Chinese Women Prefer Gucci and Chanel Handbags

This would be the headline of a curious survey conducted by RBC Capital Markets.

Leeson. 28/12/2016

The importance comes because we should not forget that China has been the main motor of growth of the luxury sector worldwide in recent years, so leading the preferences of Chinese buyers can be a preview of a very promising future in the industry. China currently accounts for 30% of the world’s luxury market (including both purchases within China and acquisitions made by its citizens when traveling abroad)

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According to this survey, 50% of Chinese luxury goods buyers prefer Gucci handbags, closely followed by Chanel, a brand mentioned by 49% of respondents. Behind the two brands comes Prada in third place, Louis Vuitton in fourth and Hermès in fifth place.

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Gucci. Click to buy

For these experts, this shows that Gucci remains as the industry favorite. Respondents said that the brand is exclusive and an icon of luxury, emphasizing that their designs are the ones that best fit their tastes. In the same survey, it is also the most desired brand in footwear, with a preference of 70%, followed by Prada and Louis Vuitton. Gucci continues to benefit from its exclusive image, which makes it one of the most recognizable brands worldwide.

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Chanel. Click to buy

With the results of this survey, RBC Capital Group has decided to raise its target price of Kering, the parent company of Gucci, from €200 to €205 per share. The firm’s experts say that Gucci is the cornerstone of Kering’s improvement, which has experienced a clear trend change this year with double-digit revenue growth. In the third quarter, Kering’s revenue increased by 10% to €3.2 billion, an increase driven by Gucci, whose sales grew 18% over the same period

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Chanel bag. Click to buy

Kering is currently trading at over €210 per share, the highest level in its history, having rose 35% so far this year. At current prices, its market value is almost €27 billion, with a P/E of 39 times. From the fundamental point of view, its market value is fair, since although its forecasts are better than the average of the industry this fact is already collected in its valuation. In fact, its average target price for the 32 firms following the stock is €213, in line with its market value. Even so, the industry’s average recommendation is Overweight, as they estimate that it will continue to behave better than the industry.

Disclosure: The Luxonomist is not responsible for the views expressed in the article. The text has been written freely expressing their own ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.

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