The Recovery Trend Of Luxury Industry Prada Shares 4 Years Later "Iron Tree Blossom"

In March this year, on the streets of Hongkong, I saw a shop which was stuck with animated wallpaper. It was originally thought to be an animation theme store or a toy store. When it approached, it was discovered that it was a world-famous luxury brand Prada (01913) store.

What is even more amazing is that Prada's share price finally rose after 4 years of dormancy. It has risen by 4 in the past two months.

So, how should we treat luxuries nowadays? industry And how do we view Prada?

The recovery trend of luxury industry is established.

In fact, from the "shopping paradise" - Hongkong, recent retail sales data have been able to smell the revival of luxury goods.

According to statistics released by Hongkong Statistical Bureau, retail sales in Hongkong rose by 14.3% in the first quarter of 2018, with sales of jewellery, watches and clocks and precious gifts increased by 21.7%.

In addition, according to Bain consultancy statistics, the global luxury market in 2017 was close to 1 trillion and 160 billion euros, up 5% over the same period last year. Prada's personal luxury sector, which experienced a three increase in growth and decline, ushered in a 6% rebound in 2017.

The stock index of luxuriant luxury industry shows that the index began to rebound after hitting the low of 91.2 points in June 2016. In December 2017, the index of gorgeous ambition reached 139.2 points, a record high, reflecting the two level market's optimistic view of luxury consumption.

Prada's 2017 business data also reflect the revival of the luxury sector.

In 2017, Prada's revenue and net profit dropped to varying degrees. However, in the second half of 2017, there was a recovery trend and the decline in all markets was narrowed.

The second largest market in the company is particularly evident in the Asia Pacific region. The sales volume in the Asia Pacific market is roughly the same as that in 2016. It was -1.2% at the exchange rate at that time and +0.8% at a fixed exchange rate. The net sales of Greater China amounted to 6.46 billion euros, up 4.6% at the time exchange rate and 7.7% by fixed exchange rate.

In the full recovery of the market, Prada opened 2 Direct stores in 2017, and the number of stores increased from 623 in December 31, 2016 to 625 in December 31, 2017.

China's demand for luxury goods in the Asia Pacific Region

Prada's sales rebound in the Asia Pacific region is attributable to the demand of luxury goods from mainland China.

Research shows that from 2012 to 2015, the average annual compound growth rate of Chinese luxury consumption is +13%, while the average annual growth rate of non Chinese luxury goods consumption is -3%. After a short adjustment from 2015 to 2016, the growth rate of luxury consumption in China rebounded sharply to 11% from 2016 to 2017, far exceeding the overall market growth rate.

From the perspective of market share, Chinese luxury consumption accounts for an increasing share of global consumption, rising from 1% in 2000 years to 32% in 2017, an increase of 2 percentage points compared to 2016, and has become the largest consumer source country.

To cater to the needs of the Chinese market, Prada also pays more attention to its own business in the mainland of China. By the end of 2017, Prada group announced that its brand e-commerce service was officially settled in China. Chinese consumers can choose the Prada selection series through the Chinese official website of Prada, Prada online and offline synchronization, consumers select products online, and support WeChat and Alipay online.

Prada group CEO has said that by the end of 2018, online sales revenue will account for 5% of total sales, and that Prada Asia Pacific sales growth can maintain a leading position.

Lowering tariffs and younger consumer groups to boost demand for luxury goods

In the eyes of APP, there are two new decisive factors behind Prada's active expansion of the mainland market. One is that China has sharply lowered import tariffs on consumer goods, and the other is that luxury consumers are becoming younger.

It is understood that from the 2015 year of the year, the Chinese government has repeatedly introduced policies to reduce import tariffs on all kinds of commodities. In November 2017, the Ministry of Finance issued the Circular of the Customs Tariff Commission of the State Council on adjusting the import tariff of some consumer products. Since December 1st of 2017, the import tariff of some consumer products has been reduced by provisional tax rate, which involves clothing, Shoe shoe There are altogether 187 categories including textiles, bags and so on. The average tax rate dropped from 17.3% to 7.7%. Among them, there are 38 clothing related categories, including clothing accessories, home textiles, shoes, bags and other products. The average tax rate is reduced from 20.4% to 8.7%, and the rate of tax reduction is greater than that of all categories.

A sharp drop in tariffs on consumer goods can prompt a sharp drop in the spread of luxury goods at home and abroad, thereby promoting the return of luxury consumption abroad and promoting China's consumption. market Luxury consumption growth. This will enhance the profitability of luxury enterprises like Prada with a real tax rate of nearly 30%.

On the other hand, the consumption group of Chinese luxury goods has been turning younger. The data of the World Luxury Association show that the average age of Chinese luxury consumers has dropped from 35 to 25 years old, and the younger trend of luxury consumer groups will continue in the future.

According to the Euromonitor data, the millennial generation (born in 1985 -1995) and the Z generation have 34% of the social wealth in 2015, which will increase to 50% by 2025. The consumption habits of the millennial generation and the Z generation will have a greater impact on the consumption of luxury goods.

Perhaps this is the trend. Prada has been attracting young designers in recent years to promote product innovation. New product lines, such as Etiquette, cahier, Paradigm and Ribbon, all have a good reputation.

Prada's recent comic style series of products has combined the "two dimension" with modern art and captured numerous "girl hearts".

On the whole, luxury. industry On the whole, the demand for luxury goods in the Asia Pacific region, led by the Chinese mainland, remains relatively strong. Prada is expected to seize the historical opportunity of reducing consumer goods tariffs and consumer groups' younger age and restarting their journey. Investors may wish to pay close attention to the adjustment of Prada stock.