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NEW YORK, United States — “The shadow has passed and the state of the union is strong,” said American president Barack Obama during his annual ‘state of the union’ address last week. “At this moment, with a growing economy, shrinking deficits, bustling industry and booming energy production, we have risen from recession freer to write our own future than any other nation on Earth.”
Indeed, in stark contrast to a still stagnant Europe and a Japanese economy that tipped back into recession in 2014, the American economy has emerged from the global financial crisis and ensuing downturn much faster and stronger than most. “Tonight, we turn the page. Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999. Our unemployment rate is now lower than it was before the financial crisis,” added Obama.
Now, as economic growth continues to slow in a troubled China — for several years the primary engine of the global luxury market — a resurgent America, expected to grow by 6 percent in the five-year period from 2013 to 2018, is rising to the top of the fashion industry’s agenda.
“The US market has been very positive for luxury and fashion businesses in the past two years, primarily supported by asset price rebounds, both in the stock market and in real estate,” explained Luca Solca, head of luxury goods at Exane BNP Paribas.
“A strong US dollar will allow European luxury goods companies to export more into America and the translation effect will create a positive boost for revenues, domestic demand and margins,” added Mario Ortelli, senior research analyst at Bernstein. “How the brands are reacting to this strong US market is [by reallocating] some of the investment that they made in the past years to build up their network of stores in Asia, where there is no more need to expand aggressively, and moving part of that investment to the US.”
Remarkably, the US is still very much an under-penetrated luxury market. “[America] has 30 percent of the world’s high net worth individuals (people with more than $1 million in liquid assets) and nearly a quarter of global GDP, but consumes less than a fifth of the world’s personal luxury goods, noted Olivier Abtan of the Boston Consulting Group in a piece recently published by The Economist.
“In the luxury goods sector, expansion is not only demand-driven, it is supply-driven as well. One region in which we have seen some opening of stores that is quite promising is Texas: Dallas and Houston,” said Ortelli. Areas with already dense luxury retail footprints also offer solid growth opportunities. “We do not expect that these luxury goods companies will open stores in all the cities in America. Due to the income and equality ratio, they benefit more from expanding in established cities, because consumers are more sophisticated so they are willing to trade up. New York is still under-penetrated, so it is a higher priority for a CEO to open another location in Soho, or elsewhere in downtown Manhattan, rather than opening in the Mid-West,” continued Ortelli……….
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