewelry brand with a score of 7.98 out of 10, in reference to its products, client experience, reputation and whether the consumers would consider returning to shop at Graff again, reports say.

The survey also collected data based on gender segmentation. The ultra-wealthy women segment ranked Tiffany as the most preferred jewellery brand, with David Yurman and Cartier following next. This segment also noted these brands to be the top three in reference to ‘preferred salesman’. More than half of this female segment was impressed with handwritten thank-you notes, reports say.″

July 3, 2013

Survey: Wealthy Women Prefer Jewelry From Tiffany & Co.

Tiffany & Co. is the jewelry brand most widely purchased by ultra-wealthy women, according to a study by The Luxury Institute.

By Daniel Ford
JCK Online
July 2, 2013

The institute surveyed ultra-wealthy U.S. consumers with minimum net worth of $5 million about luxury brands they buy and the relationships they have with luxury sales professionals.

David Yurman and Cartier followed Tiffany on the list. The women surveyed said they have a preferred salesperson at all three jewelers. And never underestimate the power of the pen: 
More than half of ultra-wealthy women who purchase from both jewelry and fashion brands say they appreciate handwritten thank-you notes.

“Relationship selling is not something exclusive to markets like high-end automobiles, real estate and wealth management services,” said Luxury Institute CEO Milton Pedraza in a statement. “Even in luxury jewelry and fashion, relationships cultivated by trust and an understanding of customer preferences can help boost both the frequency and size of sales.”

July 2, 2013

Tiffany Leads Purchases for Ultra-Wealthy Women

By Danielle Max
International Diamond Exchange (IDEX)
July 1, 2013

(IDEX Online News) – Forget Breakfast at Tiffany’s, ultra-wealthy women are ordering lunch, dinner and a midnight snack at the luxury jeweler. According to the latest survey by the Luxury Institute, Tiffany & Co. is the go-to jewelry brand for individuals with a minimum net worth of $5 million.

David Yurman and Cartier follow Tiffany in the spending stakes. And it’s not just because of product offering. The survey found that the three market leaders are also the top three jewelers where ultra-wealthy women have a preferred salesperson.

“Relationship selling is not something exclusive to markets like high-end automobiles, real estate and wealth management services,” said Luxury Institute CEO Milton Pedraza. “Even in luxury jewelry and fashion, relationships cultivated by trust and an understanding of customer preferences can help boost both the frequency and size of sales.”

The survey also found that ultra-wealthy men are less likely than women to build relationships with salespeople.

Pentamillionaire men and women both agree that the top ways salespeople build lasting relationships are by making them feel comfortable, communicating honestly, earning their trust and recognizing them on store visits.

More than half of ultra-wealthy women who purchase from both jewelry and fashion brands say they appreciate handwritten thank you notes.

June 4, 2013

Better Economy Spurs Ultra-Wealthy To Spend More On Travel, Dining And Wine, But Appetite Cools For Jewelry And Handbags

(NEW YORK) June 4, 2013 – For its 2013 State Of The Luxury Industry report, the Luxury Institute surveyed pentamillionaire consumers with net worth of at least $5 million and minimum annual household income of $200,000 to learn about current preferences and future spending on luxury goods and services for the remainder of 2013. Respondents also shared evaluations of the overall luxury market.

One-third of pentamillionaires plan to step up spending on leisure travel in the second half of 2013, making hotels, airlines and cruise operators big beneficiaries of additional spending by America’s wealthiest shoppers. Restaurants are poised for a pick-up, too, with 20% of ultra-wealthy consumers planning to spend “more” or “much more” on dining out in the final six months of the year, and 19% also pouring more dollars into wine.

Additional categories seeing significant upcoming spending interest are health & fitness (17%) and vacation real estate (17%).

Rebounding home values and the surging stock market are not spreading cheer or riches universally. More than 80% of pentamillionaires say luxury goods are less important in the current economic environment. Jewelry sales especially may be under some pressure, with 25% of the ultra-wealthy saying they will spend less or much less through the remainder of 2013. Handbags are the focus of planned spending cutbacks by 20% of those surveyed.

“Even among the wealthiest consumers, luxury goods and services are considered less important in today’s economy,” says Luxury Institute CEO Milton Pedraza. “Luxury brands can capture these increasingly discerning ultra-wealthy consumers by providing unrivaled quality, craftsmanship and service.”

About Luxury Institute (
The Luxury Institute is the objective and independent global voice of the high net-worth consumer. The Institute conducts extensive and actionable research with wealthy consumers about their behaviors and attitudes on customer experience best practices. In addition, we work closely with top-tier luxury brands to successfully transform their organizational cultures into more profitable customer-centric enterprises. Our Luxury CRM Culture consulting process leverages our fact-based research and enables luxury brands to dramatically Outbehave as well as Outperform their competition. The Luxury Institute also operates, a membership-based online research portal, and the Luxury CRM Association, a membership organization dedicated to building customer-centric luxury enterprises.

May 20, 2013

Richemont’s Asia focus drives full-year sales up 14pc

By Erin Shea
Luxury Daily
May 17, 2013

Richemont is attributing its full-year sales increase to demand in China and Asia-Pacific, contributions from currencies and exchange rates and the broad growth from its brands across all regions.

