Fashion leader Prada suffers from the performance of Waterloo luxury brand in China, "cold flow"
Zhang Yu Quartz
A few days ago, JP Morgan Chase announced that it lowered the target price of the Italian luxury goods group Prada in FY 2016/2017, from 27 Hong Kong dollars to 24.5 Hong Kong dollars, an increase of nearly 10%, while maintaining the stock's neutral rating. In recent years, with the decline in performance, Prada has been repeatedly lowered the target price by JP Morgan Chase.
"China Business News" learned in an interview with reporters that in recent years, the performance of luxury brands has fallen into a difficult situation, not the Prada family.
The half-year performance of LVMH, the world's largest luxury goods group, is also sluggish. According to its latest release of the first half of the financial report, as of June 30, 2016, the group's revenue and profit both continued to slow down, revenue rose 3% to 17.2 billion euros, operating profit was basically the same as last year, remained at 29.6. The level of 100 million euros. The income and profit of the Group's fashion leather goods division both fell by 1% and 2% respectively.
At the same time, according to RET Ruiyide China Commercial Real Estate Research Center, in 2015, 11 luxury brands such as LV and Gucci closed 34 stores, and only 14 new stores were opened.
According to Coach's latest fourth-quarter and full-year results, the Coach brand's operating income was $621 million, roughly the same as last year, and the operating margin was 15.0%. Based on non-GAAP basis, the company's operating income was US$728 million, a decrease of 7%, and the operating profit margin was 17.6%.
Regarding the reason for the decline in operating income, the reporter of China Business News called to write to Chichi Trading (Shanghai) Co., Ltd. The company responded that this was caused by the Coach brand's FY16 gross profit margin being affected by foreign exchange fluctuations by about 100 basis points. . After receiving the interview letter, Prada Trading (Shanghai) Co., Ltd. public relations department excused the interview for various reasons.
Performance continues to decline
In an interview, the reporter learned that the decline in product quality, the gradual disappearance of freshness and the change in consumption patterns brought about by the development of the Internet are the reasons why the development of luxury goods represented by Prada continues to decline.
According to the 2015 financial report released by Prada, the 12-month operating income as of the end of January 2016 (FY2015) totaled 3.548 billion euros, down 0.1% from the previous year (by 7.7% at constant exchange rates). The group's net profit was 330 million euros, a sharp drop of 26.6% compared to the net profit of 457 million euros in fiscal 2014.
Prada explained in the earnings report about the decline in net profit, the company performed well in Europe, America, Japan and the Middle East in FY2015, but suffered weakness in the Asia-Pacific market, which accounted for one-third of total revenue.
Due to the local consumption of Hong Kong and Macao and the decrease in the number of tourists, the impact of Prada's direct sales in Asia on the market in 2015 was 1.08 billion euros, down 4.4% year-on-year, at constant exchange rates. , down 16.1%, which dragged Prada's overall performance. Among them, Greater China achieved a total sales of 705 million euros, a drop of 8.3% at current exchange rates and a 22% decrease at constant exchange rates.
According to the data, the number of Prada self-operated stores in 2015 increased from 594 last year to 618.
With the expansion of the sales network, its operating costs have increased from 1.85 billion euros in 2014 to 2.06 billion euros. The number of employees increased from 11,962 in 2014 to 12,414, and the ratio of operating costs to total sales increased from 52.1% to 58.2%, but the expansion of the sales network did not lead to strong sales growth.
In this regard, CIC Kelly Consulting Executive Director Zhu Yue said that this is mainly related to the slowdown of the global economic growth and the instability of the economic environment. These factors have affected consumers' shopping desires to a certain extent, and thus the luxury goods industry. Bringing bigger challenges.
Zhang Peiying, an honorary consultant for the Luxury (China) Alliance, believes that the decline in product quality, the gradual disappearance of freshness and the change in consumption patterns brought about by the development of the Internet are the reasons why the development of luxury goods represented by Prada continues to decline.
