At one end of the spectrum you have budget clothing shop Peacocks going into administration and selling off its limbs to anyone interested. On the other end luxury brands such as Mulberry and Burberry are having the year of their lives.
In its third quarter trading statement FTSE 100-listed Burberry reported turnover up 22% year-on-year, while in its latest trading update designer handbag-maker Mulberry posted retail sales up 41% in the six weeks to 14 January, compared to the same period last year.
So much for a recession
But this is where it gets interesting, yes Burberry has seen sales in the UK increase, but the true appetite for its goods is in emerging markets.
"The evolution of Burberry in the past three years has been incredible," says Arjen Los, chief investment officer and manager of the Dominion Chic Fund, "The momentum of the brand is very strong and its pace is accelerating month after month as emerging economies increase their demand for Burberry goods."
Even in the UK increased sales of these goods are tied to the rise in Asian tourists and their bulging wallets.
Can this appetite for Western luxury brands continue? Probably not, but as a trend it’s in its very early stages and so is ripe for taking advantage of.
Bearing fruit
We have been told time and again of the growth of the consumer in China and other emerging economies and now the proof of such a phenomenon is there in black and white.
Of course, the argument that a slowdown in China could lead to a reversal in this trend is easy to make. But point to an economy, sector or stock that is completely immune to the potential pitfalls and perils associated with China’s growth, or lack of it.
Meanwhile, it is not just luxury brands that are benefitting from increased disposable income in the hands of emerging markets populations.
As Los explains, outside the Western world Starbucks is seen as desirable: "Demand for different goods works differently as your income grows and products will change to cater for local tastes.
He does not deny Chinese and Indian middle classes will develop their own aspirational favourites. This will take time though.
What’s more, Western brands have a legacy and an established pricing power, and even if they have been neglected by bad management can be brought back from the brink.
An added bonus of investing in well-known, domestic companies to gain access to consumer trends in the east is the comfort that they have comparatively good governance.
"Companies without a strategy to sell outside Europe are not invested in by our fund," says Los.
As at the end of December his portfolio was split 48% in Europe, 44% in America and 6% in Asia and sector-wise had its largest weighting in apparel and shoes at 20%.
It has outperformed the MSCI World Index substantially since launch and over three and two years. Last year it was just in negative territory, down 0.36%, but was still ahead of the benchmark which lost 1.57%.
Recession or no recession, the juggernaut of keeping up with the Jones’s – even across continents – keeps on chugging.
