The five secrets to Ferrari’s success as a luxury brand

by | Jul 4, 2024 | Business

In this articleRACE-ITFollow your favorite stocksCREATE FREE ACCOUNTIn the world of luxury, Hermès is arguably the gold standard.Its sales are growing double digits even as other luxury companies post declines or dramatically slower growth. Wealthy customers lucky enough to be anointed as Birkin-bag worthy can purchase a Birkin 25 for about $11,000 and flip it the same day for more than $23,000. Analysts predict Hermès could surpass Louis Vuitton in revenue within the next three years as the world’s largest luxury brand.Hermès stock is up 13% this year, while LVMH shares are flat and Kering is down 18%.There is one luxury company, however, that has raced past Hermès when it comes to growth and brand cache – Ferrari.This year, Ferrari for the first time surpassed Hermès as the most valuable luxury company in the world as measured by stock multiple, which gauges growth and profit prospects. Ferrari’s stock now trades at 50 times earnings, compared with 48 for Hermès and 23 for LVMH.[embedded content]The storied automaker, founded in 1947 by Enzo Ferrari as way to fund his race team, debuted on the New York Stock Exchange at $60 a share in 2015. It now trades at $410 a share.The company is valued at more than $75 billion — roughly 1½ times the market cap of Ford or General Motors, which make millions of cars each year. Ferrari produced only 13,663 cars last year.Ferrari is not a traditional luxury company, of course. It makes cars and has a race team, a merchandise company, a car-restoration company and many businesses that bear little resemblance to a maker of $1,300 scarves and $800 sandals.Yet in a recent research report, Bernstein luxury analyst Luca Solca posits that Ferrari and Hermès are similar, since both “occupy the pinnacle of the pricing pyramid” in their categories and are “perfectly positioned” to benefit from the surge in the global wealthy.To better understand what makes Ferrari a luxury brand, CNBC traveled to Ferrari headquarters in Maranello, Italy, to interview the company’s CEO, Benedetto Vigna.Get Inside Wealth directly to your inboxThe Inside Wealth newsletter by Robert Frank is your weekly guide to high-net-worth investors and the industries that serve them.Subscribe here to get access today. Vigna is an unlikely luxury king. He spent most of his career at Geneva-based semiconductor maker STMicroelectronics, where he ran its micro-electromechanical systems and sensors group. He helped create the screen sensor technology used in iPhones, for example.His appointment to the top job at Ferrari in 2021 was a sign that technology would be core to the supercar maker’s growth, and in a sense, the future of luxury.  In an interview at the company’s $200 million E-Building, Vigna talked about the upcoming electric Ferrari, its commitment to sustainability and current global demand for Ferraris.The main topic of conversation, however, was on what makes Ferrari a leader in luxury, and what lessons other companies and executives serving wealthy clients could heed from its rise. Here are five main takeaways:1. Play hard to getFerrari Purasangue SUVAdam Jeffery | CNBCAs Solca points out in his research note, Ferrari and Hermès both “sell less than the market would take.” A lot less.Based on orders, analysts estimate Ferrari could easily sell two or three times its current production. Ferrari’s allure was built on scarcity and exclusivity.Even if you can afford a Ferrari, with an average price of $380,000, securing an order is nearly impossible.The wait time for a Purosangue, Ferrari’s pseudo-SUV, and other hot models is now up to three years, the longest in its hi …

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[mwai_chat context=”Let’s have a discussion about this article:nnIn this articleRACE-ITFollow your favorite stocksCREATE FREE ACCOUNTIn the world of luxury, Hermès is arguably the gold standard.Its sales are growing double digits even as other luxury companies post declines or dramatically slower growth. Wealthy customers lucky enough to be anointed as Birkin-bag worthy can purchase a Birkin 25 for about $11,000 and flip it the same day for more than $23,000. Analysts predict Hermès could surpass Louis Vuitton in revenue within the next three years as the world’s largest luxury brand.Hermès stock is up 13% this year, while LVMH shares are flat and Kering is down 18%.There is one luxury company, however, that has raced past Hermès when it comes to growth and brand cache – Ferrari.This year, Ferrari for the first time surpassed Hermès as the most valuable luxury company in the world as measured by stock multiple, which gauges growth and profit prospects. Ferrari’s stock now trades at 50 times earnings, compared with 48 for Hermès and 23 for LVMH.[embedded content]The storied automaker, founded in 1947 by Enzo Ferrari as way to fund his race team, debuted on the New York Stock Exchange at $60 a share in 2015. It now trades at $410 a share.The company is valued at more than $75 billion — roughly 1½ times the market cap of Ford or General Motors, which make millions of cars each year. Ferrari produced only 13,663 cars last year.Ferrari is not a traditional luxury company, of course. It makes cars and has a race team, a merchandise company, a car-restoration company and many businesses that bear little resemblance to a maker of $1,300 scarves and $800 sandals.Yet in a recent research report, Bernstein luxury analyst Luca Solca posits that Ferrari and Hermès are similar, since both “occupy the pinnacle of the pricing pyramid” in their categories and are “perfectly positioned” to benefit from the surge in the global wealthy.To better understand what makes Ferrari a luxury brand, CNBC traveled to Ferrari headquarters in Maranello, Italy, to interview the company’s CEO, Benedetto Vigna.Get Inside Wealth directly to your inboxThe Inside Wealth newsletter by Robert Frank is your weekly guide to high-net-worth investors and the industries that serve them.Subscribe here to get access today. Vigna is an unlikely luxury king. He spent most of his career at Geneva-based semiconductor maker STMicroelectronics, where he ran its micro-electromechanical systems and sensors group. He helped create the screen sensor technology used in iPhones, for example.His appointment to the top job at Ferrari in 2021 was a sign that technology would be core to the supercar maker’s growth, and in a sense, the future of luxury.  In an interview at the company’s $200 million E-Building, Vigna talked about the upcoming electric Ferrari, its commitment to sustainability and current global demand for Ferraris.The main topic of conversation, however, was on what makes Ferrari a leader in luxury, and what lessons other companies and executives serving wealthy clients could heed from its rise. Here are five main takeaways:1. Play hard to getFerrari Purasangue SUVAdam Jeffery | CNBCAs Solca points out in his research note, Ferrari and Hermès both “sell less than the market would take.” A lot less.Based on orders, analysts estimate Ferrari could easily sell two or three times its current production. Ferrari’s allure was built on scarcity and exclusivity.Even if you can afford a Ferrari, with an average price of $380,000, securing an order is nearly impossible.The wait time for a Purosangue, Ferrari’s pseudo-SUV, and other hot models is now up to three years, the longest in its hi …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
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