Sales of luxury brands soar across Asia

Well-heeled folks across the world swear by it. Even the Devil wears Prada. But what’s with Hong Kong’s investors?

On Friday, the Italian luxury retailer listed for the first time, after five failed attempts to get on the ramp.
Miuccia Prada, the political science PhD and former communist who runs the business since 1978, believed that it would be better to list in Hong Kong rather than in Europe. A Hong Kong listing, she said, would better reflect the shift of economic power from West to East.

But investors don’t seem to be putting their money on Ms Prada’s convictions. Prada listed at the bottom of its price band, raising $2.14 billion, short of the $3 billion it was supposed to raise. Worse, only half of the 10% block of shares reserved for retail investors got sold.

Are Asians more tight-fisted than others? Looking at how they splurge, that argument is hard to sustain. Sales of luxury brands, from cars to clothes, are soaring across Asia.

In China, luxury carmaker Maserati sold 400 cars last year. During the same time, in India sales of expensive cars — BMWs, Mercs and Audis — shot up 70%. Clearly, Asians are no slouches when it comes to spending.

Do we suffer from a strange kind of bipolar disorder? The kind that says, when you shop for shoes, buy Prada, when you shop for stocks buy Venky’s hatchery? A closer look at some evidence will bust this myth as well.

In late March, a company called Lovable Lingerie listed on the Indian exchanges. In the two and a half months since then, Lovable is up 80%. Clearly, people love Lovable stocks as much as they like its panties.

It’s the same story for Page Industries, which makes Jockey chaddis for India. In one year, and remember it’s not been a great year for stocks, its shares are up 88%. Nothing bipolar about this.

Nah, Prada stumbled because it was too expensive, at 28 times earnings, compared to say, rival Ferragamo, which trades in Italy around 20. In the luxury market, it’s easy to forget that ultimately, price matters.