In a new report, analysts at Morgan Stanley took an in-depth look at luxury brands following the Walpole Far Eastern Growth seminar. Analysts currently see a challenging global environment for brands, marked by increasing competition and changing digital demands.
Mixed Bag In China
While the Chinese economy continues to be a major opportunity for many American brands, the recent economic slowdown in China has left many American companies re-thinking their China strategies.
According to the report, many of the wealthiest Chinese consumers make many of their high-end purchases abroad during travel excursions, rather than at home in China. Analysts note that the number of outbound tourists from China has been growing in recent years.
While recent China numbers show an increase in overall spending, trends indicate a reduction in average spend per transaction. Analysts believe this trend is an indication of an increasing mix of shoppers from lower-tier locations.
Millennial Initiatives
Analysts believe that the spending capacity of the millennial generation in China provides a major target for many brands. “In a more challenging environment, brands need to work harder- particularly on digital initiatives which we have previously discussed as being key to attracting the Millennial consumer,” they explain.
Stock Picks
Morgan Stanley’s top brand is Michael Kors Holdings Ltd KORS 0.14%. Analysts love the brand’s leading sales and earnings growth numbers among retailers. Morgan Stanley has an Outperform rating on Michael Kors stock and sees 68 percent upside to current levels.
Morgan Stanley also lists Nike Inc NKE 0.05% as a preferred brand and has an Outperform rating on the stock.
In addition, the report mentions Underweight-rated Coach Inc COH 0.79% as one of Morgan Stanley’s least preferred luxury brands.
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