Valentino: Easy To Be Acquired, Not Easy To Make Profits

Valentino has been acquired, which is the most important news in the fashion industry in the past six months. It is reported that the royal family of Qatar, known as the oil power, successfully bought the top Italian brand with 700 million euros Fashion brand This is the latest case of European luxury brands being acquired by investors in emerging markets. It is not difficult to see that this oil giant covets the luxury industry. The valuation of 700 million euros is far higher than LVMH's acquisition of jewelry manufacturer Bulgari at a price of 28.2 times the expected valuation last year. Compared with the current European luxury brands, it is 10-11 times the expected price in 2012, which is a huge premium.

"The acquisition of Valentino by Mayhoola, an investment group supported by the Qatari royal family, is a sign of the trend of fashion finance." This comment is enough to show that the acquisition of a top fashion brand with decades of reputation can obviously drive the trend undercurrent in the fashion industry more than the minor fuss of big name designers and the publicity stunt of the new season's clothing.

Luxury Plan of the Middle East Royal Family

Italian fashion brand Valentino was founded by the designer Valentino Garavani in 1960, with brand stores all over the world. Valentino sells a series of high-end luxury goods including ready-made clothes, accessories and expensive Custom clothing The symbolic bright red chiffon skirt has established a high reputation in the royal family and Hollywood star circle.

In recent years, although the fashion industry has been impacted by the economic downturn, some wealthy customers' interest in high-end luxury goods has led to a 300% year-on-year increase in the expected brand valuation in 2011, and it is expected that more will be achieved in 2012. Only a few months ago, Valentino also vowed that the company's major shareholder, Permira Fund, planned to build an Italian fashion kingdom with all its strength and had no intention of selling the company. Obviously, this acquisition negates this statement.

buy Valentino It is undoubtedly another measure taken by Qatar, an oil giant, to enter the luxury industry. Previously, Qatar had been making acquisitions around the world with huge profits from the oil and gas industry, from the German sports car brand Porsche to the shares of Bank of England Barclays. In recent years, they are very enthusiastic about luxury investment. In addition to this acquisition, they have previously spent 2.2 billion dollars to purchase Harrods, a luxury department store in the UK, and several luxury hotels in France. The latest acquisition of the luxury industry was the Qatar Investment Authority's purchase of 1.03% of the shares of LVMH, a French luxury industry giant.

It is also said that the acquisition of the Qatar royal family is a private purchase of the royal family and not a part of the global investment strategy of the Qatar royal family fund. It is said that Sheikha Mozah, the princess of Qatar, has contributed a lot to the acquisition. She usually only wears high-grade customized clothes and is famous for her love of Valentino clothes. Moza owns Qatar Luxury Group, and the group also holds shares of French leather product manufacturer LeTanneur&Cie.

It is not the first time that European fashion brands have been acquired by foreign consortia. Valentino's acquisition follows the rumor that the Russian tycoon Mikhail Friedman recently acquired the British fashion brand Doctor Martens. In 2011, Paris Group, a Dubai retailer, acquired Gianfranco Ferre, a fashion brand on the verge of bankruptcy. The Qatari royal family may even start its acquisition plan by acquiring Harrods in 2010.

Further forward, in December 2010, China's high-end men's wear brand Nippon Holdings acquired Italian clothing brand Cerruti1881 for 70 million dollars; British century old suit brand Gieves&Hawkes was acquired by Hong Kong Li&Fung Group. Other European fashion and luxury brands acquired by Chinese enterprises include Pringle, Hardy Amies and Sonia Rykiel.

It has become a trend for European luxury brands to be acquired by such rapidly rising luxury market countries as Middle East oil countries and China. According to analysis, one of the reasons why the consortia in these regions are generous with luxury brands is that they value the "luxury effect" of these brands in the local market. If they can be built successfully, the future is immeasurable.

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The road to profitability is not smooth

Although the scale of this acquisition is huge, what awaits this huge acquisition may not be a smooth market prospect. The luxury goods industry has gradually entered a period of hot sales, but from the perspective of those luxury goods enterprises that have released sales results, the hot market seems to be slowing down.

Recently, British fashion brand Burberry and other luxury brands have released financial reports. Data shows that since the first quarter, the demand for luxury consumption in mainland China is slowing down. Burberry reported that its sales growth in the Asia Pacific region (mainly China) fell to 16% in the first quarter from 67% in the same period last year. Hendry Holding Co., Ltd., China's largest watch retailer, recently said that the demand growth of high-end watches has slowed to single digits in recent months.

The reason why European private investors or private funds are not keen on investing in the fashion industry is that, in addition to the difficulty in grasping the market situation, it is more important to consider too many irrational factors when operating a luxury brand. Among them, it is particularly difficult to find a successful designer for the brand, even for an experienced fashion entrepreneur. In the Valentino brand, since Mr. Valentino Garavani retired in 2007, the Pamela Fund has been worried about finding a suitable designer for the brand. Although it is still a popular choice when stars walk on the red carpet, it has never been able to reproduce the glory it once won in the international arena.

Valentino's path as a designer is not smooth. After the old man retired, the former design director of Jieli, Allessandra Facchinetti, was dismissed after less than a year of work.

In 2008, the brand selected Maria Grazia Chiuri and Pier Paolo Picciolo from the original designer team as directors. Churi and Piccolo have worked with the old man for many years. While developing their brands, they also keep a balance with their past traditions and promote them to new consumer groups. Since then, the brand has improved. The two relatively conservative and low-key people have never been able to cause hot topics in the fashion circle. Although the brand's status is still recognized, the brand has lost a lot of voice and influence after years of silence. Now, such an Italian fashion brand has changed its ownership in the Middle East, once again pushing the name Valentino to the forefront of the wave, which also brings more variables and opportunities.