Prada Rides Luxury Boom While Mass Retailers Struggle as Chinese Demand Flags

(Bloomberg) -- Prada SpA should confirm the resilience of demand for luxury brands in Asia when it reports earnings, shrugging off lukewarm consumer sentiment in China.

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Japan has been among the world’s strongest luxury markets as a weaker yen attracted tourists looking for bargains and domestic demand remained solid. Strong earnings at LVMH Moët Hennessy Louis Vuitton SE, Richemont and Hermes International SCA were all underpinned by growth in Japan. Luxury sales across Asia also held up, defying the sector-wide cyclical downturn as Chinese shoppers hold back and growth slows in other key markets.

While affluent Asians ramped up spending, the broader population tightened purse strings, particularly in China. Online retailer JD.com Inc. may post its slowest annual revenue growth since at least 2015, Bloomberg’s estimates showed. Advertising revenue growth at Chinese online video platform Bilibili Inc. should also decelerate this year due to macroeconomic headwinds, said Alex Poon, an analyst at Morgan Stanley.

JD.com responded to Alibaba Group Holding Ltd.’s price cuts in cloud computing services with its own sharp reductions, an aggressive round of competition that will erode profits at China’s leading technology companies.

Highlights to look out for:

Wednesday: JD.com’s (JD US) slowing growth comes as economic headwinds in China, its biggest market, dent consumer sentiment. The company has said it’s considering making a bid for UK electronics retailer Currys Plc. A deal could bring some synergies as JD.com is also a major player in consumer electronics retail, analysts including HSBC’s Charlene Liu said.

• SJM Holdings’ (880 HK) fourth-quarter revenue is estimated to surge more than fourfold. The casino operator will likely see annual Ebitda turn positive for the first time in four years as its Grand Lisboa Palace property in Macau attracts more traffic. Its gross gaming revenue for the quarter should outpace Macau’s casino industry on a sequential basis with Grand Lisboa Palace continuing to ramp up operations, said Bloomberg Intelligence analyst Angela Hanlee.

Thursday: Prada’s (1913 HK) annual earnings jumped, consensus shows, driven by growth in the Asia-Pacific region, particularly Japan, while Americas revenue probably slid. The main Prada brand remained steady, while Miu Miu likely grew the fastest. Analysts at Morningstar expect the company’s growth over the next decade to be driven by its brand strength, while rising global incomes buoy the luxury industry. Prada was ranked top of the Lyst Index of luxury’s hottest brands for the fourth quarter and was in the top four for the year, according to BI.

• MTR’s (66 HK) transport operations revenue probably rose last year as railway services stabilize, though analysts at Jefferies said higher costs for hiring and utilities slowed segment recovery. The gloomy economic outlook in Hong Kong and China may weaken demand for its home projects and see more price cuts. Persistent rise in operating costs may also weigh on margin recovery, BI noted.

• PLDT’s (TEL PM) full-year earnings were probably supported by the resilient fiber business and a stabilizing mobile market, BI said. The company’s efforts to lower operating costs which include manpower cuts may keep Ebitda margin at about 50%, it added.

• Bilibili’s (BILI US) fourth-quarter loss is expected to have halved as the company expands its user base and boosts revenue. BI analysts Robert Lea and Jasmine Lyu expect Bilibili to maintain its position as the go-to platform for advertisers looking to reach China’s Gen Z, while Morgan Stanley expects slower growth in the year ahead due to macroeconomic headwinds. The company is expected to turn profitable in the last quarter of 2024.

(Updates throughout.)

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