Hongkong's Luxury Market Plunged And Prada Shares Fell To Bottom Again.

In the last quarter of 2018, luxury goods, especially the luxury market in Hongkong, plunged the stock price of the Prada SpA (1913.HK) Prada group, which was listed on the Hongkong stock exchange.

Italy group's share price has fallen four times, and it has been harvested for ten consecutive trading days.

On Tuesday, Zhou Dafu's Jewellery Group Limited (1929.HK) announced its 10-12 month performance on 14, and Prada group's share price went down in early trading, plunging 5.69% at a time, hitting a new low of more than two years in September 2016.

Subsequently, the Hang Seng index opened higher and higher, and the closing decline narrowed to 0.44% at HK $22.75, which is far ahead of the 2.02% rise in Hang Seng Index.

On Tuesday, the Hang Seng index jumped 531.96 points.

Last Thursday, Sa Sa International Holdings Ltd. (0178.HK) Sasa International Holdings Limited, a high-end cosmetics chain retailer in Hongkong, announced an unexpected fall in the same quarter sales data in the third quarter. UBS AG (UBSN.VX) released a report that lowered the target price of Prada group from HK $31 to HK $26.6.

UBS said that in view of the possible slowdown of the Italy group in the four quarter and 2019, Prada group lowered its EPS in 2018-2020 years and reduced its revenue forecast by 2-3%. It also believed that the Italy group needed greater investment and better competition among its peers. Therefore, the profit margin of Prada group EBIT was reduced from 21% to 20%, and the gross profit margin of Prada group in 2018 will be reduced by 100 basis points to 72.8% in 2018.

However, the bank pointed out that Italian company's share price had been withdrawn 26% from November last year, thus maintaining the "neutral" rating raised at that time.

The luxury goods industry has started to turn downward since the three quarter of 2018. Although LVMH Mo t Hennessy Louis Vuitton SE (MC.PA) Lu Wei Ming Xuan group and Kering SA (KER.PA) Kai Yun group all claimed that they did not see the impact of trade friction, even though the growth slowed down, they still maintained double-digit growth, so it could not be called a real recession.

However, No Agency, a fashion research and consulting investment organization, has been singing the luxury goods industry since the second half of last year. It believes that the industry is experiencing tremendous internal changes, and that the brand premium, loyalty and purchasing power are being overdrawn. The macro economy shows that the global economy is slowing down. Although trade friction is not a decisive factor, it will weaken consumer confidence. Therefore, it is believed that the luxury industry will not be able to outperform the consumer brand industry in the next few years.

At the end of November 2018, No Agency released the 2019 luxury products industry outlook report, the luxury market under the new pattern. The report said that in the next ten years, the luxury industry will fall into a long-term recession with a compound growth rate of less than 1%. A large number of brands will be in a long-term struggle, and only a few large brands will maintain a compound growth rate of low to median digits.

Prada group has been in a recession for the past four years, the worst performing among the traditional luxury goods.

Last Thursday, Macy 's Inc. (NYSE:M) Messi Department lowered its annual earnings forecast, hitting battered retail stocks, especially high-end and luxury positioning retail stocks.

No Agency released the report again, cutting the market luxury and high-end retail stock rating almost to "neutral" and below rating, and said that the biggest recession in the history of luxury goods industry has begun.

The agency quoted Messi season and Sasa International (0178.HK) holiday season as saying that the bad news of the high-end retail industry followed by a tight wind, and the bad news was much worse than expected and deteriorated more rapidly.

In the 60 years after World War II, the Western Europe, the United States, Japan and China have been unable to keep track of the luxury goods industry. The India market, which is highly regarded by the agency, is unable to undertake the enthusiasm and economic foundation of Chinese consumers for luxury goods. "Although Apple Corp, including almost every industry in the world, will increase the biggest stake in India, it will not see any improvement in the short term," Tang Xiaotang said.

