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  • Prada Asia heads online as sales slip

    Prada Asia heads online as sales slip

    The Italian-headquartered, Hong Kong-listed luxury brand says its Asia Pacific sales slumped  18 per cent on a constant currency basis in the first half of this year.

    “The negative economic backdrop continued to impact performance in both Hong Kong and Macau, but signs of improvement have been visible since July across Greater China,” the company noted in its results.

    And after a period of consistent growth since 2010, sales in Japan fell 9 per cent, mainly due to lower tourist flows from China caused by a less favourable exchange rate.

    CEO Patrizio Bertelli says the company will now make China, Hong Kong and Singapore its priorities in roll out its new eCommerce platform, which is expected to be global within to years.

    “At the same time there will be a constant enhancement of the online shopping experience,” he said. “Our eCommerce offer will also leverage new partnerships with international leaders in the sector.”

    Globally, Prada achieved net revenues of €1.6 billion, down 13 per cent on a constant currency basis. The decline was largely in the retail channel while Prada’s wholesale business remained stable thanks to an initial positive contribution from recent partnerships with international e-tailers and its licensing division, where good progress from royalties driven by the success of the new fragrances and eyewear.

    Net profit margin was down from 24 per cent of revenues in the first half of last year to 21 per cent. Net income amounted to €142 million, representing 9 per cent of consolidated revenues (10 per cent in 2015).

    Bertelli is upbeat about the remainder of 2016.

    “With the implementation of the first phase of rationalisation of various management and operating processes and with the launch of a series of new initiatives that will allow the group to respond quickly to the requirements of a rapidly evolving market, I see 2016 as a turning point.”

    He said the company’s retail network is subject to rigorous review including closure of non- strategic locations and selective openings in high potential markets.

    “Part of this process will also include the launch of new concepts such as the recent restyling of the Prada stores at Plaza 66 in Shanghai and GUM in Moscow, redesigned to offer a new and exclusive shopping experience for increasingly demanding clients.”

  • Prada falls on tough times in China

    Prada falls on tough times in China

    Italian fashion brand Prada is suffering from shrinking demand in its largest market of China, with a 20%-plus drop in first-half sales dragging down overall profit to the same degree.

    The Hong Kong-listed, Milano-based company announced late Friday that net revenue dropped 15% on the year to 1.55 billion euros ($1.37 billion) for February to July. The fall was “entirely attributable to a sales decline in the retail channel as the wholesales and royalties were positive,” Prada said. Retail net sales, accounting for more than 80% of net revenue, sank 18%.

    A significant blow came in greater China as sales from directly operated stores fell 24% to 278.7 million euros. On top of lower sales at stores on the mainland, “Hong Kong and Macau continued to weigh heavily on the region’s contraction,” the company said. China’s anti-corruption campaign and economic slowdown bit into purchases of pricey items. A reduced appetite for travel by mainlanders to Hong Kong and Macau also took a toll.

    The fall in revenue was not confined to greater China. All of its geographic categories, brands and product lines suffered declining sales. By product, sales of its signature leather goods dropped 22%, “especially in the Far East,” according to the statement.

    Excluding greater China, Europe was another hard-hit region, with a 21% drop in net sales. The main reason was terrorist attacks in major cities, with the company blaming a “reduction of traveler flows, resulting mainly from the publicized tragic events.”

    But there were some silver linings in Europe as well. Russian sales saw double-digit growth in local-currency terms, and the U.K. apparently benefited from “the weak pound after the Brexit” vote. Casualties in Japan and the Middle East were relatively light, with retail sales declining just 2% and 1%.

    Net profit decreased 25% to 141 million euros even after such belt-tightening measures as cutting labor and lease costs as well as advertising and communications expenses.

    Along with launching new collections to stimulate its customers’ appetite for buying, the company is upgrading important stores while shutting down others. Eighteen new outlets were opened in the half, while 14 were closed, bringing the number of directly owned stores to 622. The company continues to refurbish strategic stores into so-called new-concept stores in such key locations as a GUM department store in Moscow facing Red Square, and the Plaza 66 complex in central Shanghai on bustling Nanjing West Road.

    Prada closed 1.6% higher here at 21.65 Hong Kong dollars on Friday, ahead of the earnings announcement. Despite seeing some gains that day, the shares have lost more than 10% since the start of the year, while the benchmark Hang Seng index has risen 4.5%.

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  • Fresh look for Prada Hong Kong

    Fresh look for Prada Hong Kong

    Fashion brand Prada Hong Kong will renovate and expand its store on Canton Rd.

    Covering more than 1300 sqm over two storeys, the store has a secondary internal access from Harbour City.

