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The sales of GUCCI Luxury Brand in China
If there is a slowdown in China’s economy, someone forgot to tell the folks at German watch-and-pen maker Montblanc. The luxury retailer launched its biggest store in the world in Beijing this month. Inside the store, customers can perch on a replica palace throne or browse a multimedia installation featuring the namesake of the company’s new Princess Grace of Monaco-themed jewelry collection. The Chinese capital has seen many grand openings in recent weeks, as designer brands race to get in on what is soon to be the world’s largest luxury market. Consulting company estimates China’s luxury good sales will grow 18 per cent annually to reach $27-billion – earning the title of world’s largest luxury-goods market – by 2015. Already, Gucci and Prada make one-third of their world sales in China. The result is over-the-top efforts to acquaint the Chinese wealthy with foreign luxury. French design house Lanvin recently staged an opulent runway show, second only to its Paris Fashion Week show; Giorgio Armani himself came to Beijing for his One Night Only runway show and after-party in the city’s art district. The festivities come against the backdrop of a softening of China’s retail sales growth. Retail sales overall saw their slowest rate of growth last month since February, 2011, at 13.8 per cent year-on-year. Sales of garments were up 19 per cent, down significantly from their 12-month high of 27.6 per cent in September, 2011; jewelry sales rose 18.2 per cent in May year-on-year, compared to a 12-month high of 44.4 per cent in August, 2011.  Slowing economic growth is part of the problem, as are shaky consumer confidence and the tendency of wealthy Chinese to buy abroad rather than paying the luxury taxes on the same, more expensive goods at home. A government-fuelled crackdown on corruption is also making its mark; according to research, as much as 16 per cent of luxury sales over all, and 37 per cent of accessories and jewelry sales, are thought to be for business-related gift-giving. The recent slowdown in high-end consumption may be partially due to the heightened scrutiny. The French group reported flat net profit from recurring operations of €924m in 2008, up 0.2 per cent on the previous year, with luxury brands, CFAO, its African automotive and pharmaceutical arm, and cost-cutting helping to mitigate the impact of the consumer slowdown. Revenue in the fourth quarter was flat at €5.68bn, depressed by retail chains FNAC and Conforama and its mail order division, and much slower growth in its luxury brands, which include Gucci, Yves Saint Laurent and Bottega Veneta. François-Henri Pinault said disposals and acquisitions were “off the agenda”. “We’re not going to change our brand strategy because of this crisis,” he added. He declined to give a market prediction for 2009, but said January had been “satisfactory”. Luxury goods sales grew by 8.1 per cent on a comparable basis in 2008. Gucci, the flagship brand, was weighed down by continuing problems with its watches division and by the sharp recession in Japan. Mr Pinault said that strong growth in Gucci’s sales in China and Hong Kong, where it now has 33 shops, were offsetting its “big difficulties” in Japan. Gucci revenues in China grew by 42 per cent in 2008, or at an annual rate of 28 per cent in the fourth quarter. PPR provided some added reassurance to the markets by cutting its net debt to from €6.1bn in 2007 to €5.5bn last year. In view of flagging sales in the last three months of 2008 and the prospect of a difficult 2009, it cut its dividend to €3.30, down by 4.3 per cent on 2007. Wealthy Chinese tourists are expected to spend a billion pounds on luxury goods during the sales, it emerged yesterday. The booming ‘Peking Pound’ has accounted for almost a third of post-Christmas purchases of high end goods such as Burberry, Mulberry, Louis Vuitton and Gucci. Many West End stores have appointed assistants who speak Mandarin to...
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