“China’s Fosun Joins Rush To Invest In Italy By Buying Caruso Stake” (Financial Times)
The past year has seen a number of high profile acquisitions of Italian companies by foreign groups, such as Loro Piana and Pomellato. Continuing a recent streak of M&A activity in the Italian luxury sector, menswear heritage brand Caruso has sold a 35 percent stake to Fosun Group, a privately-held Chinese company that owns stakes in Greek jewellery brand Folli Follie Group and American knitwear label St John Knits. This marks its first entry into the high-end menswear space. Caruso generated a combined 64.4 million Euros in 2012. With Italy's difficult domestic climate for debt financing, an influx of foreign capital and strong global demand for luxury lifestyle brands, we are likely to see more transactions in the near future.
“Richemont Sales Growth Misses Estimates on China Sales” (Bloomberg)
Compagnie Financière Richemont SA is under scrutiny for narrowly missing its latest financial targets. Revenue climbed 9 percent in the five months through August, a percentage point shy of analysts’ forecasts. With Asia making up 41 percent of total group turnover, slowing demand from mainland customers appeared to be the cause; however, Richemont’s performance in the region was abnormally strong in recent years and the business is currently vulnerable to macroeconomic pressures. The double-digit growth of years past is simply not sustainable and more attention should be focused on the group’s individual brands and their country-specific strategies. All eyes are on former deputy chairman Yves-André Istel, who late last week took the helm as Richemont chairman Johann Rupert began his yearlong sabbatical.
“China Day-Trippers Underpin Hong Kong Mall Rents” (Bloomberg Businessweek)
Mainland travel to Hong Kong is becoming increasingly common; last year alone, the number of ‘day trippers’ rose 24 percent to reach 11 million individuals, easily outpacing the growth of overnight stays. In addition to the traditional luxury categories of apparel, accessories and jewellery, shoppers are also stocking up on pharmaceuticals, personal care, baby products and other household goods. This trend is placing upward pressure on retail rents in the New Territories, benefiting local developers like Sun Hung Kai and Sino Land with significant suburban mall portfolios. As new entrants and foreign retailers continue to be priced out of prime city centre real estate, securing space in one of a number of new “fringe” developments seems a worthwhile strategy to hedge against shifting tourist traffic patterns.
“Chinese Tourists: Pay More, Shop Less” (Financial Times)
In additional to kicking off China’s national holiday week, October 1st also marks the effective date of the country’s new Tourism Law. Tour operators who guide shopping tours will see their permissible kickbacks from retailers stringently regulated. As a result, mainland travellers taking part in popular organized holidays are seeing package prices increase manifold. Originally designed as consumer protection measures, the new Tourism Law has the potential to reshape the travelling habits of Chinese nationals. The value of purchasing luxury and brand name products overseas is still too strong a draw to resist for many; however, a short-term outcome may be that more independent Chinese travellers, armed with increased travel insight and brand knowledge, head overseas unguided.
With the supply chain backing and garment industry insight of his father, first time entrepreneur Jeff Zhang intends to build a vertically integrated men’s shirting brand online. Launched this past May, Spectre & Co. offers high quality dress shirts at $45 and $65 price points. His garments, suggestive price point and “Made in China” label aside, are not mass-produced. The elder Zhang has assembled a small and skilled production team outside of Shanghai, led by a former designer from Ascot Chang, the Hong Kong bespoke shirt-maker. The business aims to offer a narrow range of fashion basics can be retailed online to customers at value prices – without necessarily compromising on quality of materials or design. Spectre & Co. is in its infancy but has carved out a promising positioning in the fast-growing menswear space.