Luxury Brands Are Constantly Experiencing Chinese Nightmare.

Following the opening of Gucci in the end of October, the sale of the third quarter of the Gucci was over expected to decline by 1.6%. Last week, Prada announced its earnings in the first nine months of this year. The report shows that the performance of the group in the three quarter has deteriorated sharply, not only has the sales significantly shrunk, but also the profits have been greatly reduced. Due to the market environment in Europe and the Asia Pacific region, the Prada brand's three quarter revenue fell 7.5% to 651 million 800 thousand euros, which in turn led to a total decline of 5.6% in total revenue from 1.3% in the first half of the year. profit Evaporation 44%. Although the Miu Miu and shoe brand Churchs belonging to the same group both achieve more than 4% sales growth, the contribution of the two brands is obviously a drop in the bucket in the face of the negative impact of Prada, which accounts for more than 80% of the group's revenue.

From a regional perspective, the Greater China region is the "worst hit area" of the Prada group's performance: after the impact of the exchange rate was removed, the sales fell by 12%. The group said the performance of the Greater China region in October showed a further deterioration, which seemed to indicate that Prada had little chance of reversing the decline in a short period of time. In addition, the performance of the Americas and European markets also fell. The Prada market in Italy was the second largest in the mainland, and only 10.8% in the Greater China region. Only Japan and the Middle East achieved a small increase.

Look around the luxury industry. Struggle Although the group achieved 5% performance growth in the third quarter, this achievement was mainly due to the sales of perfume, watches and jewellery, while its high value-added leather and garment business had not improved; the Salvatore Ferragamo three quarter profits fell 4.6%; Ralph Lauren had an early warning of operating profits throughout the year; the sales of the Lauren group decreased by 26.2% in the first 9 months of the year, and the profit margins were horrible. The Tods brand was shrunk 3.9%, and the sales of 1.8% decreased by 1.8%. Luxury giants on the margins of profit are not just Prada and Gucci: Burberry has fallen 12.4% in the first half of this year, LVMH

At the same time, the market was unanimously optimistic in recent years. Light luxury brand It seems that this year has not been a very good day, whether it is in the US $300-700 of low-priced luxury brands. market On top of the European brand's $700-1200 middle and high end market, there is nothing but sadness: Coach's revenue in the first fiscal year of 2015 dropped by 45.3%; Michael Kors's share price went down all the way, and the same quarter sales growth in the second quarter was much lower than that of the market and brand expectations; Kate Spade's third quarter growth was halved this year; the first three quarters of Mulberry fell 17%, and the net loss was 1 million 110 thousand pounds. The lightweight luxury brand that has been placed in high hopes has also been in a state of decline this year after a brief triumph. This makes people wonder, "what's wrong with the luxury market?"

Looking carefully at the earnings reports of the major luxury brands, it is easy to see that sales in the Greater China region have been repeatedly mentioned and become the culprit behind the "shocking" performance figures of the global luxury industry. For example, the sales of Tods group in China have gone back 6%, while the Richemont peak group has successfully blocked its decline in China this year, but it has not yet achieved profitability. The sales of LVMH group and Salvatore Ferragamo in China can only be maintained at the low level of 3%-5%. Among them, China's economic slowdown, intensified government anti-corruption efforts, disturbances in Hongkong's turbulent society, and unstable factors in China's surrounding areas have become the "Star" words in this year's luxury brand earnings report. All major brands have uniformly pushed bad performance to the irresistible factors of "China's market environment". British commentator Adam Thomson has repeatedly stressed the power of Hongkong's "occupy the central" movement and the mainland's anti-corruption trend in its article "perfect storm approaching the luxury industry".

There is no doubt that the spanformation of China's economic mode and consumption environment has brought serious challenges to the global performance of international luxury brands, especially since China successfully surpassed the United States and Europe with 29% of the world's luxury consumption share. "Uncertain China" market is a fatal blow to any international luxury brand.

