Good forecast for luxury goods in Asia

Thursday, 22 July 2010

The FashionUnited Top 100 Indix closed the last session in 960.19 points, 3.05 points below its closure of the previous day.

One of the most significant facts of this week is how Hermés International gained 0.84% after the French maker of luxury handbags and silk scarves raised its 2010 revenue forecast after second-quarter sales increased faster than analysts estimated on demand in Asia. Thus, full-year revenue might escalate as much as 12%, excluding currency swings, as Paris-based Hermes said two days ago in an official record.  This percentage contrasts to the Hermes International in March forecast revenue would gain at least 5 percent.

This increase responds to the accelerating demand for luxury goods as Chinese shoppers buy more high-end clothing and accessories, and U.S. and European retailers replenish inventories after the recession. Hermes sales gained 23 percent in the first half and the company said operating profit rose at a faster pace, helped by growth in high-margin products such as textiles, leather wear and watches.

With such a positive impulse, the luxury good niche resembles the French Maison´s good news as it can be seen in the last session upturn for LVMH, Bulgary or Burberry Group.

Regarding the Middle East, another hot spot for the largest fashion houses, a recent government decision in Jordan to subject imports to a new tax system will lead to an increase in prices and worsen the already slow market. This decision may be copied in the neighboring countries, leading to a general escalating in prices.

Further to the East, Australia is emerging as a popular target for international expansion, with the Spanish clothing giant, Inditex, on the top of a bunch of apparel companies looking to enter this market. Apparently, Gap plans to open an Australian branch in 2011, while
Forever 21 of the US has also stated its intentions to enter the Aussie consumer market. British label Topshop is testing the Australian target through a distribution arrangement with Sydney fashion boutique Incu, which has seen the Australian retailer dedicate a whole floor to Topshop's premium-end collection since October 2009. In the meantime, main domestic players such as Witchery and Country Road, are reviewing their strategies to defend their current privileged positions.

According to market experts, retailers are attracted to the Australian market due to its similarities to the US and the UK, in terms of consumer tastes and the absence of language barriers, and because of the still virgin soil to be exploited.

In reference to the last session, main surprise came from the German label Triumph, which has amazingly gained 90% in just one day, after daily losing an average of 11 points for more than five consecutive days.  Also French Connection raised its value in 1.25 points, as well as Bjorn Borg, which improved its position in 1.98%. Another company noticing good news was JD Sports Fashion, which gained 5.5 points after two bad days.

However, every session brings less good figures for some firms, being Puma Ag with a drop of 3.17% and Burberry Group with a cut of 1.5 points  the ones showing the weaker performances.

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