Role Call | Luca Solca, Luxury Analyst

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LONDON, United Kingdom — Luca Solca is the head of luxury goods research at financial services firm Exane BNP Paribas, where he leads a team that evaluates and delivers advice on the profitability and long-term viability of publicly-traded luxury goods companies. As such, he has a deep understanding of how these companies are managed and their positions within the market. Solca has held similar roles at Credit Agricole Cheuvreux and Sanford C. Bernstein. Earlier in his career, he was a partner at the Boston Consulting Group.

BoF: Please describe your current role.

LS: What I do is called being a 'luxury goods analyst'. This means I study the luxury goods industry and the luxury goods companies traded in the stock exchange to advise institutional investors (the banks, insurance companies and pension funds that manage our savings) on which stocks to buy or to sell and why.

In practice, I write tomes of reports, and I travel to the four corners of the world to discuss them with my clients.

BoF: What attracted you to the role?

LS: I like the intellectual challenge and the freedom in this job. You can decide what you focus on and research. And anticipating future stock market performance is extraordinarily difficult. Many things need to be taken into account: the quality and prospects of the different companies, the global demand trends, the broader macro-economic context. This gives you plenty of opportunity to be wrong! This job fits well with my previous background: I have been a partner of the Boston Consulting Group and a consultant to luxury goods and consumer companies for 12 years and I have headed a publicly traded luxury goods conglomerate myself for three years. I have the privilege of having seen the sector from the inside, while most City analysts have a 100 percent financial background.

BoF: What is the most exciting project or initiative you have worked on?

LS: What is really exciting in this job is when you end up having a buy or sell recommendation that sets you apart from the vast majority of other analysts, the consensus. This happened to me a couple of times when I was covering retail in the early stage of my career. For example: I was one of the few analysts with a ‘sell’ on Marks & Spencer when Stuart Rose and his strategy seemed invincible and I was a buyer of Alliance Boots when all City analysts despised this freshly merged company. I was under a lot of pressure – as these recommendations did not work for a while – but in the end it was great. Today we stand out on LVMH, as we think Louis Vuitton has a good chance to come back with better organic growth than most people expect. We also think that consumer sophistication has been over-hyped, to a level that is not supported by fact and analysis.

BoF: How is your role changing? What are the forces driving this change?

LS: The brokerage industry is under increasing pressure, as volumes stay rather low and commission rates continue to decline. At the same time, investors are building their own research capabilities. In order to stay relevant, analysts have to increase the quality of the research they do in an environment which is starved of resources. It is not easy to square the circle. I have seen many promising young analysts leave to the buyside, where resources are more abundant.

BoF: Tell us about a time you failed and how you learned from it.

LS: In 2011 I accepted a Director of Research role with Crédit Agricole Cheuvreux, with a mission to reorganise the research department by sector and lead the integration with CLSA from the European side. The project hit the rocks, as Crédit Agricole was keen to sell the combined Cheuvreux and CLSA business to Citics of China. And Citics in the end decided to buy just the CLSA part of the business. It was a painful experience and a stark reminder of how tough the sellside research business has become. I am now back to being an analyst, and enjoying every minute of it! Exane BNP Paribas has resources and is one of the few houses investing in developing the business, at a time when most competitors are cutting. I am happy at Exane BNP Paribas.

BoF: What advice do you have for people who are interested in doing what you do?

LS: Build experience first. Investing is a lot about common sense and industry knowledge. Make sure you find jobs where you can learn a lot and quickly. Consulting did this to me – what I am now, I owe largely to my Boston Consulting Group experience. Also, make sure that there is a serious and long-term commitment behind the broker you are considering. Many brokers build rapidly in good stock market times, only to cut back in a bear market. You don't want the professional and emotional roller coaster of that, as well as the potential disruption that this brings to your life.

This interview has been edited and condensed.

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