Image : starkwhite
Luxury brands may be putting all their oeufs into the red and gold China basket and it may well be a robust basket at the moment, but if one reed breaks it may be difficult to stem the flow.
There have been positives with the luxury houses focusing their attention on the burgeoning Chinese market, but in the quest for balance we wish to highlight there were several stock market drops late last week and particularly for a couple of key brands Brit brands, yes you know them..the big ones Burberry and Mulberry. These brands have a lot riding on the overall expansion of their businesses to be in the Asian market, read: Chinese market in particular and a glitch like this may put a tad of a reality check back into the seemingly unending growth of this coveted market.
Financial website thisismoney.co.uk reports that luxury fashion firm Burberry and leather goods maker Mulberry, which to date have managed to escape the downturn unscathed, are beginning to feel the pain after China’s manufacturing sector contracted for a third consecutive month.
Yes, it’s an exciting market that is growing at a pace that you just want to get on this high speed train before you miss it. Yet as the royal ‘they’ say if it seems too good, it probably is, go forth with caution we say and make sure there are scenario plans in place for a more moderate not stratospheric growth plan, or otherwise there is a lot of pressure on China to continually perform. Spread the risk.
The Telegraph in the UK agrees with us in the sense that the Chinese two-speed country economy is all on its own. Whilst the Chinese consumers are perhaps seeing Louis Vuitton and Gucci symbols in their eyes, they may be slightly distracted forgetting that the Chinese property bubble may be about to burst and a troubled Hang Seng Index.
“In my experience there is no such thing as a soft landing for an economy,”Mr Walker told The Telegraph. “Chinese growth will slow significantly to between 0 and 3 per cent next year.”
Whilst most western economies have been dented or crumbling, it is not likely that they will be the knight in shining armour and help bail any countries out.
“Everyone thinks China will rescue the West, but it does not have the capacity,” Robin Parbrook, head of Asia equities for firm Schroders said. “The banking system is flawed – there is bad debt tied up in local government projects which won’t be allowed to default – they will simply be repackaged on.”
It could be a case of too much too soon for the Chinese luxury market. It was a familiar sight of the property market in Dubai.. Everyone started building there believing there was money to be made, but in the last year or so, the building has stopped due to property developers unable to complete their projects due to money woes.
Could it be the same for China or do the luxury companies need to move some eggs out of their brimming Chinese basket and spread it around?
With the stock market proving to be still somewhat inconsistent, Tiffany & Co., Coach and Ralph Lauren shares all tumbled last week, showing that noone is safe from any financial glitches.
Reuters reports that Tiffany & Co. and Coach shares fell as much as 11 per cent in regular trade, while Ralph Lauren dropped 7 per cent.
“The risk is a China blow up, not the Euro debt crisis,” Morningstar analyst Paul Swinand told Reuters. “People were assuming luxury is a safe haven and are now rotating out.”
China is closing in on Japan as the world’s second largest market for luxury goods, after the United States. Greater China’s luxury market grew 23 per cent last year.
Tiffany’s sales in Asia outside Japan rose 45 per cent in its most recent quarter, fueled by Chinese consumers who covet high end, Western brands. Coach now gets about 5 per cent of sales in China and expects that to reach 10 per cent in a few years.
French luxury companies LVMH and Hermes, which also rely on China, closed down 5.2 per cent and 6.2 per cent respectively.
So what do you think are we too conservative or over confident?
Subscribe GOLDEN CHOICE News
Via moluxury
Luxury News / Golden Choice by Lux Creative International