    Its facade pays homage to Franco-Venezuelan kinetic artist Carlos Cruz-Diez with a geometric pattern. The Harbour City frontage, in black marble, has display windows and offers view of the store interior.

    prada inside

    The Canton Rd entrance introduces a room defined by signature elements of the brand, such as the black-and-white checkerboard floor and walls of light green encaustic and marble.

    Glass display cases with bottoms in green marble alternate with shelving systems. The beamed ceiling is a contemporary interpretation, in Prada green, of the typical ceilings of historic Italian buildings. Throughout the store, new materials are paired with 1950s design. Seating elements of different forms and colours create intimate salons, arranged with low tables. Classic materials like velvet are juxtaposed with modern materials like acrylic glass and marble.

    On the ground floor, the footwear area has carpet with velvet-covered walls, with exclusive green velvet chairs by Osvaldo Borsani.

    A special display niche inside the store’s mall entrance features black marble and a video screen. Spaces in green encaustic and black marble dedicated to leather and women’s accessories alternate with salons in red and green velvet with geometrically patterned carpets.

    In the clothing area, the beamed ceiling is covered in velvet to match the walls as a counterpoint to a video wall. Green velvet Borsani chairs, acrylic glass furnishings and the polished steel racks complete the decor.

    Sheathed in green marble, the stairway leading to the basement floor has as a background a steel and glass display case. The basement is dedicated to the men’s collections, with a special selection of clothing and footwear for women. A black-and-white marble floor, a beamed ceiling and green encaustic walls are the predominant elements.

    The men’s area is distinguished by tall furnishings in black iron and glass, blue ostrich skin chairs and carpet in aviator blue and grey with geometric patterns.

    A special room dedicated to clothing features a dark wood floor of narrow boards, walls covered in aviator-blue velvet and chairs in grey velvet with wooden arms.

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  • Innovate or die: Singapore retailers advised to reinvent as brick and mortarshops lose luster

    Innovate or die: Singapore retailers advised to reinvent as brick and mortarshops lose luster

    Some brands are even advertising via Snapchat.

    In a fast-paced and technologically-savvy city-state such as Singapore, brick and mortar shops of retailers, however traditional, may not be adequate anymore.

    According to a report by Cushman and Wakefield, Italian luxury brand Prada, for example, has announced plans to advertise via Snapchat, and will be offering their range of goods online.

    Additionally, the Singapore Tourism Board is using WeChat and Baidu Connect, and other online travel services and social review sites to reach out to independent Chinese travelers.

    “Thus, it is essential for all major stakeholders to reinvent their operations to drive the retail scene forward,” the report noted, highlighting the inevitable paradigm shift.

    Meanwhile, to combat the surge of e-commerce, the report said retailers are increasing F&B components in shopping malls and department stores, as such experience-based concepts are irreplaceable by online retail.

    “For instance, Muji Café and Meal will be opening their second outlet in Raffles City, and a cluster of 16 restaurants will open in Wisma Atria’s Japan Food Town. In addition, Robinsons the Heeren welcomed Angela May Food Chapters in this quarter,” the report added.

     

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  • YNAP pins hopes on expansion

    YNAP pins hopes on expansion

    Italian online fashion retailer Yoox Net-A-Porter (YNAP) aims to double sales and boost profits by 2020 as it expands in new markets, including Asia, but says it is still committed to Britain despite the vote to leave the European Union.

    The group says it is expanding its London headquarters and hiring several hundred new staff members despite Brexit. About a sixth of its total revenue comes from Britain.

    “We believe in this market. We believe in London and we continue to grow here,” says chief executive Federico Marchetti. “We have a very resilient business model thanks to our geographies being global.”

    YNAP says it plans to more than double revenues to around 4 billion euros (US$4.4 billion) by 2020. Its growth plans include further expansion in China and the rest of Asia.

    It also plans to offer jewellery and watches – Swiss watchmaker Richemont is a major shareholder – targeting sales of 100 million euros by 2020. This is part of a strategy to focus more on premium customers and fast-growing brands, as well as investing heavily in mobile. It says three-quarters of sales are set to come from mobile devices by 2020, from 41 per cent now.

    YNAP, a merger of Italy’s Yoox with upmarket rival Net-A-Porter, has its own multi-brand shopping websites but also runs online stores for luxury brands including Armani and Valentino. It added Prada this week.

    Finance chief Enrico Cavatorta says he expects synergies from the merger to take full effect from 2018, improving margins, and says the group should be cash positive from 2018.

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  • Giorgio Armani Asia suffers in China

    Giorgio Armani Asia suffers in China

    Italian fashion house Giorgio Armani Asia is the latest luxury retailer to cite greater China as the cause of a downturn in sales.

    Burberry and Hugo Boss have also been hit by China’s economic slowdown, leading to Hugo Boss cutting its prices in Asia.