Bu Anzhen, founder of the Da Ren Think Tank, pointed out that there are several factors that hinder the development of the industry in terms of the current development of luxury goods: one is to think of ways to build products (especially single products); the other is to adopt global discriminatory pricing ( Especially for the rouge pricing in developing countries such as China); the third is to adhere to expert design and classic fashion (rather than based on user interaction). He mentioned that Prada exists in these problems and it is corrected very slowly.
In the earnings report, Prada said that it has taken a series of measures to cope with the profit pressure caused by the weak retail growth and the decline in wholesale business.
For example, Prada will make some adjustments to the price based on exchange rate changes and its own brand positioning, in addition to cutting operating costs. Today, Prada claims to place brand maintenance and relationship maintenance with increasingly complex consumer groups in the forefront.
Under the pressure of continued decline in performance, Prada has refurbished the store in Shanghai's Hang Lung Plaza and the flagship store opened in Guangdong Road, Hong Kong and launched a high-profile show.
"Customized change" is not optimistic
On July 18th, Prada launched a high-profile project on its WeChat public platform. On July 25th, LVMH Group announced the sale of Donna Karan International Inc to US apparel manufacturing and distributor G-III Apparel Group Ltd. (NASDAQ: GIII) for US$650 million.
A few days ago, the "China Business News" reporter learned in a field interview with a franchise store in Prada, Jing'an District. The tailor-made product types include suits, coats, jackets, shirts, trousers and shoes. According to Prada's official information, there are currently 50 stores around the world offering more than 300 suit and jacket fabrics, 30 coat fabrics and about 230 shirt fabrics for guests to choose from. In the store's VIP room, guests can choose a tailored model to make further personalized choices. Taking a tailor-made shirt as an example, the reporter found in the exchange with the clerk that the custom shirt can be selected from 3 different versions, 10 neckline styles, 8 cuff styles and 4 embroidered colors. Additional custom details, including shirt embroidered or pockets, can be added to meet the needs of the guests.
According to official Prada news, the price of tailor-made clothing varies according to factors such as fabric cutting: the price of the suit is between 30,000 and 5,000 yuan; the price of the shirt is between 5,000 and 7,000, and the price of the jacket is between 30,000 and 30,000. - between 400,000 yuan. It is reported that since all products need to be made in Italy, the shirt takes about 4 weeks to cut, and the suit and jacket take about 5 weeks to cut. Similarly, women's clothing can also be customized, but only in the beginning of the spring, summer / autumn and winter seasons. As for the leather goods, the customer can also choose the material of the leather goods after adding the style, or add some details.
Zhu Yue said that customized service is one of the exploration directions of major luxury brands in seeking growth strategy, but it is not a top priority. The development of luxury brands in China should gradually reduce the spread to attract those who are too big. The price difference is the top priority for consumers who choose other purchase channels.
Coach was exposed to the "word of mouth" crisis caused by environmental issues
By combing relevant information, the reporter found that the biggest luxury brands in China are not only Prada and LVMH. Luxury jewelry giant Burberry has continued to slump this year. The data shows that in 2016, Burberry's full-year profit continued to decline. In fiscal 2016, Burberry's total operating income was 2.515 billion pounds lower than the 2.523 billion pounds in fiscal 2015. In 2016, the gross profit of 1.763 billion pounds was lower than the 2015 gross profit of 1.766 billion pounds. Adjusted profit for FY2016 was 421 million pounds, down from 456 million last year. The group also announced that its 2017 profit will be at its lowest level. Dior's second-half financial report showed that its revenue was 893 million euros, down 2% year-on-year. The profit was 74 million euros, down 30.2% year-on-year. In addition, luxury brands such as Chanel are also accelerating the integration of the upstream industry chain. European top luxury jewelry companies, including Hermès and Kaiyun Group, are accelerating their layout and seeking new ways of development.
