In China, the Devil doesn't wear Prada

By Donny Kwok

HONG KONG (Reuters) - The Devil, it seems, wears anything but Prada in the eyes of Chinese bloggers determined to expose corrupt government officials flashing luxury labels way past their pay grades.

Prada is among a few premium brands reporting solid growth in the world's second largest luxury market even as a government campaign against conspicuous spending and gift-giving hurts firms with instantly recognisable brands like LVMH , Compagnie Financiere Richemont and Kering SA .

The logos on Prada's deluxe leather handbags, wallets and shoes are, by and large, low-key and these days, discretion is key in China.

This month, the government jailed a provincial official for 14 years for corruption after pictures of him wearing expensive watches - including what bloggers said 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.

Prada did not comment during its pre-results blackout period and both LVMH and Kering do not comment on their rivals' performance.

CRACKING CHINA

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 Kering-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, such 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. , which has benefitted from the rising demand for diamonds among couples, Burberry Group Plc and leather goods maker Coach .

Investors sensing the shift in China's luxury market have also helped propel Prada's shares 8 percent higher so far this year, beating a 2 percent gain for the benchmark index .

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.

"Prada is an Asia Super Ten stock." (Additional reporting by Vikram Subhedar and Alexandra Hoegberg in HONG KONG and Astrid Wendlandt in PARIS; Editing by Anne Marie Roantree and Miral Fahmy)

--

Did you know that you can get stories like this on the Yahoo mail app?
Download it here.

Latest News

  • Gaurav Chopra dons Virat Kohli's look for 'Gulmohar Grand'

    Mumbai, April 18 (IANS) Actor Gaurav Chopra, who mostly flaunts his grown out locks with aplomb, has gone in for a hairdo and look similar to that of Indian cricketer Virat Kohli for his upcoming TV show "Gulmohar Grand". Last seen in "Savdhaan India", the tall and handsome Gaurav will be playing the main lead of Aniruddh in "Gulmohar Grand". Star Plus's new offering "Gulmohar Grand", a finite series of 26 episodes, will give an insight into the world of a five-star hotel. …

  • Looks count more than talent in India, says Marzi Pestonji

    New Delhi, April 18 (IANS) Ace choreographer Shiamak Davar's former students like Shahid Kapoor and Sushant Singh Rajput are now among sought-after Bollywood actors. Asked if he would follow in their footsteps, Pestonji told IANS: "Do I look like an actor? In India, talent is not that great (a factor). Besides, you need to learn up so many words in one time and speak... not possible," added the former "Dance India Dance" judge. …

  • May make more films in sync sound: Mani Ratnam

    Chennai, April 18 (IANS) Ace filmmaker Mani Ratnam enjoyed making his latest Tamil outing "O Kadhal Kanmani" in sync sound so much that he plans to make more movies using the same technique. Sync sound refers to sound recorded at the time of filming a movie. The experience was so good that I'm thinking of making more films in sync sound," Mani Ratnam told IANS. "O Kadhal Kanmani", which features Dulquer Salmaan and Nitya Menen in the lead, was completely shot in sync sound, and Ratnam admits …

  • Happy with girl-next-door tag: Sri Divya

    Chennai, April 18 (IANS) Actress Sri Divya, who has mostly featured in simple, girl-next-door roles in her career in southern cinema so far, says she doesn't mind the tag as it suits her personality. Having made her cinematic debut in Telugu industry in 2010 film "Manasara", Divya went on to be a hit heroine in Tamil filmdom in the last few years. The only reason is that Tamil cinema gave me better roles," she said. In Tamil too, Divya says she hasn't accepted every role that has come her …

  • Few gains in LGBT roles in Hollywood films - report
    Few gains in LGBT roles in Hollywood films - report

    By Maria Caspani (Thomson Reuters Foundation) - More Hollywood movies in 2014 featured one or more lesbian, gay, bisexual and transgender (LGBT) characters than in the previous year, but those roles were mostly minor and stereotypical, said researchers. GLAAD, a U.S. organisation that researches and promotes LGBT issues in media, found that 17.5 percent of 114 films released last year by major studios included characters who identified as LGBT, compared to 16.7 percent in 2013. "Every year …

  • Shah Rukh Khan, Zayn Malik, Sanjeev Bhaskar honored at UK Asian Awards 2015

    London, April 18 (ANI): Bollywood superstar Shah Rukh Khan, Zayn Malik and Sanjeev Bhaskar were amongst the celebrities who were honored at the recently held Asian Awards 2015. While the former One Direction star, 22, who made his first public appearance since quitting the boy band, picked Outstanding Contribution to Music award, Khan was honored with Outstanding Contribution to Cinema, the Mirror reported. Held at the at London's Grosvenor House Hotel, the ceremony, which was hosted by …

  • Denver teacher's third grade assignment goes viral online

    By Keith Coffman DENVER (Reuters) - A Colorado teacher who posted notes from her third grade class online and started a social media whirlwind under the hashtag #IWishMyTeacherKnew said on Friday the assignment had been a revelation for her. Kyle Schwartz, 26, asked the eight- and nine-year-olds at her Denver inner city school to write down something they wished she knew about them, partly as a writing exercise, and partly as a way for her to learn about her pupils. Schwartz, a …

  • 'King and I' gets royal treatment in new Broadway revival

    By Patricia Reaney NEW YORK (Reuters) - A revival of the Rodgers and Hammerstein 1951 musical "The King and I" is getting the royal treatment on Broadway with a 29-piece orchestra and huge cast in a production critics say is breathtaking and beautiful. The show that opened on Thursday night at the Vivian Beaumont Theater tells the story of the Welsh widow, Anna Leonowens, who travels to Bangkok in the 1860s to become a teacher to the King of Siam's children. Yul Brynner and Deborah Kerr …

Loading...