In a world of its own: European luxury

European luxury is in a world of its own. Even the Chinese, who've tried to replicate the success of European industry, have had no success engraving a luxury brand into consumers' minds that compares with Europe's best in class – Chanel, Prada, Burberry, Cartier, Hermes, Gucci, Dior and Louis Vuitton.

Europe's ability to capture the imagination and sell leather shoes, monogram handbags and trench coats has seen it capture the lion's share of the global luxury market selling more than 70 percent of the overall market. According to industry body European Cultural and Creative Industries Alliance (ECCIA), if the European luxury goods industry were a country, it would be ranked the seventh-largest economy in Europe and 20th in the world.

The durability of European luxury has been striking in a world where disruptors have upended market leaders. Louis Vuitton has retained its 10-year reign at the top of the luxury charts according to Annual Brandz Top 100 Most Valuable Global Brands Ranking by WWP and Millward Brown. The Louis Vuitton brand alone is worth $27 billion. Investors in the LVMH group which encompasses 70 different brands including Moet & Chandon along with Hennessy tally up an even bigger valuation with the group as a whole worth about $74 billion in market capitalization.

A customer looks at discounted hand bags and purses for sale in the Galeries Lafayette SA luxury department store in Paris.
Balint Porneczi | Bloomberg | Getty Images
A customer looks at discounted hand bags and purses for sale in the Galeries Lafayette SA luxury department store in Paris.

Europe's biggest luxury companies, LVMH and Kering, have also used their marketing prowess to rejuvenate other well-known names that had fallen out of favor with the fashion pack such as Yves St Laurent, which was controversially rebranded St Laurent, and Celine. St Laurent has doubled its sales revenue from 353 million euros ($398.1 million) in 2011 to 707 million euros in 2014. While Celine had record sales in 2014 and it continues to experience strong growth this year.

Europe's biggest players also continue to nurture newcomers, for instance, Christopher Kane and Stella McCartney which were taken under the Kering umbrella.

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Brand development and expansion plans could transform these new European names into a major force, with some industry writers questioning whether Stella McCartney could become the "Calvin Klein of Europe."

Profit is being sought across the luxury space as the big brands chase new product categories and new markets. From the traditionally well-performing fashion and leather goods division, Louis Vuitton has sought additional earnings from watches and jewelry as well as perfumes and cosmetics. The former category saw profits almost double in the first half of the year from the same time a year ago.

The major brands were quick to recognize their value in the fast growing region of Asia. Louis Vuitton earns 29 per cent of its revenue in Asia ex Japan and Kering 32 percent from Asia Pacific. While they acknowledge Asia isn't performing as well as it had previously, Europe's fashion and jewelry houses have tapped into a European and U.S. revival in consumer spending, protecting earnings. For instance, Prada witnessed negative growth in Asia in the first half of this year with Hong Kong and Macau weighing on sales in particular. But Prada says difficulty in the region was more than compensated by growth in markets in Europe, Americas, Middle East and Japan.

It's not just the retail and wholesale markets that European names have muscled into in emerging markets. Capital markets there have also opened their arms to Europe's best. Prada was selling 40 percent of its goods in Asia Pacific back in 2011 when it decided to list on the Hong Kong Stock exchange in a much publicized flotation, instead of on an exchange in Europe. The nimble management team decided Asian capital markets would offer a more attractive valuation and lower regulatory hurdles. Prada raised $2.1 billion in a volatile environment giving the company a $13 billion market capitalization at the time.

Few sectors have provided much shelter this year as markets have been roiled in August and September and luxury has been a mixed bag. But some luxury names retain positive returns with LVMH is up more than 12 percent at the start of October, Dior 14 percent and Hermes up 9 percent.

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