However, the depression of the environment is not the whole story. Although China's luxury consumption environment is going straight down, the market still shines with some bright "bright colors". Herm s's three quarter results were warmer and overall sales increased by 11%. Although brand sales in China are also affected by external factors, there is a certain degree of tightening, but 10.2% profit growth still leads the industry. In this regard, Herm s Axel Dumas, chief executive, said: "at present, the form of China's luxury market will be more and more beneficial to Herm s, because Chinese consumers are gradually stepping out of the stage of showing off luxury goods and begin to pay attention to the connotation of luxury goods." Luca Solca, director of luxury research at Bank Securities Department, Paris, also holds the same view. He thinks that luxury brands such as Louis Vuitton, Gucci and Prada have not caught the taste of the more mature Chinese consumers in time, and have not worked hard to shape or improve the brand value.

This leads to a phenomenon: when the economy is booming, consumers are willing to spend more money to try different luxury brands, so there is a contention of flowers in the market. But when the economic environment changes, consumers' "monetary tightening", the demand for gifts diminish, and luxury consumption turns to personal consumption, luxury goods with more brand value are often more secure. So the lack of value accumulation of light luxury brand has become the victim of the first batch of "killed in battle". For many of the top luxury goods, it is not lack of brand value. Today, "losing the Chinese Empire" is mainly lost in the lack of enough time to change. At present, the sales and profits of Louis Vuitton, Gucci and Prada in China basically depend on the low price products which lack investment value. The high priced products are still in an awkward situation with high complexity. It is still necessary to cultivate their "mass base" in the Chinese market by "time and fire". Moreover, China's luxury market can be highly selective nowadays. Louis Vuitton and Gucci's "go Logo" campaign has not been effective, and it is easy to catch up with the rising stars such as Bottega Veneta. Bottega Veneta continued to maintain the two digit growth momentum in the third quarter of this year, further consolidating its position as the top second of Kai Yun group.

In addition, after ten years of rapid growth in China, some brands have been saturated in the Chinese market and produced an aesthetic fatigue. This is also one of the reasons why consumers turn to the top luxury brands. Luca Solca, director of the luxury Research Department of the bank and Securities Department of Paris, once said that Gucci should learn about Saint Laurent Pairs's innovation. At present, Saint Laurent Pairs is the fastest profit brand of Kai Yun group. This achievement is due to the fresh or even controversial changes brought to the brand after the entry of Hedi Slimane. As of the end of September, Saint Laurent Pairs's three quarter revenue grew by 27.6% to 177 million 800 thousand euros.

A few months ago, the head of HSBC consumer and retail research, irwan Langbo, unveiled his new book, the shining Dynasty: why the era of Chinese luxury consumers has just begun. In the book, he said that the core consumers of luxury goods in China used to be male traders, who spend most of their money on gifts rather than on their own. Now the anti-corruption trend in mainland China has made individual consumers gradually become the mainstream of luxury consumption. This will make China's luxury market healthier and will make Chinese consumers more and more like American consumers. From the perspective of luxury brands, the current "labor pains" will also help brands spanform from the extensive mode of grabbing to the more attention to the connotation and innovation of the development pattern. After all, with the current development of luxury market in China, the number of luxury goods in China will reach about 150 million by 2025, which will surpass the total population of Japan. The luxury market in China will be more subdivided, and any powerful luxury brand will find its corresponding position.

Prada group has 170 direct outlets in the Asia Pacific market. During the reporting period, 16 new stores were opened and 3 stores closed. Prada chief executive Patrizio Bertelli said: "2014 is a more challenging year than expected. On the basis of this difficult international business environment, Luxury goods The market will remain in a period of adjustment. It is not clear when to resume. "

"We expect Prada to have at least three quarters of weak top line trend, profit margin decline and negative EPS (earnings per share) growth, so we recommend that investors take advantage of recent stock price as a selling opportunity," said Karim Salamatian, an analyst at Credit Suisse. Prada's share price has plummeted nearly 1/3 this year.