China is the new Japan. According to a Goldman Sachs report, “Analysis of Chinese Demand Potential,” strong consumer interest from, and increased international travel by, the Chinese could raise the average fair value for some luxury stocks by 15 percent. While some brands have made inroads in China, opening stores in Beijing and Shanghai, Goldman Sachs believes the market’s impact is still underestimated. Already the third-largest customer base for some of the biggest labels, the Chinese account for about 12 percent of global sales for several companies on this list. With growing disposable income and a young population, the Chinese could develop an appetite for luxury products as insatiable as the Japanese’s. Of the companies it researches, Goldman Sachs said these seven stand to gain the most from increased Chinese spending.

  1. TOD’S SPA
    2005 Revised earnings growth estimate, based on potential Chinese demand: 28.4 percent

    2005 Sales growth estimate, based on potential Chinese demand: 8.6 percent
    Tod’s came late to the Chinese party, arriving in 2003 with a store in Shanghai and last month opening its second store in Beijing, part of an aggressive expansion campaign that will bring 20 more stores to the country within the next five years. As Chinese travel to European destinations increases, as it is expected to, consumers will become more familiar with French and Italian brands, and the logos of companies such as Tod’s will be increasingly sought after. The company’s price points and varied product line also bode well for expansion in China, which prompted Goldman Sachs to raise its previous 2005 estimates of 25.1 percent growth in earnings and 7.4 percent growth in sales.

    2005 Earnings growth: 24.9 percent

    2005 Sales growth: 10.1 percent
    At DFS Galleria Sun Plaza in Hong Kong, the Chinese account for 41 percent of Dunhill’s sales and 28 percent of sales of writing instruments, leathergoods and watch brand Montblanc. But others of the group’s watch brands — which include Cartier, Vacheron Constantin, Jaeger-LeCoultre and IWC — are too pricy, in the view of Goldman Sachs, to attract a significant number of Chinese customers. The investment bank’s previous 2005 estimates called for 18.8 percent growth in earnings and an 8.6 percent rise in sales.

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