    Armani says revenues grew 4.5 per cent last year, a 16 per cent drop from the year before. Revenues totalled €2.65 billion (US$ 2.95 billion). Prada had sales of €3.55 billion.

    The Milan-based group, whose products include accessories, cosmetics and furniture, and the more affordable Armani Exchange range, says earnings before interest, tax, depreciation and amortisation edged up 1 per cent to €513 million last year, from €507 million in 2014.

    Despite the slowdown, the firm says its cash reserves of €640 million allowed it to step up investments in its brands to “further strengthen its competitive market position”.

    “These results are the outcome of an attentive diversification policy for the group’s lines, paired with the co-ordination of distribution channels and enhancement of the role that our trade partners play,” says president Giorgio Armani, who founded the company in 1975. The 81-year-old designer is still actively involved in the business.

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  • Luxury brands Gucci & Zegna shutting shop as Chinese buyers turn thrifty

    Luxury brands Gucci & Zegna shutting shop as Chinese buyers turn thrifty

    It’s already happened to middle-of-the-road stores across high streets and main streets. Now the world’s biggest luxury stores are starting to shutter outlets. The culprit is the Chinese consumer, who is starting to rein in spending at home and abroad. The effect will be no less severe: expect more closures to come.

    Over the past decade, Chinese consumer demand and new store openings together turbo-charged luxury sales. New store space accounted for 55% of global luxury revenue growth over the past eight years, according to analysts at Mainfirst.

    As for Chinese nationals, they powered about two-thirds of luxury market’s growth over the past decade, according to Exane BNP Paribas.

    Now both of these forces are running out of steam. Given the slump in Hong Kong and the slowdown in China, stores there are the main focus of attention.

    MIXED BAG

    Gucci and Zegna were among luxury brands to cut their store footprint in the first quarter.

    Hugo Boss has already announced plans to close 20 of the 131 stores it directly owns on the mainland. It’s reviewing as many as another 20 of its least-profitable 430 stores globally.

    The company is in talks with its landlords, so not all of these outlets will close but it expects to announce a sizeable number of exits later this year.

    Prada won’t say where its selective store cuts might fall, but as it expanded aggressively in Asia, it’s a good bet that some will be there.

    And last week, Richemont, maker of Cartier jewelry and Jaeger-LeCoultre watches, said it was also reviewing its retail network in Hong Kong and Macau.This could include closures, moving to cheaper premises or lease renegotiations. Indeed, seeking rent reductions is an alternative to outright closure. Bloomberg Intelligence’s Patrick Wong ays rent reductions of as much as 50% says rent reductions of as much as 50% are possible in some locations in Hong Kong. But demand remains strong for space in premium malls, limiting the scope for discounts.

    In mainland China, tenants have the most bargaining power in new malls, particularly in second-tier cities , hit by a slump in demand and plentiful new supply, Wong notes.

    While the most attention might be on China, globally, brands are focusing on making their existing stores work harder. Rather than planning large scale openings, existing outlets are being refurbished.

    The luxury groups are right to halt their dizzying expansion, and start to cut back. As they do, there could be opportunities for more niche upmarket brands to expand. Kering’s Saint Laurent, LVMH’s Givenchy Fendi and Celine, and Swatch’s Harry Winston could all open stores at more attractive rents.

    Pandora, the affordable luxury chain, is one retailer that is still growing its store base, including in China. And here’s another trend that mirrors what is happening on high streets and main streets. As mid-market brands retrench, discount players move in. Pandora is hardly the same as Primark (its jewelry can cost 60 ($87) rather than 6 at its less upscale cousin). But the Danish jeweller offers cheaper, more accessible luxury.

    That’s still a winning formula in China, whether it is LVMH’s cosmetics and fragrance brands -or Pandora’s charms.

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  • Asia drops Burberry profit

    Asia drops Burberry profit

    Hong Kong has been blamed for a further decline in Burberry profit and a consequential cutback of staff and products.

    The British luxury goods brand has reported an 8 per cent fall in adjusted pre-tax profit to £421 million in the year to March 31 on flat revenue of £2.5 billion.

    In an earnings call, CFO Carol Drinkwater said trading in Hong Kong and Macau, which account for about 8 per cent of sales, remained tough, but the group’s stores there are still profitable, and all luxury brands were affected.

    “Conditions remain extremely challenging,” she said.

    As Andy Hall, explains, retail like-for-like sales were down by 1 per cent globally.

    But that was entirely due to falling demand in Hong Kong and Macau, where Burberry and its peers have had to contend with a collapse in demand for luxury goods. Excluding the two territories’ figures, same store sales rose a more respectable 3 per cent.

