A luxury label is a must-have this summer for Gulf investors

LONDON // Arabian Gulf investors have been out on a shopping spree for luxury fashion brands – and it’s a trend expected to continue for many seasons to come, analysts say.

Two major deals emerged on a single day last month, marking the latest in a string of fashion forays by regional investors.

Luca Solca, the head of luxury goods research at the investment firm Exane BNP Paribas in Switzerland, said “we have just seen the beginning” of such investments from the Gulf – despite a recent slowdown in the global luxury sector.

Bahrain’s Investcorp on June 21 said it had bought a majority stake in the Italian menswear company Corneliani, valuing the group at US$100 million. On the very same day, it emerged that the Qatari fund Mayhoola for Investments had agreed to buy Balmain, the French fashion house powerful enough to lure celebrities such as Beyoncé and Kim Kardashian to its parties.

“Gulf investors have identified fashion and luxury as an area of opportunity,” said Mr Solca.

“I don’t think these are trophy assets. Rather, I see these brands as relatively small. Their acquisition [is] a bet on their potential growth, given appropriate management and resources.”

It is not the first time Investcorp and Mayhoola have ventured onto the catwalk when it comes to their investment strategies.

Investcorp is a former investor in luxury brands such as Tiffany and Gucci and currently has Dainese and Georg Jensen in its portfolio.

Mayhoola – which did not respond to The National’s requests for comment – already owns the Italian label Valentino, which it bought in 2011, and a stake in the British handbag maker Anya Hindmarch.

Other luxury fashion investments from the region include those made by the Qatar Investment Authority through its subsidiary Qatar Holding, the owner of the Harrods and Printemps department stores. Its investments include stakes in Tiffany and LVMH, the French luxury group that owns Louis Vuitton bags and Dior perfume.

Mr Solca sees an opportunity for Gulf investors to build conglomerates out of multiple niche brands in what he describes as a “fragmented” industry.

“Italian luxury, in particular, is very fragmented with many interesting companies. High-profile success stories like Valentino have increased investors’ confidence,” he said. “There is a chance to build conglomerates – as these are few and far apart: LVMH, Richemont, Kering.”

This would seem to be backed up by a report in The Financial Times, which said Mayhoola’s plan is to combine Balmain and Valentino under one umbrella and eventually list the group.

Yet despite the high-profile investments from the Gulf in haute couture, there has been a general slowdown in the personal luxury goods market over the past 18 months.

The management consultancy Bain said in May that the global personal luxury goods market – including leather accessories, fashion, fragrance and cosmetics – was last year worth €253 billion (Dh1.02 trillion) in revenue.

That marked just 1 per cent growth in real terms compared with 2014, something Bain attributed to global challenges such as decreased tourism across Europe, instability in the Middle East and a downturn in China.

“The 2015 slowdown seeped into the first quarter of 2016 with only 1 per cent growth – a trend that is expected to continue throughout the year,” the consultancy noted.

But Hazem Ben-Gacem, the head of corporate investment for Europe at Investcorp, said he expects improvement in the luxury market in the years to come.

“By providing strategic and financial support we have been able to successfully build global and iconic brands and this is exactly the model we intend to replicate with Corneliani,” he said.

“We also see the luxury market, in particular the menswear category, continuing to experience increased growth over the coming years.”

Mr Solca agreed that the time could be right for investing in luxury fashion brands.

“It is never cheap to buy relatively rare assets, but this is possibly a time when it is indeed cheaper,” he said.

“It makes sense for Gulf investors to build a broader business platform beyond energy. Fashion and luxury goods promise long-term relevance.”


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