Changing tastes whipsaw fashion fortunes

New consumer behaviours also reordering the rankings for billionaires

LONDON: Bernard Arnault and Amancio Ortega are both major shareholders of multinational fashion businesses, and the only European citizens today with more than US$50bil to their names.

Their fortunes, though, are diverging amid growing demand for luxury goods and low growth among fast-fashion retailers.

Ortega, 82, the Spanish founder of Zaraowner Inditex SA, has seen his wealth drop by more than 7% this year to US$69.7bil, including a US$3.5bil fall on Wednesday, according to the Bloomberg Billionaires Index.

Arnault, 69, chairman of Paris-based luxury goods-maker LVMH, is worth US$79.3bil, after a 25% increase in 2018, which saw him overtake Ortega as Europe’s richest person.

Fuelled by demand from China, the luxury goods market will grow as much as 8% this year to 281 billion euros (US$329bil), according to a June report from Bain & Co.

Fashion retailers with brick-and-mortar shops like Inditex face more competition from online rivals as consumers feel more comfortable receiving clothes at home.

“For mass-market fashion, the peak margins are in the rear-view mirror,” said Charles Allen, a senior analyst with Bloomberg Intelligence. “With the luxury brands, the margins seem more resilient.”

Shares of Inditex tumbled 5.7% on Wednesday, the most in more than six months, after Morgan Stanley analysts Geoff Ruddell and Amy Curry cut their recommendation on the stock to “underweight”, the equivalent of sell.

“Inditex is still a world-class retailer, but its investment proposition has been weakening for some years,” the analysts wrote.

Changing consumer tastes and behaviours are reordering the rankings for other billionaires.

Giorgio Armani, the founder of his eponymous Milan-based fashion house, has added 11% to his fortune this year.

The wealth of Stefan Persson, the largest shareholder of Inditex rival Hennes & Mauritz AB, has tumbled 25% to US$14.6bil, according to the Bloomberg index. Philip Green, majority owner of Arcadia Group, the UK’s largest closely held clothing retailer, has seen his fortune slide almost 9% to US$2.9bil.

“While fast fashion had a huge run obviously, luxury is really coming back,” JanHendrik Schlottmann, chief executive officer of New York-based fashion house Derek Lam International LLC, told Bloomberg TV in May. “Young woman are much more knowledgeable about quality.” — Bloomberg