King Charles III’s favorite brands thrive on the stock market

(News Bulletin 247) – The companies that hold the favorite brands of the British monarchy are beating the flagship index of the London Stock Exchange. The “Royal Index” of the broker eToro outperformed the FTSE100 by more than 60% over three years, driven among others by Hermès, owner of the shoemaker John Lobb.

This Saturday, May 6, Charles III will officially become king about eight months after the death of Queen Elizabeth II. More than 2,300 hand-picked people were invited to this global event. All eyes will be on the United Kingdom, which will experience three intense days of festivities to celebrate the coronation of the new British monarch.

In addition to his role as Head of State of the United Kingdom and the Commonwealth, the Sovereign Monarch is empowered to award a Royal Warrant of Appointment . This is a mark of recognition from the Royal Family to companies that provide quality products and a sense of service.

Displaying this precious sesame is not acquired for life. These royal mandates are granted for a maximum period of 5 years or in the event of a change of monarch. And this scenario has arisen since the death of Queen Elizabeth II. “In the event of a change of monarch, the Royal House reviews the warrants granted, while the company or individual can continue to use the royal coat of arms in the course of its activity for a maximum period of two years”, explains the Royal Warrant Holders Association, the Association which brings together the holders of royal warrants. The exercise is not new to King Charles. During his years as Prince of Wales, he had already granted nearly 200 royal warrants.

To date, just over 700 brands have benefited from a Royal Warrant of Appointment. For the unfortunate companies that have not had the favors of the new monarch, they will have two years to remove the precious seal. This mark of recognition is not only cosmetic. It allows companies to enjoy a reputation on the other side of the Channel.

British companies are not the only ones to benefit from this mark of trust. French know-how is also acclaimed. Pernod Ricard has royal mandates for its Champagne Mumm or its aperitif brand Dubonnet, while LVMH benefits from the precious sesame for its Champagne brands Moët et Chandon, Krug or even Veuve Cliquot.

A “Royal Index”

On the occasion of this global event, the broker eToro returned to the performance of its “Royal” index, which compiles 10 companies listed on the stock exchange or part of companies listed on the financial markets, which have received a royal mandate.

The luxury groups listed on the Stock Exchange are mainly present in this “Royal” index, including the French Hermès, which owns the shoemaker John Lobb, the British watchmaker – contrary to what its name indicates – Watches of Switzerland (owner of the Mappin & Webb) or Burberry. Aston Martin, the iconic car brand of famous British secret agent James Bond is also in eToro’s selection.

This index is not only royal in its composition. The performances achieved by the sample concocted* by eToro are also. According to the broker, this index has outperformed the FTSE 100 – the flagship index of the London Stock Exchange – by 24% over the past five years. The outperformance even amounts to 62% over a period of three years.

The ‘Royal’ index also beat the FTSE 100 with a 10% year-to-date outperformance, “although over two years the trend is reversed, with stocks like Watches of Switzerland, Hermès and Frasers – owner of the tailor Gieves & Hawkes who have seen their performance slow down on the stock market”.

“The strong performance of this index shows that heritage and luxury are selling regardless of the ups and downs of the economy,” said Ben Laidler, Global Markets Strategist for eToro.

Red carpet for luxury

But behind this front unit hide mixed stock market performance. With a performance of 281% of its share over five years, Hermès dominates the ranking. The French luxury saddler recently published stratospheric sales for its first quarter. The title is currently evolving at its zenith, not far from the threshold of 2,000 euros which it crossed for the first time on April 21.

Mappin & Webb watches have also posted a hearty performance of 182% since the introduction of its parent company Watches of Switzerland in May 2019. A Swiss player is also doing well since it is the Richemont group which holds the Purdey gun brand. The Swiss luxury giant has posted growth of 64% over five years and 190% over the last three market years.

However, the royal warrant does not immunize against stock market setbacks. At the other end of the spectrum, Aston Martin shares have indeed lost 95% of their value over the past five years. James Bond’s favorite brand has had a chaotic journey on the London Stock Exchange since its IPO, deemed a failure in May 2019. In the space of three and a half years, the manufacturer of the legendary DB5 had to be bailed out twice to never die.

The case could be relaunched on the stock market with the arrival of Fernando Alonso in the colors of Aston Martin in Formula 1. Like football clubs whose performance on the ground influences that of their stock market action, the arrival of the prodigy in the Aston Matin team gave a boost to the title. In the first weeks of March, the action soared by almost 50%, galvanized by the performance in the Grand Prix of the Spanish racing driver.

For its part, the brewer Shepherd Neame staggers on the London square with a title that has fallen by 44% over the last five years. Britain’s oldest brewer was heavily penalized by health restrictions that had forced pubs to remain closed.

“The index, which ranges from guns to watches to shoes and raincoats, has fairly consistently outperformed the FTSE 100, with only one modest year where some gains were lost. The brands included in the index all have a unique history, giving them an attractive combination of demand resilience and pricing power,” continued Ben Laidler, Global Markets Strategist for eToro.

The 10 values ​​of the “Royal” index of eToro:

* To calculate the collective performance of the Royal index, eToro explains that it used a simple weighted average for the 10 companies in the basket. All stock price data extracted from Refinitiv as of April 24, 2023.