    “While the Burberry brand retains appeal globally, wider economic conditions and trading in traditionally lucrative Asian markets has dampened footfall, and hurt luxury players like Burberry the most,” said Hall.

    CEO Christopher Bailey is now looking to create a more efficient retail operation – with a £100 million cost reduction plan to be implemented over the next two years to restore profit growth and appease increasingly nervous shareholders while it weathers the Hong Kong storm.

    The company plans to cut between 15 and 20 per cent of its products across all its range, focus more on handbags and eliminate about 100 jobs.

    “I am mindful we are embarking on this plan at a time when our industry is facing significant challenges,” said Bailey, who has seen the company’s market value fall by about 37 per cent over the last 12 months.

    Handbags have higher margins and the company is not selling as well as rivals Louis Vuitton and Prada in that category.

    Furthermore, Burberry is aware it needs to increase its sales per square foot, currently estimated at around 1600 euros a year, a third that of Louis Vuitton and also well behind Moncler and Prada.

    Bailey has conceded Burberry is not as good as its rivals in “retailing basics”. It now plans to make its stores more productive by further tailoring ranges for local customers, improving customer service, increasing staff training and reviewing merchandise to highlight a reduced, simpler range of product.

    Hall says a renewed focus on in-store service and productivity would bring Burberry in line with the focus of luxury peers and would create a leaner, fitter operation with which to take the blows being dealt by a declining global demand.

    “Burberry’s decision to streamline its product ranges, at the same time as introducing some new products such as its Scarf Bar and new male fragrances, demonstrates its commitment to innovation, and attempts not to be left behind by other luxury fashion players.”

    Hall says Burberry has a lot of attributes in its favour and the collapse in demand in Hong Kong is unlikely to be its undoing.

    “However, with the retailer now re-focusing its efforts on retail (which accounts for 73 per cent of group revenue), it is crucial it continues to make pro-active improvements to the business. Examples of this – such as its reshaping of the fashion-show calendar, and imminent relaunch of its Burberry.com website, will help the brand to retain strong recognition, and ensure it holds its appeal even as the wider trading backdrop remains challenging,” said Hall.

  • Luxury prevails in Dubai’s retail space

    Luxury prevails in Dubai’s retail space

    Despite suggestions to the contrary, luxury retail spending is still rising in the UAE, albeit at a slower pace.

    Dubai, in particular, is leading the way. In a survey carried out before the World Retail Congress last month, Dubai Chamber said the retail sector in the emirate was expected to grow by 5 percent annually until 2017, by which point it was forecast to reach $55bn in value.

    The research, based on data from Euromonitor and an AT Kearney Research study, suggests luxury retail still offers multiple opportunities in the UAE.

    “There is growth of wealthy and ultra-rich consumers, the main potential customers of the luxury segment. All in all, consumption is going up and retailing in the UAE is a major sector, which is supportive of economic growth and offers a lot of business opportunities,” the analysis says.

    The research is supported by Savills, which ranked Dubai at number four in the world in its Global Retail Destination Index 2016, behind New York, London’s West End and Hong Kong.

    The report focused on Dubai Mall, and ranked it higher than London’s Regent Street, New York’s Fifth Avenue and the Champs-Elysees in Paris in terms of the overall quality of its retail facilities and amenities. Further enhancing Dubai Chamber’s findings, the Savills report says, “Dubai is forecast to report the strongest growth in retail sales over the next five years of the seven Global Cities examined, potentially challenging London’s West End’s current global position.”

    The growth is supported by a strong tourism sector, with 14.3 million overnight visitors to Dubai last year, according to the Mastercard Global Destination Cities Index 2015, which led to a total spend of $11.7bn, an average of $819 per visitor.

    “Dubai is now perceived as a top global retail destination,” says David Godchaux, CEO of Core Savills, the UAE associate of Savills. “But this is only the tip of the iceberg as we now start seeing developers trying to improve the shopping experience not only for tourists as in the past 15 years, but also for residents.

    “This trend of moving away from the ‘bigger is better’ approach, to more user and resident friendly retail developments, bringing a real city experience and European-style shopping to areas of Dubai similar to those found in London, Paris and Milan, is something that was much awaited by the market and that we see finally happening.”

    Dubai Chamber estimates the emirate’s retail market reached $35.4bn last year, and says it is expected to grow by 7.7 percent in 2016 and an average 8.1 percent annually between 2017 and 2020, when retailing sales turnover are expected to surpass $52bn.

     This predicted growth comes despite the backdrop of uncertainties surrounding economic conditions due to the drop in oil price, and the obvious currency effects of a strong dollar and a weak rouble affecting the number of high-spending visitors coming to the emirate.