Luxury conglomerate Richemont reported a 14 percent increase in annual sales to approximately $13 billion in 2012, compared to last year’s sales of $11.4 billion.

Richemont also reported that its profits for the year are up 30 percent to $2.6 billion from $2 billion in the previous year, much of which can be attributed to the sales in Asia-Pacific. The conglomerate released its results May 16 for the fiscal year that ended March 31.

“The Chinese and the Asians have a very healthy appetite for jewelry,” said Milton Pedraza, CEO of The Luxury Institute, New York.

“I think that ready-to-wear products may be oversaturated [in Asia], and handbags may be oversaturated, so watches and jewelry tend to be valuable,” he said.

“There are some companies in luxury that continue to grow, despite the global economy.”

Mr. Pedraza is not affiliated with Richemont, but agreed to comment as an industry expert.

Richemont, which was not able to comment directly, owns a number of luxury brands including Vacheron Constantin, Jaeger-LeCoultre, Baume & Mercier, A. Lange & Söhne, Cartier, IWC, Piaget, Alfred Dunhill, Van Cleef & Arpels, Montblanc, Chloé and Roger Dubuis.

Asian expansion
Richemont attributes its sales results to an increased demand in China and Asia-Pacific, contributions from currencies and exchange rates and the broad growth from its brands across all regions.

The company said that it works on a long-term basis of benefiting from the prestige and heritage of its brands, which will continue in the future.

However in the short-term, Richemont said that economic troubles may impact consumer confidence in some markets. Overall, the conglomerate is cautiously optimistic about the future.

During this past fiscal year, Richemont reported that Asia-Pacific accounted for the majority of its sales, with 41 percent of the group’s total sales coming from that area. Hong Kong and mainland China are its two largest markets.

Europe, including the Middle East and Africa, was responsible for 36 percent of Richemont’s overall sales.The conglomerate says this area’s growth was a result of demands from tourists.The Americas region had a third consecutive year of double-digit growth. This year, it accounted for 15 percent of group sales.Compared to other regions, Asia-Pacific is the area that is leading Richemont’s growth.

“Asia-Pacific is still a vibrant part of the world and there are some companies that are doing well there,” Mr. Pedraza said.

“Some brands are doing a fantastic job in that area,” he said. “Richemont is doing a fantastic job.”

Retail v. wholesale
Another aspect responsible for Richemont’s growth is its individual brands’ focus on retail over wholesale.

Cartier boutique

For the Asia Pacific and Europe, Richemont reports that its brand’s own boutiques had the highest growth rates.

In Asia, the brand boutiques had higher sales growth than the company’s wholesale partners. This is in part due to the expansion of the boutiques in the region.

“Richemont has set out over the last few years to try to keep its own distribution,” Mr. Pedraza said.

“Retail is outselling wholesale, which can help a company grow faster,” he said. “You can have faster growth when you are de-emphasizing wholesale and emphasizing retail.

“Most luxury brands want to control their own distribution. Watch brands tend to be more retail-oriented.”

January 15, 2013

Tiffany Deal Whispers Buoy Value After Earnings: Real M&A

By Tara Lachapelle and Cotten Timberlake
January 14, 2013

In the eye of the investor, Tiffany & Co. (TIF)’s blue-boxed gifts are so alluring to potential suitors that not even the worst earnings stretch in at least a decade has put a dent in its valuation.

Even though the $7.6 billion company has missed profit estimates in four straight quarters and said last week that analysts’ fiscal 2014 projections were too high, the jewelry seller fetches 18.6 times earnings, according to data compiled by Bloomberg. That’s only 0.4 point lower than the multiple in March, when the shortfalls started, as takeover speculation helps support the shares, Ariel Investments LLC said.

LVMH Moet Hennessy Louis Vuitton SA (MC), PPR SA and Cie. Financiere Richemont SA could all boost their earnings by adding the company to their current stable of luxury brands, according to ISI Group and the Luxury Institute. Ariel says a buyer would have leeway to expand Tiffany in the U.S., Asia and Europe. A purchase at current prices would be the biggest of a retailer since Coles Group Ltd. more than five years ago, data compiled by Bloomberg show.

“Sooner or later someone will make a run at Tiffany,” Howard Ward, the chief investment officer for growth equities at Gamco Investors Inc., wrote in an e-mail. Gamco, which oversees about $37 billion, owns shares of the company. “It is a trophy property,” he added. “There are some obvious foreign luxury brand companies that would be interested.”

Swatch Group AG today said it agreed to buy the Harry Winston watch and jewelry brand for about $1 billion, adding a luxury label in the Swiss watchmaker’s biggest acquisition ever. Shares of Tiffany advanced 1.6 percent to $61.25 today.

Takeover Speculation

Mark Aaron, a spokesman for New York-based Tiffany, said the company doesn’t comment on speculation, when asked about the retailer’s takeover prospects. Chairman and Chief Executive Officer Michael Kowalski said in a 2011 interview with the Financial Times that Tiffany has been the subject of deal speculation “probably since we went public in 1987.” He added that his shareholders would be “best served” by the company remaining independent.

