Post date: Apr 05, 2013 3:21:51 PM
A tight fit for Prada as it misses full-year estimates even as profits rise 45%. Global uncertainty and crackdowns in China on conspicuous consumption seen to be taking their toll on a previously recession-defying sector. Richard Hunter atHargreaves Lansdown says the long-term still looks positive for luxury goods stocks.
LONDON, ENGLAND, UK (REUTERS) (APRIL 5, 2013) - HARGREAVES LANSDOWN HEAD OF EQUITIES,RICHARD HUNTER, SAYING:
"(QUESTION: Prada's stock is up 11% year-to-date, 69% year-on-year. Maybe it's a bit toppy now, but why would you not want to buy it?) Well I tend to agree. I mean the longer term kind of trajectory is still very much in place not only in China of course but also in the likes of India where you've got the emergence for the first ever time of the middle class and a middle class that's prepared to spend increasingly as we've seen with the likes of a number of German cars, for example. Clearly the margins might be slightly thinner than they might be in Western markets. Nonetheless the sheer volume of people out there should more than compensate for that. And I guess the other overarching thing which has changed over the last day or so is if Japan succeeds in stimulating its own economy in much the way it seems to be intending to want to do, then you can probably add some Japanese consumers to the list as well. So I think the long term story still very much intact.
(QUESTION: Alright, so you're not put off by, and let's face it- there's so many reports out there about- I'm looking at some now. Luxury spending hit by a drop here in Europe in tourist demand, the Chinese and the Japanese aren't coming in, they're not picking up these items. You're not put off by the possible hit that they'll take as a result of that?)
I think there's a distinction to be made between the uber wealthy and the more aspirational buyer. The uber wealthy aren't going to be affected to any great degree by recessions or depressions. And those are the kinds of people who will continue to buy these real high end bargains. Now in terms of the aspirational purchaser, yes, there may be something of a slowdown and we saw something similar over the last year or so. Burberry, for example, UK FTSE 100 company, had been benefiting greatly from Japanese tourists in Europe. And that's fallen slightly off a cliff over the last year or so. So there is an impact in the middle but I'd be wary of saying that at the very top end there's been much of a change at all and that demand remains robust."