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Wednesday, July 14, 2010

Perspective on Consumer Trends Around the World from Estee Lauder and Harry Winston

We happened to catch William Lauder, Estee Lauder (EL) Executive Chairman on CNBC a few weeks back, on Thursday 6/24/10. He provided insight on global consumer trends, noting that the consumer is "very local and very different everywhere." Some highlights:
  • Europe - "Consumer seems to be spending but not quite with robust flavor."
  • U.S. - "American consumer is very binary, either in then out. American consumer is back, especially the slightly more affluent middle class consumer... back in meaningful way... Consumer seems to be back with certain level of confidence.... But, if given excuse, she will pull back."
  • China - "Consumer very confident. Attitude that this is going to get better... buying aggressively. We have a lot of confidence in greater China (including Hong Kong, Macau, Taiwan)...."
One minor comment - he mentions boom-time U.S. unemployment rate of 4% as pretty much normal historical full employment, but we would put the "normal" textbook rate at 5-6%. We include the video here:

His commentary is fairly consistent with that relayed by Harry Winston (HWD) regarding the luxury market at the company's recent annual shareholder meeting - from the slide deck:

We acquired shares of Harry Winston in late 2008 and early 2009 at a significant discount to net tangible book value (asset play), but recently reduced our exposure slightly to reallocate capital into current out of favor names. Nonetheless, we still sleep well owning Harry Winston based on normalized earnings power and diamonds as a store of value (beyond retail, the company owns an interest in a valuable Canadian diamond mine) - also from the annual meeting:

In addition to our remaining HWD position, we participate in the global retail market through our positions in eBay (EBAY) and Bidz (BIDZ). We also own Central European Distribution Corp. (CEDC) and Compania Cervecerias Unidas S.A. (CCU), although these alcohol/beverage companies aren't exactly retail. We've not previously covered these names at length, but may in future posts. Prior commentary on eBay and Bidz here:

eBay Remains Powerhouse - Enjoy the "Victory Lap" While it Lasts (April)

BIDZ - Execution Critical to Show/Realize Durable Earnings Power Like QVC/HSN; Risks Remain (March)

Happy investing,

Jeffrey Walkenhorst

Disclosure: long HWD, EBAY, BIDZ, CEDC, CCU.

© 2010 Jeffrey Walkenhorst
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