Representatives of LVMH, PPR (PP) and Richemont declined to comment.

Tiffany shares plunged 4.5 percent, the biggest drop in six weeks, on Jan. 10 when the company said earnings for the fiscal year ending this month will be at the low end of its forecast after holiday sales growth slowed in the Americas and Asia. Tiffany also projected earnings in the fiscal year ending in January 2014 of about $3.39 to $3.49 a share, compared with the $3.80 average of analysts’ estimates, data compiled by Bloomberg show.

Not Suffering

The company had already missed analysts’ income forecasts for four straight quarters, the longest stretch in at least a decade, the data show. Still, Tiffany’s price-earnings ratio hasn’t suffered much, only falling to 18.6 from 19 on March 19, the last close before its first profit shortfall. The valuation has held up even as Tiffany’s market capitalization dropped from last year’s peak of $9.3 billion.

The Tiffany brand may be alluring to potential acquirers, according to Tim Fidler, a Chicago-based money manager at Ariel Investments, which oversees about $5 billion including the retailer’s shares. In the luxury jewelry industry, Tiffany has the best-known brand among affluent consumers surveyed by the Luxury Institute. Despite falling short of earnings projections since early last year, the company’s fiscal 2013 revenue is forecast to be $3.8 billion, up $1.1 billion from three years earlier, data compiled by Bloomberg show.

Tiffany’s Consistency

“There aren’t many companies in the public markets today on the retail side that you can argue have all the positive attributes with the consistency that Tiffany has demonstrated,” Fidler said in a phone interview. “A lot of the big, European houses would love to own a brand of this type.”

Tiffany said this month that it signed a 20-year agreement to keep selling jewelry by Elsa Peretti, which accounts for about 10 percent of its sales. The accord lets Tiffany retain exclusive rights to the designs, which include “Diamonds by the Yard” and iconic heart- and bean-shaped pendants.

By renewing the deal, Tiffany removed an impediment that could have deterred suitors from considering a purchase of the company, Omar Saad, a New York-based analyst at ISI, wrote in a Jan. 8 note. He said Tiffany “would be a highly attractive asset to the large luxury conglomerates,” and argued that LVMH, PPR and Richemont could all boost earnings by purchasing it. Milton Pedraza, the CEO of the Luxury Institute, a New York- based research and consulting firm, agreed that those three European companies could fuel growth with Tiffany.

High Ranking

“Tiffany continues to have a high brand ranking and prestige,” Pedraza said. “Is it an interesting acquisition opportunity for somebody? Yes, presuming they will do something better and more interesting with it.”

Francesco Trapani, head of Paris-based LVMH’s watch and jewelry unit, said in November that he expects more consolidation in the industry. While the world’s largest maker of luxury goods always has “a window open on M&A,” the company won’t pay “stupid prices,” Trapani said. LVMH bought Bulgari SpA, the Italian jewelry maker, in 2011, and it also sells products including Louis Vuitton bags and Dom Perignon champagne.

PPR of Paris is reorganizing to focus on luxury, sports and lifestyle brands as it seeks to lift sales to 24 billion euros ($32 billion) by 2020 from 12.2 billion euros in 2011. The owner of the Gucci brand has said acquisitions will account for about 20 percent of that goal.

Coles, Wesfarmers

Richemont, the second-biggest luxury goods company, owns brands including Cartier and Van Cleef & Arpels.

A deal for Tiffany at current prices would be the largest takeover in the retail industry since Wesfarmers Ltd. purchased Coles for $15.8 billion in 2007, according to data compiled by Bloomberg.

Because Tiffany’s management knows it’s running an “iconic” brand, it may command a takeover price higher than acquirers are willing to pay, said Brian Yarbrough, a St. Louis- based analyst for Edward Jones & Co. Tiffany shares would be trading above $90 if they were meeting their historical relationship to forecast profit, he said. The company, which ended last week at $60.28, may seek something similar in a sale, he said.

“For a public company, it’s going to be hard to pay that kind of a premium and have it not be dilutive,” Yarbrough said in a phone interview. “Management is going to be very hesitant to sell down here when the business is struggling and not firing on all cylinders. There are reasons why buyers could be interested, but it’s all going to come down to price.”

‘Very Few’

The most likely buyers are the global luxury conglomerates that would buy Tiffany for strategic reasons and that “can afford to pay the most,” said Oliver Chen, an analyst at Citigroup Inc. in New York.

Tiffany is “an extremely attractive asset as an American brand,” Chen said. “They are one of the very few,” he added. “There is an opportunity for incremental product innovation, and Tiffany has an extremely attractive global presence and global awareness.”

Ariel’s Fidler estimated that Tiffany’s value to a buyer is in the “high $70s to low $80s,” based on past acquisitions by strategic buyers in the industry, a discounted cash flow analysis and the current valuations of its peers.

“Obviously if someone is interested in the company, much like management, you always want to listen,” Fidler said. “There’s enormous value at this company and it’s not hard to get to a number substantially higher than the current stock price for a potential transaction.”


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