Quiet Luxury Shifts Retail and Investor Portfolios

Quiet luxury, a trend rooted in understated opulence and minimalist elegance, emerged as a prominent fashion trend in the past  year, transcending viral fame on social media platforms to become a significant driver in investor portfolios. 

Characterized by subtle displays of wealth and sophistication, quiet luxury represents a departure from the ostentatious fashion statements of the past, favoring understated elegance over flashy logos. “[The client] knows how passionate and elegant she is,” says Félix Díaz, Country Manager, TFG Group, in an interview with MBN. “Our clients are looking for something tailored to their needs. They are looking for elegant occasion-wear that is subtle.”

Beyond the realm of fashion, this trend has captured the attention of investors, reshaping the landscape of luxury stocks. Luxury brands traditionally viewed as a hedge against inflation due to their high pricing and affluent customer base have experienced a resurgence in interest. Companies embracing the ethos of quiet luxury have seen notable outperformance compared to their more conspicuous counterparts. 

Quiet luxury companies, including renowned names like Hermès, Miu Miu, and Brunello Cucinelli, outpaced their louder peers by 23% points in 2023, according to data from DBS Bank. This shift underscores a growing consumer preference for understated quality and elegance. “We let the product speak for itself. The difference from our competitors is the confidence and trust we instill in our clients,” highlighted Díaz.

Investors are adopting a long-term view towards quiet luxury companies, recognizing the enduring appeal of heritage brands and high-quality products. “There is this element of: ‘I am tired of all the big logo stuff,’” said Markus Hansen, Portfolio Manager, Vontobel Quality Growth Boutique. “It comes back to the heritage of these houses, which are the ones that are the most successful ... and what we invest in are the ones that take a very long-term view.”

Mexican consumers are not exempt from this, as luxury retailers like El Palacio de Hierro and Saks Fifth Avenue carry brands that have been categorized as quiet luxury. “Since the 1980s, the awareness of luxury in Mexico has been on the rise but our segment is referred to as quiet luxury,” said Díaz. “We do not have big logos; we do not print big names on our garments. This gives our client confidence, and she trusts us; what we sell at the end of the day is trust [in quality].”

In the Asia-Pacific region, the demand for luxury goods is evolving, driven by China's recovery and emerging markets like India. With an estimated 100 million people in India projected to become affluent by 2027, luxury brands are diversifying their focus beyond traditional markets.

Furthermore, the rise of quiet luxury has also impacted brands associated with louder expressions of wealth. Kering-owned Gucci and Burberry experienced downward pressure in global luxury stock rankings as investors pivot towards companies aligned with the quiet luxury ethos.

However, LVMH, the world's largest luxury group, reported robust sales for 2023, surpassing expectations and signaling resilience in the face of adversity. Despite a turbulent end to 2023, luxury stocks received a boost following LVMH's reassuring results, reflecting optimism among investors.