    That effect was reflected in last year’s Luxury Goods Worldwide Market Monitor, compiled each year by Bain & Co, which said the luxury goods retail market in the Middle East had plateaued, driven by a reduction in tourism spending.

    However, the report’s author Cyrille Fabre, partner and head of Bain’s Retail and Consumer Products practices in the Middle East, said at the time the report was released: “Going forward, we expect the Middle East market to show new signs of life driven by mall openings, but the region’s growth will occur at a much slower level versus the last five years.

    “A sustainable high single-digit growth rate will become a new normal for the market with important implications of the required capabilities for success.”

    Knight Frank’s head of commercial and retail, Matthew Dadd agrees: “At the moment in the UAE, we’re not seeing much take-up of new luxury retail space.”

    The confidence in the luxury retail market, however, has been fairly evident at the city’s two key shopping malls, he says, with other cities keen to develop their luxury retail offerings as well, which have continuously lagged behind Dubai in the luxury segment.

    “Within the major malls there is the configuration-extension of the luxury segment offering, both within Mall of the Emirates and Dubai Mall,” he says. “Also, when you look regionally, there is the provision of quality, prime retail centres such as Mall of Qatar or the forthcoming Majid Al Futtaim centres in Riyadh regarding new luxury space for the market segments which have traditionally been under-served.”

    Looking to the year ahead, Dadd says the single-figure growth is quite likely, but confidence remained high. “It’s going to remain fairly stable in its current state, which has been more subdued than it has been in previous years,” he says.

    “We’ve still got a high GDP per capita for locals across the GCC. There is still a lot of personal wealth that can be spent in the luxury segment. You will see the mall developers looking to position themselves as the focal go-to destination of luxury spend and the access and the add-on amenities in terms of leisure that really make the mall appealing for the whole family will be paramount to obviously increasing the spend per head in these malls and retaining that spend within Dubai, UAE or the region rather than going internationally.”

    That confidence is also reflected in the ability of some malls to increase their rent.

    According to Knight Frank, Emaar Malls Group has 18.5 percent of the emirate’s 3 million square feet (sq ft) of retail gross leasable area. The publicly-listed company, 84 percent owned by Emaar Properties, said it raised rent prices for renewals by 25 percent in 2015. It is also planning to add 92,900 sq ft to its “trophy asset” Dubai Mall this year, further underlining its confidence in luxury retail.

    “The Dubai Mall, our trophy asset, is today the first choice for luxury retail for high net worth individuals [HNWIs] from a wider catchment area of the Middle East, Africa, South Asia and China, thus serving over 2.5 billion people,” chairman of Emaar Malls and Emaar Properties, Mohamed Alabbar said while announcing Emaar Malls’ annual figures for 2015. The division recorded a $451m net profit and rental income growth of 11 percent to $815m.

    However, Dadd says the rental increases have been limited to “the core markets”.

    “Across the markets, you’re not seeing exorbitant rent increases,” he says. “I think the market is being more realistic in terms of where spend is and it has got to be truly reflective of the overall performance of the mall before they can actually start putting in any increments.”

    The perennial issue for luxury retailers is exodus of HNWIs from the Gulf region to cities in Europe and the US, as they escape the desert summer.

    The Saudi government estimated that in 2014, tourists travelling outside the kingdom spent at least $20bn on shopping trips abroad every year.

    A report towards the end of last year, by the Travel & Tourism Intelligence Centre, said GCC outbound expenditure would reach $100bn by 2018, up from $65bn in 2013.

    Knight Frank’s recent wealth report emphasised the seasonal fluctuations of multi-millionaire ($10m-plus) populations around the world, showing a 571 percent difference in the number of multi-millionaires in Dubai between the winter and summer months (10,470 at peak, 1,560 at low).

    Maintaining brand loyalty has been an important facet when it comes to luxury retailers. Luxury brand public displays and activations are a weekly occurrence in Dubai’s malls. Dadd says it is important to enhance customer consumer experience in order to develop brand loyalty.

    “When you go into any shop, it doesn’t matter if it’s luxury or mainstream trade, your experience is paramount to your return visit,” Dadd says. “When you look at international brands that have local stores that experience has got to be the same level of standard and quality [as the home market] in terms of customer experience with the staff and the shop, the fit-out, the apparel or the merchandise that are being sold. So you’ve really got to ensure that is kept to a high standard when you’re talking about an international brand.”

    An extension of the brand loyalty is the need for luxury retail brands to implement an omni-channel experience into their customer engagement strategies, which means engaging in e-commerce.

    “If you’re looking at the base case scenarios of where online trends are at the moment, they’re obviously coming from a very low base,” Dadd says. “I think they are picking up and if you look at where the UAE is in terms of digital accessibility, it’s number three in the world after UK and US, so when you look at where the take-up is in terms of mobile access and access to retail platforms, that is growing very quickly.”

