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Can clothing ever be considered an investment?

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19/09/2014
As Fashion Week moves from London to Milan we ask whether there’s any such thing as an ‘investment piece’.
Can clothing ever be considered an investment?

Anyone who has picked up a fashion magazine has likely read the phrase “a perfect investment piece”, usually beside an item with an enormous price tag.

In this context the word ‘investment’ is taken to mean that the item will last several seasons. But can clothing ever be considered an investment in the traditional sense, as an asset whose value grows – or at least holds firm – over time?

Samantha Lilley, director of valuations at Borro.com, says: “Buying clothes as an investment is not really an option. Most contemporary clothing brands have mark-ups so high that you’re going to lose money immediately. But some brands are selling on the open market for the same sort of money as they would at retail.”

According to Lilley accessories like ultra-high-end handbags from the likes of Hermès, Louis Vuitton and Chanel tend to hold their value well. Even a decade ago, when Lilley worked at auction house Christies, Hermès Birkin bags sold well. She says: “Hermès is a recognised brand with a waiting list years long. Although the Birkin bag is fashionable at the moment they’ve always performed well at auction.”

It’s this strength at resale upon which Borro.com, which offers loans against bags worth £1,500 or more, is based. It has issued £210,000 in loans against designer bags, recently lending one person £16,500 against an electric blue crocodile Birkin bag (pictured) worth between £35,000 and £40,000 new.

If you don’t have £20,000 to spare on a bag, going down the vintage route is another option.

Kerry Taylor, of specialist vintage auction house Kerry Taylor Auctions, says that the value of high-quality vintage clothing can appreciate over time.

She explains: “While most vintage is affordable, I would recommend buying more expensive pieces by the great designers in unaltered and good condition. You can’t go wrong. I wish I had bought the top lot in every sale of the last 20 years – pieces selling for £2,000 in the late nineties can make £20,000 to £40,000 today.”

The reason, she says, is simple: “Supply is finite but demand is going up.”

Most of the people involved in the vintage clothing market are collectors, she says. “While most vintage is affordable, I would recommend buying more expensive pieces by the great designers in unaltered and good condition. You can’t go wrong. I wish I had bought the top lot in every sale of the last 20 years – pieces selling for £2,000 in the late nineties can make £20,000 to £40,000 today.”

Taylor recommends selecting fine haute couture from the 20th and early 21st century and antique costume in good condition.

For those who would rather keep their investments to the contemporary brands they know and love, premium brand funds could be an option. With stakes in companies like Burberry, Moncler and Michael Kors, these funds stand to gain from the uptick in luxury consumption that accompanied the global recovery.

Scilla Huang Sun, manager of the JB Luxury Brands fund at Swiss & Global Asset Management, says: “A global economic recovery, even at a slow pace, is beneficial for luxury stocks as demonstrated by past cycles. We expect solid organic growth of six or seven per cent this year.”

According to Alice de Lamaze, who manages the Pictet Premium Brands fund, retail investors have good reason to be attracted to luxury brands. She explains: “They have superior top line growth and are exposed to the kind of high-end consumers who are less impacted in their ability to spend during a recession. High-end brands also have a much higher profit margin – between 20 and 30 per cent – compared to an average operating margin of 13 or 14 per cent.”

While buying shares of a luxury brand could turn your passion for clothes into a viable investment, the same can’t necessarily be said for buying the clothes themselves.

Taylor explains: “I think many women tell themselves that they’re buying an ‘investment piece’ to justify spending high sums on modern ready-to-wear. But if I’m honest, there are few designers today whose clothes are well enough made and innovative enough that they can be viewed as headline pieces.”

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