2025 JULY ISSUE
MARKET INTELLIGENCE
SHORT READ
| PART 1
Contents:
Shein’s IPO Attempt
Luxury Brands Are Investigated for Money Laundry
Perceptions for Luxury Items
Shopping Malls
Victoria’s Secret’s Report on the Second Quarter
Lululemon is Tasting the Dilemma
Zara Misses Sales Forecasts
Kering and Gucci’s Challenges
Shopping For Fashion Declined for the First Time
Zara is the Star
On Hold AG’s Positive Market Report
An Analysis on the Luxury Brands
The Changes of Designers for the World’s Top Brands
Gap’s New Shop Strategy
Giorgio Armani’s Will
Written by Andrew Sia
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From the Desk of the Publisher
In this issue we have continued to write about the luxury brands and their performance. It seemed that after entering into 2025 they have lost their mojo. We can blame it to the uncertainties of the financial situation around the world. Although they have realized that going forward, they have to depend on those aspirational shoppers and perhaps they have themselves to blame that they have been raising their prices so much for the past years that it is almost unrealistic for those affordable customers. Imagine a pair of shoes at £800, handbags are at least £2,000 and it is becoming so unrealistic.
And almost at the same moment, they have all appointed new design directors, and we are talking about 15 of those design houses that we will begin to see the new faces at the catwalk.
At our final article, we paid our tribute to Giorgio Armani, who was not only a successful designer, but he was also a success businessman. I can imagine that it those days the luxury conglomerates were all keen to acquire his brand. He rightly commented that those “mega structure that lack personality,” and he danced away from them Giorgio Armani was so smart.
Shein’s IPO Attempt
The Singapore-based group, founded in China, concentrated its manufacturing in the Guangdong area, has filed a draft prospectus with the Hong Kong stock exchange (HKEX) and in the meantime seeking for China Securities Regulatory Commission’s approval. It filed for a London IPO 18 months ago but wasn’t able to secure the regulatory approval. This time it has to do with the language used to disclose its supply chain, knowing that Shein has engaged the politically sensitive Xinjiang region. This region has been accused of human rights abuses against the indigenous Uyghur population. We have to know that in recent years, the Beijing-based regulator—CSRC—has become stricter on how companies describe the risks associating with operating businesses in China, especially if it is related to Xinjiang.
This time Shein has filed to float in Hong Kong partly due to the pressure it applied on the UK regulators for the disclosure requirements. This IPO could be the biggest on the London Stock Exchange knowing that IPOs in London this year has been shrunk to a 30-year low.
If the Financial Conduct Authority (FCA) in UK can accept a CSRC -approved prospectus, London would still be a favored exchange given its more diverse and international investor base. The House of Commons business and trade committee is skeptical about the cotton used in the clothes are sourced from Xinjiang.
Shein filed for an IPO in the U.S. on November 27, 2023. The initial application faced challenges and scrutiny, particularly due to concerns surrounding Shein’s labor practices and supply chain.
HKEX is expected to take a more tolerant view than London. Furthermore, Beijing is encouraging companies to seek to overseas to prioritize Hong Kong over New York and London.
We have to know that Goldman Sachs, Morgan Stanley, and JPMorgan are the lead banks working on the public offerings.
The company is in a slump of profit and whether Shein would still achieve the $66 billion valuation it reached two years ago. Last year, its sales rose 19% but net profit dropped almost 40% to $1 billion. It is under the threat of de minimis rulings in the U.S. which is going to affect its profit further.
As of September 2025, Shein hasn’t been able to public listed successfully. Its regulatory hurdles and scrutiny remained with its labor practices and supply chain. It has also to get approval from Chinese regulators to list, which has been a major obstacle. It may also need to shift its headquarters back to Hong Kong from Singapore to obtain the approval from Chinese regulators.
Luxury Brands Are Investigated for Money Laundry
We read about the case of Louis Vuitton, who has been under investigation in their shops in the Netherlands from this single Chinese customer who bought millions of euros’ worth of bags and other luxury goods from the LV shops. This Chinese woman’s behavior was obvious, and it ought to have alerted the shops to bring in investigation whether this could have violated money-laundering regulations.