In the January 10th report, No Agency maintained Prada's "sell" rating and lowered its target price from HK $26.5 to HK $18.6. The Italy group will usher in a bigger recession cycle.

Analyst Tang Xiaotang believes that the Italian company failed to record positive performance in a rare strong rebound in the luxury industry in 2017, indicating that the group's core brand Prada has lost contact with its core consumers. Despite a series of marketing activities invested heavily, the positive performance of the Italy 1H group in 2018 mainly benefited from the peak of global economic growth in 2017 and the rebound of the industry as a whole, and the return on marketing investment was less than the industry kinetic energy. It was believed that 2H was unable to continue its momentum. The annual revenue was recorded in fifth consecutive fiscal years, while earnings were expected to record low single digit growth. However, the fourth quarter was not seriously deteriorated, resulting in the fifth consecutive fiscal year profit decline.

The latest survey by research firm CSG and advertising agency Ruder Finn shows that the luxury consumption of Chinese luxury goods is still optimistic.

During the 11 months of November 30th, two companies surveyed 1385 high-end shoppers who bought luxury goods for more than $35 thousand last year. The proportion of mainland consumers claiming to increase their luxury spending this year increased from 42% to 46% a year ago, compared with 32% in Hongkong.

However, according to No Agency's survey of 1500 people in China's first tier cities with annual household income above 800 thousand or net assets above 8 million, the desire for luxury purchases continued to be low in the four quarter of 2018. After reaching 82% in the fourth quarter of 2017, the past four quarters were 75%, 39%, 32% and 29% respectively.

The survey shows that the high net worth population will increase spending on education and tourism, and the low price of housing and stock market is the main reason for reducing or stopping the consumption of luxury goods.

According to statistics, in the first half of 2018, Prada Group recorded a profit growth of 10.7%, net profit increased from 95 million 428 thousand euros or earnings per share 0.037 euros to 105 million 700 thousand euros or earnings per share of 0.041 euros; during the reporting period, the income was 1 billion 535 million 300 thousand euros, an increase of 3.3% over the 1 billion 486 million euro in 2017, of which sales income 1 billion 510 million 600 thousand euro, an increase of 3.4% over the same period.

However, the above performance still runs significantly to the main players. In 1-6 months, Gucci Gucci brand recorded a 36% increase in sales, a 44.1% increase over the base. The sales of fashion and leather goods department of the world's largest luxury group group recorded a 15% increase in the first half of the year; the Herm s International SCA (HRMS.PA) Hermes international group increased its fixed exchange rate by 11.2% in the first half of fiscal year.

During the reporting period, the advertising cost of Prada group was 94 million 379 thousand euros, an increase of 6.3% over the 88 million 810 thousand euros in 2017, with a rate of 6.1% and an annual increase of 10 basis points.

However, as advertising spending is more prolific in the Chinese market, No Agency estimates that in the first half of the year, the Italy group's advertising expenditure increased by more than the sales growth.

In the same period, the Italy group's R & D cost was 64 million 572 thousand euros, down 2.2% from the same period last year, and the rate fell by 20 basis points to 4.2%.

The Greater China market is still the main driving force of the Italy group. In the 1-6 month, the market sales increased by 9.2%, the fixed exchange rate increased by 17.2%, and stimulated the overall Asia Pacific market revenue to grow by 6.6% and 13.8% of the fixed exchange rate growth.

As of the end of June, the Italy group has increased 4 stores by a total of 5 stores, excluding Japan. The Asia Pacific market has increased by 5 to 189. The group has operated 629 DOS stores at the end of the first half of this year.

As of Tuesday, Prada SpA (1913.HK) Prada group has lost 11.82% of its share price in the past half year so far, and has lost far more than 3.81% of the same period, which is also inferior to the increase of -5-2% in the same way, such as Lu Wei Ming, Kai Yun group, Hermes group and Burberry Group PLC (BRBY.L) Boboli group.