The company, which previously announced that it will continue to expand its stores in China, was also exposed to the “word of mouth†crisis caused by environmental issues. According to a recent report in the "Legal Daily", the Environmental Protection Organization's Public Environmental Research Center and other investigations found that there are environmental violations in suppliers suspected of being in China. In response, Coach responded that Changshu Meidiyang Leather Co., Ltd. ("Changshu Meidiyang Leather") is not currently a COACH supplier. “The company was once a supplier of COACH, but the partnership has been terminated in 2011.â€
The person in charge of the relevant department of the Coach Group also said: "The first time we received an IPE inquiry on this matter is August 11th of this year (August 12th, Beijing time). The email inquiry was received and processed by the relevant team of COACH New York. IPE has released a report on August 13, Beijing time. As we need reasonable time to conduct a comprehensive internal investigation and communication on relevant inquiries, plus August 13-14 as a weekend, we plan to reply this week. â€
For the future transformation and development, the heads of the above-mentioned Coach Group said that each industry has its own challenges. Coach believes that the success of a brand lies in the differentiation of brands and products, timely insight into market changes, and providing resonance and emotional connection with consumption. Products and services.
Bu Anzhen pointed out that due to the overlapping of multiple factors in the Chinese market, the luxury market including clothing has changed: First, the impact of anti-corruption, anti-corruption factors have a large impact, but not fundamental; second, the outbound travel of Chinese people Sexual growth, the discriminatory pricing of luxury goods leads to a large outflow of purchasing power; the third is the change of fashion concept, many classic brands do not introduce new consumption culture in time, resulting in neither retaining middle-aged customers nor attracting new generations of users.
In Zhu Yue's view, the luxury goods industry has a history of hundreds of years, inheriting the fine craftsmanship and rich artistic and cultural values, and will not be killed because of the short-term downturn. In order to stand out from the competition, it is necessary to develop a development strategy that conforms to the market trend and has its own brand value. “Not only customized services, new design and new products, but also aspects such as improving consumer experience, differentiated operations across regions, optimizing distribution networks, strengthening new media marketing, and disseminating brand core values.â€
Zhang Peiying said that the combination of stylistic entertainment is a direction that can be considered for the transformation of luxury goods.
On August 9th, the newly renovated Prada self-operated store on Nanjing West Road in Jing'an District of Shanghai was extremely luxurious.
Zhang Yu Quartz
A few days ago, JP Morgan Chase announced that it lowered the target price of the Italian luxury goods group Prada in FY 2016/2017, from 27 Hong Kong dollars to 24.5 Hong Kong dollars, an increase of nearly 10%, while maintaining the stock's neutral rating. In recent years, with the decline in performance, Prada has been repeatedly lowered the target price by JP Morgan Chase.
"China Business News" learned in an interview with reporters that in recent years, the performance of luxury brands has fallen into a difficult situation, not the Prada family.
The half-year performance of LVMH, the world's largest luxury goods group, is also sluggish. According to its latest release of the first half of the financial report, as of June 30, 2016, the group's revenue and profit both continued to slow down, revenue rose 3% to 17.2 billion euros, operating profit was basically the same as last year, remained at 29.6. The level of 100 million euros. The income and profit of the Group's fashion leather goods division both fell by 1% and 2% respectively.
At the same time, according to RET Ruiyide China Commercial Real Estate Research Center, in 2015, 11 luxury brands such as LV and Gucci closed 34 stores, and only 14 new stores were opened.
According to Coach's latest fourth-quarter and full-year results, the Coach brand's operating income was $621 million, roughly the same as last year, and the operating margin was 15.0%. Based on non-GAAP basis, the company's operating income was US$728 million, a decrease of 7%, and the operating profit margin was 17.6%.
Regarding the reason for the decline in operating income, the reporter of China Business News called to write to Chichi Trading (Shanghai) Co., Ltd. The company responded that this was caused by the Coach brand's FY16 gross profit margin being affected by foreign exchange fluctuations by about 100 basis points. . After receiving the interview letter, Prada Trading (Shanghai) Co., Ltd. public relations department excused the interview for various reasons.
Performance continues to decline
In an interview, the reporter learned that the decline in product quality, the gradual disappearance of freshness and the change in consumption patterns brought about by the development of the Internet are the reasons why the development of luxury goods represented by Prada continues to decline.