    While still in its infancy in the region, recent moves by high profile companies based in the Middle East have underlined the need to develop and grow an online presence.

    “You can look at where Marka VIP have launched their new online portal and obviously we see Mohamed Alabbar taking a stake in [European online luxury fashion site] Net-a-Porter to expand that across the Middle East. It’s showing how the market is developing, maturing and following the trends that we’re seeing in Europe, US and Asia.

    “But I still don’t think it will necessarily be of concern yet to any of the bricks-and-mortar of the retail industry, because it’s still very much an experience when you’re going to buy a luxury product.”

    A natural extension of that has been social media, in particular Instagram, which has become one of the most influential online tools for luxury brands.

    “Instagram is obviously a visual tool and when you’re looking at the luxury segment — IWC or Prada — these brands can very much sell a lifestyle through images which is a very quick and easy way of targeting large proportions of the population which has access to social media,” Dadd says.

    “The influence of Twitter can’t be underestimated in Saudi Arabia, which has the highest penetration of Twitter followers.”

    At the heart of brand loyalty — online or in the malls — is the customer.

    “Customer experience is paramount and it has to transcend everything — online or in-shop,” Dadd says. “The brand is core to any business, and in the luxury segment it is key. Brands have got to work a little bit hard to make sure they position themselves correctly throughout all platforms.”

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  • Is Growth For Luxury Brands in China Over?

    Is Growth For Luxury Brands in China Over?

    China and the Chinese played a primary role in the growth of the luxury sector in the past decade. But what was once a boon for luxury goods brands is now turning around.

    Chinese consumers account for the largest portion (31 percent) of global luxury spending, up from only 1 percent in 2000, according to a study by consulting firm Bain & Company. And in the past decade, thanks to China and Chinese shoppers abroad, the luxury goods market worldwide grew by 72 percent in size.

    luxury goods

    (Statista)

    “The relentless expansion of the domestic economy that fueled China’s voracious appetite for the finer things in life has slowed,” Exane BNP Paribas analyst Luca Solca.

    “This only compounds the chilling effect that the government’s anti-corruption campaign has had on demand for luxury fashion and fine jewelry.”

    Many luxury goods brands opened up store after store to tap the Chinese market. The experts are now debating whether they are too exposed to China.

    In his analysis, Solca looked at whether each brand is over- or underexposed to the Chinese market based on the number of stores they have. Accordingly, Versace is the most over-exposed brand with 22 percent of its stores based in China. Moncler, Tod’s, and Dolce&Gabbana are among the overexposed brands as well.

    The only large brands underexposed to China are Hermes, Tiffany, and Michael Kors. And these brands still have some retail expansion opportunity in China, according to Solca.

    (Source: Exane BNP Paribas analysis, RE-Analystics, Business of Fashion)

    (Exane BNP Paribas analysis, RE-Analytics, Business of Fashion)

    Sales of luxury products in the mainland have started to slow down after Chinese regime leader Xi Jinping launched his political anti-corruption campaign in 2013. Many of the Chinese officials and their numerous cronies and associates notorious for using luxury items for bribes stopped shopping for those items.

    A slowdown in the Chinese economy since mid-2015 was the second blow for luxury brands. Some brands have already started closing stores in China.

    “A corollary to the drop in domestic sales is a reduction of the store footprint by most brands, with a greater focus on fewer, larger, and better-located stores” Bain & Company stated in its report on China’s luxury market in 2015.

    Louis Vuitton, which is the most valuable luxury brand in the world, closed six stores and opened two new stores in China in 2015. And the company recently announced the closure of two additional stores located in Shanghai and Shanxi.

    Meanwhile, Gucci closed five stores in China, Burberry closed two stores, and Prada closed four stores in 2015, according to the Bain report. Due to collapsing demand in China, brands are expected to shut more stores across the country in coming months.

    Adding to the industry’s woes, publicly traded luxury goods companies announced weaker than expected results in April 2016, caused by slowing Chinese tourism in Europe. Burberry Group Plc, Prada SpA,Kering SA, and LVMH Moet Hennessy Louis Vuitton SE all reported disappointing results following terror attacks in Europe.

    According to Bruno Lannes, a Bain partner based in Shanghai, luxury brands should place greater emphasis on exclusive and fashionable collections, digital platform engagement and digital content, as well as pricing, in order to remain competitive in rough times.

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  • Hong Kong and Macau drag down Prada profits

    Hong Kong and Macau drag down Prada profits

    Difficult times on Asian markets, especially in Hong Kong and Macau with lower local demand and fewer tourists, have impacted Prada profits.