Luxury goods may be used in financial crime especially when these goods could have involved high-end clientele who tried to disguise the origins of funds. Although the shops don’t have the obligation as banks to report suspicious financial activity, and yet they have to alert the authorities to some type of huge sums of transactions that changed hands. The person the Dutch authority identified had spent nearly €3 million (US$3.5 million) from September 2021 to February 2023. The person was said to have received large sums of illicit money generated through criminal activity from an individual who has been convicted in connection to the scheme. She is said to have spent the cash in several Louis Vuitton shops in the Netherlands using various names as covers. The goods were sent to Hong Kong and China. The shoppers always spent just under the €10,000 threshold to avoid from trigger cash transaction that would require for reporting.
There is this global watchdog—Financial Action Task Force—an intergovernmental agency established in 1989 to counter money laundry. The participants, in this case, allegedly made use of a surrogate shopping system known as “daigou,” in which purchasers abroad shop on behalf of someone in China. Luxury goods are offered less expensive abroad, less likely to raise concerns about authenticity.
We can find oligarchs, kleptocrats, and criminals, travel around the world who spent money in villas, yachts, luxury cars, arts, and luxury goods to enjoy their criminal proceeds and to move money out of their countries.
Last year, more than $400 billion was spent globally on personal luxury goods. How much of this is processed through money laundry is yet to be quantified. The U.S. law enforcement officials are in high alert to find out the part from China’s money laundering organizations. The luxury market is part of the channels.
Perceptions for Luxury Items
What makes us buy a luxury item? Actually no one needs to own a luxury item, the purchase is perhaps propelled by aspiration, status, self-affirmation and desire. Then there is the slightly transgressive thrill of spending lots of money on something you simply want. The sweaty, credit-card-at-the-ready denial of what others might interpret as a reasonably spend. Only few will not have the impulse, other will still crave for it. But there is the sacrifice of things in order to justify the luxury spending.
For many years there was a consensus among those luxury retailers that the gateway price to attract a new client was around £250 and it is a psychological entry point for customer to enter. But then the price increased since the late 1990s as we have seen it had been keeping pace with the inflation. Today, a pair of shoes is generally about £800, handbags are at least £2,000.
After the pandemic, the industry doubles its effort in courting its top-tier luxury goods spenders, and eventually it left its aspirational shoppers behind.
Lately, the luxury industry is facing an adverse wind and the biggest one, LVMH, its stock is down one-fifth so far this year. Wealthy clients are withholding their spending.
Shopping Malls
In recent years, especially after the lockdown of the Covid pandemic, department-store chains are selling their properties due to various reasons, and business being taken over by e-commerce is one of the most critical challenges.
While the legendary retailers like JCPenney and RH Macy’s are unloading their real estate portfolio, we have found that Dillard’s just purchased the Longview Mall in Texas, about two hours east of Dallas.
Investors have been found among the most active mall buyers as mall value plummeted. There are buyers who would snap up malls at rock-bottom prices, but they haven’t been remedying maintenance issues at their properties. Smaller retailers would end up moving to a new shopping center when their leases expire.
Bigger department stores typically tended to own their anchor space they occupy, to make their fortunes deeply entwined with malls. But recent years this trend has stopped as the sector is among those weakest performance in retail and has been losing customers to discounters, specialty and online stores.
Many department stores are closing stores in malls and looking to write off this investment. Macy’s is aiming to generate as much as $750 million from asset sales by the end of 2026. JCPenney’s is planning to sell 119 stores to a private-equity company for about $950 million. These are all big numbers.
Dillard’s is a fashion-apparel retailer that sells clothing, cosmetics and home goods is a public trading chain based in Little Rock, Arkansas. It owns 272 stores, and it is still able to maintain a loyal customer base and a strong balance sheet with more than $1 billion in cash as of the end of its second half result.
Victoria’s Secret’s Report on the Second Quarter
Its sales increased for the full year after strong sales growth in the second quarter. The lingerie, clothing, and beauty retailer raised its sales targets for the year to between $6.33 billion to $6.41 billion, up from its previous range of $6.2 billion to $6.3 billion. Its expectations for adjusted income remained unchanged at $270 million to $320 million.
Net sales in the quarter rose to $1.46 billion from $1.42 billion while analyst expected $1.41 billion. Total comparable sales increased 4% driven by Victoria’s Secret and Pink’s North America and global sales.
It has admitted that the impact of tariffs is worse than previous expected.