According to the 2015 financial report released by Prada, the 12-month operating income as of the end of January 2016 (FY2015) totaled 3.548 billion euros, down 0.1% from the previous year (by 7.7% at constant exchange rates). The group's net profit was 330 million euros, a sharp drop of 26.6% compared to the net profit of 457 million euros in fiscal 2014.
Prada explained in the earnings report about the decline in net profit, the company performed well in Europe, America, Japan and the Middle East in FY2015, but suffered weakness in the Asia-Pacific market, which accounted for one-third of total revenue.
Due to the local consumption of Hong Kong and Macao and the decrease in the number of tourists, the impact of Prada's direct sales in Asia on the market in 2015 was 1.08 billion euros, down 4.4% year-on-year, at constant exchange rates. , down 16.1%, which dragged Prada's overall performance. Among them, Greater China achieved a total sales of 705 million euros, a drop of 8.3% at current exchange rates and a 22% decrease at constant exchange rates.
According to the data, the number of Prada self-operated stores in 2015 increased from 594 last year to 618.
With the expansion of the sales network, its operating costs have increased from 1.85 billion euros in 2014 to 2.06 billion euros. The number of employees increased from 11,962 in 2014 to 12,414, and the ratio of operating costs to total sales increased from 52.1% to 58.2%, but the expansion of the sales network did not lead to strong sales growth.
In this regard, CIC Kelly Consulting Executive Director Zhu Yue said that this is mainly related to the slowdown of the global economic growth and the instability of the economic environment. These factors have affected consumers' shopping desires to a certain extent, and thus the luxury goods industry. Bringing bigger challenges.
Zhang Peiying, an honorary consultant for the Luxury (China) Alliance, believes that the decline in product quality, the gradual disappearance of freshness and the change in consumption patterns brought about by the development of the Internet are the reasons why the development of luxury goods represented by Prada continues to decline.
Bu Anzhen, founder of the Da Ren Think Tank, pointed out that there are several factors that hinder the development of the industry in terms of the current development of luxury goods: one is to think of ways to build products (especially single products); the other is to adopt global discriminatory pricing ( Especially for the rouge pricing in developing countries such as China); the third is to adhere to expert design and classic fashion (rather than based on user interaction). He mentioned that Prada exists in these problems and it is corrected very slowly.
In the earnings report, Prada said that it has taken a series of measures to cope with the profit pressure caused by the weak retail growth and the decline in wholesale business.
For example, Prada will make some adjustments to the price based on exchange rate changes and its own brand positioning, in addition to cutting operating costs. Today, Prada claims to place brand maintenance and relationship maintenance with increasingly complex consumer groups in the forefront.
Under the pressure of continued decline in performance, Prada has refurbished the store in Shanghai's Hang Lung Plaza and the flagship store opened in Guangdong Road, Hong Kong and launched a high-profile show.
"Customized change" is not optimistic
On July 18th, Prada launched a high-profile project on its WeChat public platform. On July 25th, LVMH Group announced the sale of Donna Karan International Inc to US apparel manufacturing and distributor G-III Apparel Group Ltd. (NASDAQ: GIII) for US$650 million.
A few days ago, the "China Business News" reporter learned in a field interview with a franchise store in Prada, Jing'an District. The tailor-made product types include suits, coats, jackets, shirts, trousers and shoes. According to Prada's official information, there are currently 50 stores around the world offering more than 300 suit and jacket fabrics, 30 coat fabrics and about 230 shirt fabrics for guests to choose from. In the store's VIP room, guests can choose a tailored model to make further personalized choices. Taking a tailor-made shirt as an example, the reporter found in the exchange with the clerk that the custom shirt can be selected from 3 different versions, 10 neckline styles, 8 cuff styles and 4 embroidered colors. Additional custom details, including shirt embroidered or pockets, can be added to meet the needs of the guests.
