Asia: Luxury Brands Thrive Thanks to Asian Demand

The stock price of European luxury brand makers like Burberry, Hermes and Louis Vuitton keeps soaring despite the depressed economies of their home nations thanks to a steep rise in sales in Asia. Amid a 5.44-% drop in the French stock market this year, Hermes rose by over 68 %. And though the British stock market rose by just 1.7 % this year, Burberry soared 55 %.

A lot of luxury firms including Chanel, Prada, Armani and Ferragamo are not listed, but there are rumors that Prada will be listed any minute at this time as in general sales increased considerably thanks to bumper sales of handbags and shoes in Asia. In the late 1990s, Prada’s attempt to expand by acquiring Jil Sander and Helmut Lang failed, and it had to resell them. Unable to foresee world financial crisis in 2008, Prada invested massively in new shops around the world, making a huge dent in its financial structure. From presently on despite amount this, outsiders appraise it as still in rude health. Although the company posted 100 million euro net profit in the prime half of this year, estimates put its total market price at around 4 to 5 billion euro.

The pressure is on for the luxury brands to fasten funds for massive investment through initial public offerings to meet explosive request from Asia, even if that takes away some of the exclusive cachet of their goods.

The importance of the Asian market in their sales is growing each year. According to Bloomberg, Hermes' sales in Asia accounted for 17 % of its total sales until 2007. The figure steadily increased to 18.2 % in 2008, jumping to 22.1 % last year. The French luxury maker's sales in Asia grew 31.9 % on-year last year, compared to 11 % in the United States and 1.8 % in Europe.