Luxury still sells – for now. Luxury goods shares went into a designer dive last autumn as investors took fright that $1,000 handbags and $300 sunglasses would be the first things credit-crunched consumers stopped buying. In fact, first-half 2008 sales for the big luxury groups were buoyant. Friday’s earnings figures from PPR and Hermès bolstered confidence that sales were not been maintained at the expense of margins. At PPR, the 13 per cent increase in operating profits at Gucci Group – which includes brands such as Yves Saint Laurent and Balenciaga – outsparkled less bling-bling performance from Redcats and Conforama, its retail businesses. At constant currencies, Gucci’s profits were up 36 per cent.

Not all the growth is coming from the Abramovich class in emerging markets. Luxury goods groups have broadened their appeal to young professionals prepared to save up for that Bottega Veneta handbag. They have also been careful to put their golden eggs into different baskets by developing multi-brand portfolios and geographically diverse businesses.

No one expects luxury goods to defy gravity for ever. HSBC calculates that, in the past three years, the sector’s organic sales grew by an exceptional 13-15 per cent annually. A soft landing with a reversion to, say, 8-9 per cent looks likely. The biggest threat is unemployment. Luxury goods sales have held up amid falling equity and house prices. But they will be far less resilient if job losses escalate beyond the financial services sector.

Without a surge in joblessness, the luxury sector’s average p/e of about 12 times 2009 earnings – excluding Hermès, its shares inflated by takeover speculation – looks oversold. And expect PPR to bounce back further from recent lows at any suggestion François Pinault is ready to jettison the boring retail stuff and focus on the style.

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