According to official Prada news, the price of tailor-made clothing varies according to factors such as fabric cutting: the price of the suit is between 30,000 and 5,000 yuan; the price of the shirt is between 5,000 and 7,000, and the price of the jacket is between 30,000 and 30,000. - between 400,000 yuan. It is reported that since all products need to be made in Italy, the shirt takes about 4 weeks to cut, and the suit and jacket take about 5 weeks to cut. Similarly, women's clothing can also be customized, but only in the beginning of the spring, summer / autumn and winter seasons. As for the leather goods, the customer can also choose the material of the leather goods after adding the style, or add some details.
Zhu Yue said that customized service is one of the exploration directions of major luxury brands in seeking growth strategy, but it is not a top priority. The development of luxury brands in China should gradually reduce the spread to attract those who are too big. The price difference is the top priority for consumers who choose other purchase channels.
Coach was exposed to the "word of mouth" crisis caused by environmental issues
By combing relevant information, the reporter found that the biggest luxury brands in China are not only Prada and LVMH. Luxury jewelry giant Burberry has continued to slump this year. The data shows that in 2016, Burberry's full-year profit continued to decline. In fiscal 2016, Burberry's total operating income was 2.515 billion pounds lower than the 2.523 billion pounds in fiscal 2015. In 2016, the gross profit of 1.763 billion pounds was lower than the 2015 gross profit of 1.766 billion pounds. Adjusted profit for FY2016 was 421 million pounds, down from 456 million last year. The group also announced that its 2017 profit will be at its lowest level. Dior's second-half financial report showed that its revenue was 893 million euros, down 2% year-on-year. The profit was 74 million euros, down 30.2% year-on-year. In addition, luxury brands such as Chanel are also accelerating the integration of the upstream industry chain. European top luxury jewelry companies, including Hermès and Kaiyun Group, are accelerating their layout and seeking new ways of development.
The company, which previously announced that it will continue to expand its stores in China, was also exposed to the “word of mouth†crisis caused by environmental issues. According to a recent report in the "Legal Daily", the Environmental Protection Organization's Public Environmental Research Center and other investigations found that there are environmental violations in suppliers suspected of being in China. In response, Coach responded that Changshu Meidiyang Leather Co., Ltd. ("Changshu Meidiyang Leather") is not currently a COACH supplier. “The company was once a supplier of COACH, but the partnership has been terminated in 2011.â€
The person in charge of the relevant department of the Coach Group also said: "The first time we received an IPE inquiry on this matter is August 11th of this year (August 12th, Beijing time). The email inquiry was received and processed by the relevant team of COACH New York. IPE has released a report on August 13, Beijing time. As we need reasonable time to conduct a comprehensive internal investigation and communication on relevant inquiries, plus August 13-14 as a weekend, we plan to reply this week. â€
For the future transformation and development, the heads of the above-mentioned Coach Group said that each industry has its own challenges. Coach believes that the success of a brand lies in the differentiation of brands and products, timely insight into market changes, and providing resonance and emotional connection with consumption. Products and services.
Bu Anzhen pointed out that due to the overlapping of multiple factors in the Chinese market, the luxury market including clothing has changed: First, the impact of anti-corruption, anti-corruption factors have a large impact, but not fundamental; second, the outbound travel of Chinese people Sexual growth, the discriminatory pricing of luxury goods leads to a large outflow of purchasing power; the third is the change of fashion concept, many classic brands do not introduce new consumption culture in time, resulting in neither retaining middle-aged customers nor attracting new generations of users.
In Zhu Yue's view, the luxury goods industry has a history of hundreds of years, inheriting the fine craftsmanship and rich artistic and cultural values, and will not be killed because of the short-term downturn. In order to stand out from the competition, it is necessary to develop a development strategy that conforms to the market trend and has its own brand value. “Not only customized services, new design and new products, but also aspects such as improving consumer experience, differentiated operations across regions, optimizing distribution networks, strengthening new media marketing, and disseminating brand core values.â€
Zhang Peiying said that the combination of stylistic entertainment is a direction that can be considered for the transformation of luxury goods.
On August 9th, the newly renovated Prada self-operated store on Nanjing West Road in Jing'an District of Shanghai was extremely luxurious.
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