JHVEPhoto/iStock Editorial via Getty Images I've been dwelling on luxury and prestige brands. The main thesis is that luxury brands are great to have during negative economic events due to the persistence of the revenue streams, which are usually capable of weathering recessions with small revenue losses and quick recoveries, which translates into better stock performance in the aftermath of recessions. I have made this case for Louis Vuitton ( OTCPK:LVMUY ) and will now test it for L'Oréal ( OTCPK:LRLCY ).
L'Oréal operates in prestige self-care beauty segments through dermatological products, cosmetics, and fragrances. Most of their segments target the high-end of self-care, and the company's several brands have a lot of recognition and appeal among the consumers. A good way to examine the company's revenues during the period between the subprime crisis and the European debt crisis.
YCharts The results were very interesting. The company was capable of weathering two main financial crises with relative ease and by 2013 was already posting all-time revenue records. In terms of stock market action, during the subprime crisis from peak to valley the company lost close to 60% of its stock price.
Hardly a safe haven. Seeking Alpha However, that result doesn't surprise us. For those who remember the panics in 2008 and 2009, it will be recalled that these type of flight to liquidity behavior does not leave any company immune.
More important to me is how fast the company was able.
