SLOW AND STEADY: Demand for luxury goods will continue to grow at a “moderate” pace in the second half, with trade in China and Hong Kong under pressure and tourists from emerging luxury markets clamping down on spending, according to a report issued Thursday by Exane BNP Paribas.

 

The report, prepared by Luca Solca, Paola Bertini and Hui Fan for institutional investors, was based on conversations with more than 35 industry leaders in New York, London, Milan and Paris as the spring-summer 2015 shows unfold.

 

The bank said revenue growth would likely remain in the mid-to-low single digits, although currency headwinds will abate as the year progresses, “flattering” earnings before interest and taxes (EBIT) margins.

 

It cited the travel-retail company Global Blue’s projections of a 2 percent fall in revenue growth this year. While Chinese tourists are still splashing the cash — and represent 29 percent of the global spend abroad — consumption by the Russian, American, Indonesian and Thai travelers is down.

 

Spend in Mainland China and Hong Kong “seems more subdued,” due to underlying social and political tensions in Hong Kong; an ongoing anti-gifting campaign by the Chinese government, and escalating retail rental and staff costs on the mainland.

 

As far as emerging luxury markets go, it’s only the Middle Eastern tourists — from Kuwait, Saudi Arabia, Qatar and United Arab Emirates — who are increasing their spend.

 

The Exane report also said that Burberry is “escalating the digital race,” via retail partnerships with high-traffic retailers such as Amazon and Tmall, and that competitors are eyeing Kering’s recent move to take back control of its eyewear business.

 

“Execution risk is not zero, and start-up costs will weigh heavy on Kering’s profit and loss in the short-term,” the report said. “If successful, Kering’s move could open new scenarios, potentially challenging the licensor/licensee model established in the past 30 years.”

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