PARIS — Chinese textile and apparel giant Shandong Ruyi’s plans to become luxury’s next big leader are faltering, with its European businesses retrenching — and deals stalling.
It hasn’t been an easy few years for Chinese companies that have invested in Western brands. The government’s tighter rules on overseas investments, the trade war with the U.S., and the devalued renminbi have all staunched the flow of capital from the country, while Chinese managers have struggled to run the luxury businesses in particular.
In early 2018, Shandong Ruyi Group, one of China’s largest textile firms, revealed with much fanfare that it was buying a majority stake in Bally from JAB. Nearly two years later, that deal still has not closed.
In 2017, Shandong bought a 51 percent stake in struggling men’s wear retail unit Trinity from Victor Fung and his family’s holding. Since then, cutbacks appear to have deepened across all brands in the Trinity portfolio.
Cerruti 1881 has been without creative leadership since parting ways with chief creative officer Jason Basmajian in July. The Paris-based men’s wear brand skipped the catwalk last season and has not launched production on a spring 2020 collection, according to sources with knowledge of the matter.
The brand hasn’t had a permanent Paris store since closing its historic flagship on Place de la Madeleine in 2015. Recently, its design teams moved from the brand’s headquarters at the same address to smaller premises on nearby Rue Royale.
“The Fungs didn’t set Trinity up for success, but certainly since the new owners took over, it’s gone from bad to worse,” said one source. “Why buy these brands to not grow them? What went wrong? They’re kind of letting them wither on the vine.”
The source said that vendors haven’t been paid, and design teams haven’t seen samples or prototypes since spring. “There are no new collections going into the stores,” the source said.
Claire Landrau, global vice president marketing and communications at Cerruti, declined to comment on the situation at the house, but confirmed that Trinity was in the throes of a major cost-cutting drive in a bid to return to profitability.
“The Trinity group, at the request of its main shareholder, is undergoing a complete restructuring of its organization,” she said. “This has a direct incidence on all regions and production chains. The negotiations between the different parties have had repercussions on the contractual relationships with some of our suppliers.”
She added that the transformation strategy “is starting to bear fruit since our results for the first half of 2019 are now positive.”
The group posted a profit of 76.6 million Hong Kong dollars, or $9.76 million, in the six months ended June 30, versus a loss of 196.8 million Hong Kong dollars in the same period a year ago.
“This specific metric is particularly important to us as we recognize that, ultimately, the bottom line is the most significant determinant in the success or failure of our endeavors,” Trinity said in August, adding that it planned to grow its premium brands Cerruti 1881, Gieves & Hawkes, Kent & Curwen and licensed brand D’Urban.
“Ahead of establishing flagship stores, as well as examining opportunities to strengthen our presence in prime areas and travel-related locations, we have been welcoming industry veterans to join our management team,” it said.
“Through their considerable experience and foresight, we are confident that all of our brands will not only enhance their global presence, but also enjoy a new period of renaissance,” Trinity added.
Some observers were skeptical, however, noting that Shandong Ruyi Technology Group was recently downgraded by Moody’s because it will struggle to meet upcoming debt repayments.
Shandong isn’t the only Chinese company that’s been faltering in Europe either.
In January, Hardy Amies, the couture house that once dressed Queen Elizabeth II and forged ties with royals, world leaders and celebrities, went into administration, the U.K. equivalent of Chapter 11.
Fung Capital, the private investment vehicle of Victor and William Fung, who control the Hong Kong-based Li & Fung Group, had acquired Hardy Amies out of administration in 2008 with the aim of transforming it into a men’s wear house that offered a mix of fashion-forward and traditionally tailored clothing.
In 2012, Hardy Amies joined the London Men’s Fashion Week calendar and inked a deal with Bloomingdale’s to sell a secondary line. Two years later, it opened a 3,778-square-foot flagship at 8 Saville Row. In a cold climate for high-end tailoring and traditional men’s wear — and the dominance of luxury brands such as Gucci, Saint Laurent and Prada — Hardy Amies struggled, like many others, to keep up.
The flagship shut earlier this year and will become the new home of British men’s wear brand Hackett.
Sonia Rykiel, another brand owned by the Fung family, went into liquidation in July after failing to find a buyer. The sale of the famed striped-knitwear firm’s assets is set to wind up by the end of the year, according to Richard Morgan, who is acting as financial adviser for the court-appointed liquidators on the transaction.
Gangtai is another group that tried — and failed — to make a luxury brand flourish. Last month it ended up selling the luxury jeweler Buccellati to Compagnie Financiere Richemont for an undisclosed price.
During the short time that it owned the Italian jeweler, Gangtai failed to roll out stores as planned, and investment was slow in coming. Not long after Gangtai acquired the Italian brand, rumors were rife that it was looking for a partner to invest in the jeweler.