    “At the same time, social and political tensions worldwide further contributed to a general decrease in willingness to consume and in tourist flows,” the Milan-based group says in its annual results.

    The company plans to offset new shop openings with selective closures this year and next in an effort to shield profit margins from weaker demand, according to Business Insider.
    Prada profits fell by a larger-than-expected 28 per cent in the 12 months to January 31 – to 14 per cent of revenue, down from 20 per cent the previous year.

    After listing on the Hong Kong bourse in 2011, the group expanded its retail outlets in the territory. Now it has been hit by China’s economic slowdown as well as a crackdown on extravagant gift-giving. Similarly affected, luxury goods industry leader LVMH has just posted first-quarter sales below forecasts.

    CFO Alessandra Cozzani, who took over the role in February after the sudden resignation of Donatello Galli, says Prada will balance new openings with closures and work to keep operating expenses flat.

    “The retail network will remain the same for sure in 2016 and probably also 2017. We’re working on increasing the productivity of stores.”

    Prada’s directly operated stores (DOS) increased from 594 to 618 in the 12 months to January 31.

    Head of strategic marketing Stefano Cantino says the group will bet on eCommerce with the aim of doubling revenues over the next two years. It will start working with partners such as Yoox Net-A-Porter to sell its products on multi-brand e-shops.

    Digital and marketing initiatives will also be used to strengthen relationships with clients.
    Meanwhile, the Asia Pacific is still the group’s leading market, generating new sales of €1080 million (US$1.23 billion) during the year. However, net sales fell by 4.4 per cent at current exchange rates and by 16.1 per cent at constant exchange rates.

    In Japan, where there was a strong flow of tourists, the brand ended the year with net sales of €403.7 million, a 10.7 per cent increase.

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  • DFS launches new Spring Galleria campaign

    DFS launches new Spring Galleria campaign

    DFS Group has announced its new Spring 2016 campaign tie up with three international influencers and global travellers to support and celebrate the launch of its new travel #mustpack concept – aimed at equipping travellers with the essentials ‘for wherever your journey takes you’.

    The new campaign features Ethiopian philanthropist and model Liya Kebede, Chinese model Zhao Lei and Chinese actress Chen Ran and is designed to provide DFS’ customers with a photographic inside track on these celebrities’ #mustpack journey choices, using photos and stories from their personal travels.

    DFS says that the campaign will run between March, April and May, allowing its customer to interact with the campaign in-store, online and through its social media channels.

    T Galleria

    How the new T Galleria front window displays look in Hong Kong.

    Mustpack window close up

    A close up of the #mustpack store window display.

    Customers will also be able to connect with each influencer, as well as their travel destinations, plus the selected #mustpack products that will be available for sale at T Galleria by DFS stores

    Commenting on the campaign, John Gerhardt, Senior Vice President, Creative Branding Direction, DFS Group said: “This season we were particularly inspired by those #mustpack items you have to have with you throughout your journey.

    “We wanted to bring that story to life by showcasing Liya, Zhao and Chen’s love of travel through their own personal travel photos, as well their true travel #mustpacks.”

    ‘IMMERSIVE’ DIGITAL EXPERIENCE…

    The retailer says that the new campaign is being shown utilising three videos featuring Liya, Zhao and Chen, plus ‘an immersive digital experience’ at TGalleria.com where customers can discover the videos and travel guides as well as the season’s #mustpack products.

    DFS’ customers in Hong Kong will also be able to meet the influencers, with Zhao Lei set to host a shopping night at T Galleria by DFS, Hong Kong, Canton Road on March 17 and Chen Ren attending the T Galleria Beauty by DFS, Hong Kong at Causeway Bay on April 14.

    The campaign brands feature #mustpack products from 15 of DFS’ most popular brands, including Estée Lauder, Givenchy, Prada, Bulgari, Rémy Martin and others and DFS says this is ‘just a sample’ of the from the 700 brands across its ‘five pillars of luxury’.

    Adding her comments, Sibylle Scherer, DFS Group President Merchandising and Consumer Marketing said: “Our Spring 2016 campaign’s celebration of travel as well those essential items you have to bring with you along the way, truly brings to life everything our customers love about DFS.

    Big 2 T Galleria by DFS Spring 2016 Campaign Featuring Liya Kebede_verticalSTORES ‘PACKED’ WITH #MUSTPACK PRODUCTS

    “From fashion and beauty to watches and wines, our stores are packed with the #mustpack products that complete your journey and we’re thrilled that Liya, Zhao and Chen have joined with us to share that story this season.”

    DFS adds that its store windows now show “x-ray” views into the various suitcases displaying this season’s collection, while in-store customers encounter highlighted #mustpack products at multi-category display tables.

    These are designed to simulate the experience of unveiling products through an airport security x-ray machine.

