TTIP prospective trade deal impact on luxury segment

Worldwide
Published:  06 July, 2016

As the Brexit vote results in more challenging conditions for the fashion, footwear and leather goods market, the proposed trade agreement between the U.S and the EU is to continue despite the UK’s decision to leave the single market.

Speaking at an event in Washington on June 28, Cecilia Malmstrom, EU Commissioner, said negotiations for the TTIP (the Transatlantic Trade and Investment Partnership agreement), though difficult, will go ahead despite the Brexit vote.

“There are a lot of uncertainties related to Brexit. We can’t answer them now we will have to wait until we see a clearer picture,” said Malmstrom. “But for now and for the immediate future, the United Kingdom is a member of the European Union, and we negotiate this on behalf of all 28 members”, she added.

However, completing the TTIP in the final months of Obama’s administration now seems a hard task to be accomplished as the EU loses its second-largest economy and diverts attention and political capital to sorting out the UK-EU relationship.

So far in the luxury sector, the Savigny Luxury index (“SLI”) continued its downward trend after the referendum results, dropping a further 2% in July, joined by the MSCI World Index, which dropped almost 1%. 

If Kors, Gucci, and Mulberry have maintained strong results, it is less so the case of Ralph Lauren with restructuring and job cuts taking place, and Ferragamo has warned that 2016 is more about risk management than growth.

Tod’s is currently reviewing its sales strategy but is confident that all the Group’s brands will end 2016 on a positive note. Read more here.

In the aftermath of the Brexit vote, the Italian stocks fell 5-11%. LVMH’s stock also reacted negatively falling 9% after the announcement of the referendum results only to recover some ground towards the end of June, down more than 5%.

Burberry’s luxury stocks are among the happy few to benefit from Brexit as the impact of a devalued pound on sales growth outweigh the potential increase in costs from its Euro-based suppliers.

Brexit’s impact on the luxury goods is unclear. Analysts predict the short term outlook will be governed by currency fluctuations, hence, creating opportunities for some of the brands, mainly British, but the trading conditions should be more challenging.

Sources: The Financial Times/Business of Fashion

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