Lululemon is Tasting Ite Dilemma
It was known as the brand, which was outstanding during the Covid pandemic, but it has lost its luster now. Lululemon’s core products are not generating the same buzz when it was used to be the leader of the fastest growing market for casual athleticwear. This dynamism kept the competitors to grow.
This time the sales and profit guidance for the second-quarter results fell short of expectations. Its underperformance of its yoga pants and scuba sweatshirts caused its shares to drop 19%, about 56% down by this year.
Its dominance in casual sportswear and loungewear in their new colors fell flat in front of the consumers. Also, its new products are not attractive to revive the brand.
The market is hinting that a valuation similar to a specialty apparel retailer rather than its previous status as a high-growth apparel brand. It recorded its weakest month of the quarter in July when most retailers saw their strongest sales, and its lackluster third quarter outlook suggested a tough back-to-school shopping period.
I feel that it is too cruel to say that Lululemon has becoming less relevant. Its sales may drop in 2026 as we will continue to see the new entrants like Alo Yoga and Vuori are gaining market share.
I have noticed that the tariffs would have increased the cost of products, this has applied to every brands. But I must say to the consumers to look at the quality of the products. Lululemon has been known for its impeccable treatment in its products, and it has been emphasizing their functions and image. Let the consumers judge the competition.
Zara Misses Sales Forecasts
Zara’s parent company, Inditex, reported first-half year sales that fell slightly short of analysts’ projections, but its growth picked up during summer after a slowdown earlier in the year amid fierce competition in the fashion world.
Inditex, the Spanish fashion giant, reported its sales for the first half year to July came to €18.36 billion. It missed the analysts’ forecast of €18.55 which was like a split of a thin hair.
The group’s sales, including brands like Massimo Dutti, Pull & Bear and Bershka, grew 5.1% compare with the previous year.
Shares jumped 6.5% in European trading and net profit for the first half of the year rose 8% to €2.79 billion.
Inditex operates in 214 markets which is quite fragmented. It is said to work on ways to optimize its stores to boost productivity. It is targeting to grow 5% between 2025 and 2026. At the end of 2024, it was reported that the group was operating 5,563 stores worldwide.
Zara, as the company sourced also half of its goods from Spain, Portugal, Turkey, and Morocco which are facing lower tariffs than bigger clothing producers who are sourcing from China, Vietnam, Indonesia, India and Bangladesh.
The group is investing heavily in its logistic-expansion plan which will increase its capabilities, generate efficiencies, and add its competitiveness.
Kering and Gucci’s Challenge – FT, September 24, 2025
The root cause of its parent company—Kering, is Gucci’s underperformance with its sales, which is accounted about half of its parent company’s total revenue. This year, they are going to be down by 40% compare with their peak in 2022.
The brand has been trying to look more exciting, but one can blame on the fickle fashion, and it is hard to attract the customers when the brand is down.
Falling sales can be blamed on creativity, and to identify what is the season going after. But a lot has to depend on the resources to back the company’s vision and to buy inventory, to market it and to dress up stores to reflect the new zeitgeist are all necessary to consider, but this all cost money.
Kering has little money to spend. The cost of running the business, excluding the cost of the goods, has already risen to almost 60% of the revenue.
Gucci’s divisional operating margin has more than halve from 35% in 2022 to 16% in the first half of 2025.
Kering has been opted to buy the 70% stake of Valentino from Qatar investment company, Mayholla, until at least 2028. And it may step up to sell its real estate portfolio, which includes a €1.3 billion building in Milan’s Via Montenapoleone.
It will need to cut its costs to streamline its operation.
Shopping for Fashion Declined for the First Time – FT, August 3, 2025
We found that second-quarter sales with LVMH, Prada, and Moncler, were all hit by lower spending from American tourists in Europe and Chinese tourists in Japan.
Unlike last year when the Chinese consumers flocked to Japan to take advantage of the weakening of the yen which had fallen to its lowest level for over 30 years. The same for the American tourists who were spending freely in European boutiques with a stronger dollar.
This year the yen recovers, and the dollars declines, this has taken away the currency advantages
LVMH reported the drop of 9% of its fashion and leather goods division.
Prada’s tourists attributed 30% of sales, and management reported 2% decline in the first half year sales.
