the Devil doesn’t wear Prada
This month, the government jailed a provincial official for 14 years for corruption after pictures of him wearing expensive watches including what bloggers s tommy hilfiger uk aid was a Vacheron Constantin became a hit on the Internet, earning him the nickname “Brother Watch”.Richemont owns several leading luxury watch companies including Vacheron Constantin, Cartier and Piaget, and earlier this month said demand in China had weakened.”Some companies, like Richemont, had a lot of exposure to sectors that have taken a big hit in China this year, especially luxury watches,” said James Roy, senior analyst at China Market Research Group in Shanghai.”Many luxury clients here are moving away from more loud or bling focused luxury brands like Gucci or Louis Vuitton, towards things that are a bit more subtle and sophisticated without the flashy logo,” he added.LVMH’s Louis Vuitton and Kering owned Gucci, which won over legions of fans with their visibly branded products, have recently moved away from the logo look and are now offering more upmarket leather handbags.Prada is expected on Tuesday to report a 12 percent rise in profit for the six months ended July, largely due to an almost 12 percent growth in sales in the world’s second largest economy.Analysts polled by Reuters expect a 321.3 million euros profit.The shift away from in your face luxury brands is most prominent in big cities such as Shanghai and Beijing, where many companies have their biggest stores and where customer tastes are rapidly evolving.Logos, however, are still very popular in China’s vast interior, where luxury labels are still a novelty, analysts say.”Prada really offers an alternative to Louis Vuitton and Gucci from a customer’s choice perspective. They are a third choice, an understated choice for people who stay away from logos,” said Franklin Yao, CEO of Shanghai based consultancy SmithStreetSolutions.Another plus factor for Prada is its pricing many handbags and wallets are less expensive than the equally discreet offerings by K tommy hilfiger uk ering owned Bottega Veneta, whose woven leather goods are also gaining popularity in China.”What I am looking for is bags with great quality, low profile, which means the logo should be smaller,” said Chloe Chen, a 23 year old college graduate in Shanghai.”As for brands, I don’t like those known by the majority, suc tommy hilfiger uk h as Burberry, Gucci, LV. Personally speaking, LV or Gucci are a little out of fashion.”Other luxury brands that are doing well in China include jeweller Tiffany Co.Prada, at 22.6 times forward earnings, is more expensive than Burberry and LVMH but earnings growth expectations are higher: on average, analysts expect Prada’s earnings to grow a fifth next year, or about 50 percent quicker than LVMH or Burberry.”From a valuation perspective, we maintain that although the PE does not look appealing, Prada remains the most interesting stock in the luxury sector from a ‘price to growth’ point of view,” HSBC wrote in a research note last month. Thomson Reuters journalists are subject to tommy hilfiger uk an Editorial Handbook which requires fair presentation and disclosure of relevant interests.