    DFS concludes that this campaign will also run on social media, with T Galleria by DFS teaming up with various influencers in key DFS locations, such as Gaile Lok in Hong Kong, Halley Elefante in Hawaii and Andrea Chong in Singapore. They will also be giving away the season’s best #mustpack products for dedicated followers of @DFSOfficial.

     

     

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  • Prada Asia fortunes wane

    Prada Asia fortunes wane

    Prada Asia is the Italian luxury label’s achilles heel with the company reporting  a 16 per cent decrease in sales in the region in the year to January 31.

    “The economic situation of the Chinese market remains negative although there was some improvement in the final quarter,” Prada said in its earnings statement.

    “Consequently, in the 2015 financial year, the entire Asia Pacific area (excluding Japan) recorded a 4 per cent revenue decrease at current exchange rates and a 16 per cent decrease at constant exchange rates.”

    Japan proved a better market, for the label: for the fifth consecutive year, sales rose, this time by  11 per cent at current exchange rates, or 4 per cent at constant rates.

    Global sales changed little – for the second year in a row – largely due to the strengthening US dollar.  Total revenue was 3.552 billion euros (US$3.96 billion) in 2015. Sales in the US fell 9 per cent excluding currency fluctuations.

    “Throughout 2015, we had to deal with an economic environment characterised by extreme volatility in currency markets, as well as by the deteriorating geopolitical situation in many world regions,” commented said CEO Patrizio Bertelli, in a clear reference to the falling demand for luxury goods in China and the Paris terrorist attacks.

    “These two factors have made prices fluctuate wildly and diverted tourist traffic in sudden and unpredictable ways. Our retail network – now truly global thanks to investment in recent years – enables us to keep developing a direct relationship with our ever more demanding customer all over the world. In the coming months, the group will be focusing its energies on the development of new commercial and marketing initiatives to sustain organic growth, also by means of an extensive digital project to strengthen dialogue with our customers. These actions, taken against the background of rigorous and disciplined cost control, will enable us to consolidate our market position with satisfactory margins and returns on investment.”

    Prada is listed in Hong Kong.

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  • Prada finance chief Galli resigns

    Prada finance chief Galli resigns

    Italian luxury goods group Prada said on Friday its finance chief was resigning with immediate effect, two days after the company reported almost flat full-year sales, held back by weakness in Greater China.

    Prada said in a statement to the Hong Kong stock exchange that Donatello Galli was stepping down for personal reasons to pursue new career opportunities, adding there had been no disagreement with the board during his tenure.

    “There is no other matter relating to his resignation that needs to be brought to the attention of shareholders of the group,” the statement said.

    Galli, who was also a board member, had been chief financial officer since joining the company in 2004.

    Hong Kong-listed Prada said Alessandra Cozzani, head of investor relations and executive director of the company, had been appointed to replace Galli.

    A search is also under way for a new board member, the company added.

    Prada, best known for handbags that retail for as much as 6,000 euros ($6,667), has seen earnings slump in recent quarters, hurt in part by costly investments in new shops in the face of softening demand for luxury goods.

    On Wednesday, the Milanese fashion house said net revenue totalled 3.55 billion euros in the year to Jan. 31, little changed from a year earlier.

    “We haven’t spoken to the company yet, but a management change is hardly surprising. The company’s been under a lot of pressure of late and has come down heavily from peaks,” said an analyst, who spoke on condition of anonymity.

  • Prada also experiences issues in China

    Prada also experiences issues in China

    Italian Prada Group‘s 2015 turnover dropped ever so slightly, blaming it on the lousy economic state China is in. The country is an important market for plenty of luxury brands, although the expensive dollar also had a negative effect.

    Strong growth in home territory

    Prada’s 2015 turnover dropped slightly, from 3.55 billion euro to 3.54 billion euro, with drops in Asia and the United States. Asian turnover fell 4 %, mainly because of China’s negative results, while American turnover dropped 9 % as the Italian fashion company struggled with the expensive dollar.

    Prada believes the European turnover growth (6 %) was thanks to the many Asian and American tourists, with a significant boost in Italy. Japanese turnover did extremely well, with an 11 % increase, the exact same number as in the Middle East.

    “Price variations and diverted tourist traffic”

    “Throughout 2015, we had to deal with an economic environment characterized by extreme volatility in currency markets, as well as by the deteriorating geopolitical situation in many world regions. These two factors have made prices fluctuate widely and diverted tourist traffic in sudden and unpredictable ways”, Prada CEO Patrizio Bertelli said.

    Prada will increase its focus on its retail network expansion. It already has 618 stores and retail turnover grew 76 million euro to 3.1 billion euro, while wholesale activities dropped 88 million euro to 444 million euro.

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