Perhaps the luxury brands should look in areas to appeal to consumers who are in the middle classes to sustain their overall business portfolio.
Zara is the Star – FT, August 31, 2025
With the luxury brands losing their market, the more mass-market retailers like Zara are stepping up their sales. Inditex, owner of Zara, with a broader customer base, are gaining in the market with larger, glitzier stores, and even with some higher-priced products including a £700 leopard print jacket in last year’s collaboration with Kate Moss. And already its average price per item of $34 compare with $26 from H&M, with $14 at Shein is a huge improvement. Its fast reaction to the market with four weeks to change about 40% of its online collection has given Zara the extra pricing power.
Already Inditex grows faster than its rival, Zara, with over twice the EBITDA margin. Market capitalization equivalent to 22 times forward earnings, a discount of less than 10% to LVMH. And its upward mobility provides a fetching trim.
On Holding AG’s Positive Market Report – WSJ, August 13, 2025
On Holding AR raised its outlook on the year despite uncertainty brought by the tariffs but still sending its shares higher. The Swiss athletic shoemaker now expects sales to increase by 31% year-on-year while gross profit margin is forecasted in the range of 60.5% to 61%.
On Holding counts the U.S. as its biggest market and rely on Vietnam for most of its production.
An Analysis on the Luxury Brands
China, with a population of 1.4 billion, has more than 60 Louis Vuitton stores. India has a population of 1.4 billion and slightly bigger than China has only three stores. That tells you the spending power and the desire for luxury shopping is completely different.
For LVMH, together the two markets, China and the U.S., generate around half of the sales, but the demand from Chinese consumers have scaled back because of the country’s deflated property bubble has wiped 30% off the household wealth. The sales in Asia dropped by 10%.
Luxury sales in the U.S. peaked in 2022 and have tailed off since although a slight recovery happened last year. But soon it is snuffed off by the tariff war. Sales in the U.S. fell 3% from a year before for the first quarter.
For 2025, it is said that the global sales are expected to fell by 2%. For the luxury brands for the past two decades, they were used to grow by 6% year-on-year, and the dependence on China and the U.S. is becoming a challenge.
In the luxury brands market sector, there is always the rich customers who are buying and try to stay ahead of the luxury fashion and trends. But in recent years the middle-class customers are coming up and more than 50% of the global luxury sales are coming from tens of millions of middle-class shoppers who spend something like $2,200 per year.
Take China as an example, between 2009 and 2019, its economy grew 8% a year on average. Back in 2000, the Chinese customers generated 1% of the global luxury sales. But today it is 25%. For a change, we could find advertisements of the luxury brands in China which was banned before.
In China, approximately 65% of its population lives in urban areas. It was a dramatic increase from 16% in the 1960s compare that with India, where only a third lives in the cities. Although it has been one of the fastest-growing economies in the world for several years, it is still a long way for India to catch up. It is also because of its people who are supposedly less individualistic culture and strong ethnic clothing. There is also the lack of luxury brand awareness. Having said that, today the luxury brands still manage to sell $1 billion worth of goods in India, but compare with China’s $45 billion, it is such a small fraction.
India’s retail infrastructure also doesn’t exist, and for now luxury brands are selling their goods in the lobbies of five-star hotels. They don’t have the high streets like London’s Bond Street, or New York’s Fifth Avenue where you can build those flagship stores.
Its high import duty, around 50% have to be added to the prices and there are only eight luxury shopping malls inside the hotels, and this have all driven the rich shoppers to shop from overseas.
Luxury brands are not doing great in Europe either for obvious reasons as their economy is stagnant. Also, there is the war between Russia and Ukraine is adding a lot of uncertainties as well.
Saudi Arabia is perhaps the market to watch for as it has half a million square meters of luxury retail space under development over the next decade.
Luxury brands are trying to attract the middle-class customers to promote growth. They have to blame themselves as for the last few years since 2022 they have hefty price increase put their goods out of reach for aspirational customers.
The solution for the luxury industry’s growth would lie in a re-emerging middle-class spending in the U.S. and China rather than looking for new emerging markets.
The Changes of Designer’s for the World’s Top Brands – New York Times, September 14 and FT, September 20, 2025
We have seen the slowdown in spending that once powered the designers’ brands. This has increased the worry and the anxiety to the investors and executives and the change of the creative directors have become inevitable.
