Apple: Still Largely a Luxury Brand
On October 14, 2013, Apple (NASDAQ:AAPL) issued a press release stating that it had handpicked Angela Ahrendts, former Burberry CEO, and awarded her with a newly created position. As a Senior Vice President, Ahrendts has been granted discretion to manage the operation of Apple retail and online stores. Prior to serving as Burberry chief, Ahrendts also put in time as an executive at both Liz Claiborne [now Fifth & Pacific] and Donna Karan International, a subsidiary of Louis Vuitton Moet Hennessy.
On resume, Ahrendts will be tasked with making the seemingly awkward transition out of the world of haute couture fashion and into the Silicon Valley sphere of nuts and bolts geekdom, Moore’s Law physics, and fan boy product launches. In reality, however, Angela Ahrendts will immediately fit right in: Apple is actually a luxury brand.
Technology Vs. Luxury Profitability
Tiffany (NYSE:TIF), as a jeweler, represents the epitome of a luxury brand. Charm bracelets, diamond rings, and assorted baubles are but mere ornaments that are of little to no industrial use for consumers. Several Tiffany diamond rings price out for above $50,000.00. At the low end, a classic Tiffany sterling silver heart tag charm bracelet begins at $275.00.
The typical Tiffany client may remain somewhat insulated from the day-to-day economic realities of gasoline prices and job layoffs. If anything, Tiffany business results would be more so correlated to stock and high-end real estate market performance, which often times diverge away from the economic landscape facing the common man. Still, in comparison to Big Tech, Tiffany’s five-year average margins, return on equity, and growth rate statistics may appear somewhat pedestrian.
Nominal statistics may support a superficial case that Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), Intel (NASDAQ:INTC), and Apple are all luxury brands that defy standard laws of price elasticity, where price and sales volume are negatively correlated. Beneath the surface, however, Microsoft, Google, and Intel have each leveraged their dominance above one specific sector to maintain fat profit margins.