The Staying Power of Luxury Companies

Here’s how to cash in on businesses that cater to big spenders

- KIM CLARK

As worries about inflation and economic troubles take their toll, average Joes and Janes pinch pennies. But the rich continue to splurge. You may not be able to afford a $229,000 Mercedes-Maybach sedan or a $68,000 rose gold Cartier watch, but for a tiny fraction of those sums you can buy a stake in a company that sells such luxuries and set yourself up for a chance at a sumptuous profit.

During times of economic difficulty, companies that serve the middle class typically get squeezed. And discounters, not surprisingly, get a boost. (For more, see the box on the facing page.) Perhaps more surprising is that companies representing the ultimate in consumerism also typically thrive. “There are two groups that could do well within an economic downturn: the really high luxury end and discounters,” says Joe Mazzola, a former portfolio manager who now heads trader education for financial giant Charles Schwab.

The longer-term out- look for the luxury market is bullish, according to a January report from the Bain & Co. consulting firm. The reopening of China’s economy, rising wealth in India and growing interest in luxury goods among affluent millennials and Gen Zers around the world raise prospects for a luxury boom lasting several years, according to Bain, which expects total annual luxury sales to rise 50% from 2022 levels, to $625 billion, by 2030.