China Consumer

Going into fashion

Can Fosun turn around French couture house?


Lanvin showcases latest collection

In an interview with the Financial Times last weekend, London entrepreneur Robin Birley said that his main concern has little to do with the opening of a new private members club called Oswald he’s launching in the city.

Instead he’s wondering whether the luxury brand Lanvin – the oldest surviving house in French fashion – will carry on making his shirts.

Birley, the owner of the exclusive club 5 Hertford Street, says that he orders custom-made shirts from Lanvin in Paris, but “I’ve got to have more made because I fear that one day they’re going to shut that department down”.

Since the departure of Alber Elbaz in 2015, the French fashion house has been struggling to stay afloat. New creative director Bouchra Jarrar managed only two collections for the fashion house before being shown the exit. And it remains to be seen how long Olivier Lapidus, who has just presented his second collection at Paris Fashion Week, will last. Vogue described his most recent efforts as “not completely awful”, a compliment compared with his debut, which some described as a “fashion apocalypse”.

So Birley might have been cheered by news in February that Chinese conglomerate Fosun had agreed to pay €120 million (around $150 million) for a majority stake in the Paris-based firm, trumping Mayhoola Investments, a fund backed by the Qatari royal family that owns brands like Balmain and Valentino (price aside, Lanvin’s previous owner, who is Taiwanese, had once said she wanted the brand to “remain in the hands of Chinese”).

The takeover was the talk of the recently-concluded fashion week in Paris, because most heritage brands are still owned by French-based groups.

Lanvin says it is hopeful that Fosun, which also owns the French tourism group Club Med, along with fashion brands Folli Follie, St. John and Caruso, would give the label a boost with new cash and help it secure prime boutique locations.

“Not all brands can go through more than a century and still shine like Lanvin,” claimed Fosun’s chairman Guo Guangchang as the takeover was announced. “This globally renowned brand and its rich history has tremendous growth potential.”

Fosun says it expects Lanvin to generate at least €1 billion in annual sales (from a little over €100 million now) by branching out into areas like hotels and homeware.

Reuters reported that revenues in 2017 for the privately-held group were down 30% from a year ago after seeing a 23% drop the year before. Lanvin has been shutting down unprofitable stores and cutting advertising spending to rein in costs.

Its dismal finances meant that the response to the Fosun deal was mixed. 21CN Business Herald was particularly derisory, calling Lanvin “a chicken that can’t lay eggs”.

“For Fosun, the crackdown on capital flight means it doesn’t have much quota for foreign acquisitions, so to put the money in this deal is really not worth it. And besides, all of its previous acquisitions – like [cosmetics maker] AHAVA, Caruso and Folli Follie – offer little synergy to begin with,” it scoffed.

Others were similarly sceptical about Fosun’s ability to revive the couture house. “While Lanvin won’t go bankrupt thanks to Fosun’s capital infusion, money alone is not enough to maximise its potential. In fact, many of Lanvin’s employees are worried about Fosun’s lack of experience in the luxury goods industry, which requires careful brand management and a great deal of patience and investment,” Kaifa Licai, a finance blogger, warned.

A few days later Fosun announced it was buying a controlling stake in Vienna-listed hosiery maker Wolford for €33 million (about $40 million). Wolford’s executives took a similar line to Lanvin’s, welcoming the fresh capital and the potential for introductions to the Asian marketplace. But can Fosun make these investments work? In a sign that it can revive a failing franchise, its football team Wolves looks set for promotion to the English Premier League this year. Guo Guangchang’s firm will then become the latest Chinese entity to majority-own a Premiership club (with Southampton and West Brom already in Chinese hands and a strong chance that Tony Xia’s Aston Villa could also get promoted).

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