Beginning of the year, we saw Peter Copping made his debut as the creative director of Lanvin. Then Verinica Leoni moved into Calvin Klein. Sarah Burton took over at Givenchy, and Haider Ackermann landed in Tom Ford.
To find a new face to reignite the market’s desire is becoming very true. And at this time, unknowingly to one another, we have found the changes of designers for many of the designer brands.
We try now to walk you through the different designer houses and introduce their new creative directors:
Balenciaga – Pierpaolo Piccioli, from Fendi and Valentino
Bottega Veneta – Louis Trotter, from Whistles, Gap, Calvin Klein, Tommy Hilfiger, Jigsaw, Joseph, Lacoste and Carven
Carven – Mark Thomas, from Neil Barrett, Burberry, Joseph, Givenchy, Helmut Lang, Lacoste and Icicle
Celine – Michael Rider, from Balenciaga, Celine and Polo Ralph Lauren
Chanel – Matthieu Blazy, from Balenciaga, John Galliano, Raf Simons, Maison Margiela, Celine, Calvin Klein and Bottega Veneta
Dior – Jonathan Anderson, from Brown Thomas, Prada, JW Anderson and Loewe
Gucci – Demna, from Maison Margiela, Louis Vuitton, Vetements and Balenciaga
Jean Paul Gaultier – Duran Lantink, from Duran Lantink
Jil Sander – Simone Bellotti, from AF Vandevorst and Gianfranco Ferré
Loewe – Jack McCollough and Lazaro Hernandez, from Proenza Schouler
Maison Margiela – Glenn Martens, from Jean Paul Gautier, Y/Project and Diesel
Mugler – Miguel Castro Freitas, from Dior, Yves Saint Laurent, Lanvin, Dries Van Noten and Sportmax
Versace – Dario Vitale, from Dsquared2, Bottega Veneta and Miu Miu
Gap’s New Shop Strategy – WSJ, September 5 and FT, September 7, 2025
Gap is going for a makeover by adding cosmetics to the stores. This fall, it will start with Old Navy, and the beauty assortments will include skincare and makeup to hair products and nail polish with most items priced under $25
This strategy will extend to other Gap stores by adding beauty products and starting fragrances.
Its Chief Executive Richard Dickson stressed that it would strengthen its apparel first before it would push into the new categories. Knowing that Gap is already a 56-year-old retail group, which also owns Old Navy, Banana Republic, and Athleta. Richard Dickson who took over the role as Chief Executive of the company two years ago.
Actually, many retailers have already added beauty products in their product categories starting with the luxury brands like Chanel and Louis Vuitton to mall chains like Abercrombie & Fitch and Urban Outfitters. Kohl’s has Sephora shops in their stores, and Target has Ulta Beauty shops which doesn’t work too well.
Roughly 150 Old Navy Stores will have an expanded array of beauty and personnel care items in their checkout lanes. They will also be staffed with beauty advisers.
Beauty is a large and fast-growing category with higher margins than apparel. It is also a big draw for the younger shoppers. The U.S. beauty and personal care market is expected to total $129 billion this year, up almost 4% from 2024 in according to market research company Euromonitor.
A bit more about Dickson that he was the Chief Operating Officer of Mattel, and he remodeled Barbie for the new generation. He was with Bloomingdale’s and later joined The Jones Group.
Gap had been on a steady decline since its heydays in the 1990s as the brand continued to bring out the same hoodies and jeans. It lost the competition to Zara which displaced it as the most valuable clothing retailer in 2008.
Throughout the time it tried to revive the stores and in 2022 it cutoff its tie with the rapper Kayne West. Gap reduced its product range and closed stores in the U.S. and overseas. It stopped most of its operation in Europe.
Dickson started in 2020 and closed 350 Gap and Banana Republic stores in North America between 2020 and 2025. The group still has about 3,500 stores in more than 35 countries.
Gap is developing the next generation of Gap customers without alienating the Gen Xs and baby boomers. It is using influencers to target Gen Z shoppers.
It is introducing a line known as GapStudio, which is more high-fashion and meant for runway.
Gap reported $216 million in its second quarter, compared with $206 million a year ago.
Old Navy remains its largest and more valuable operation. Its athleisure brand, Athleta, is struggling and its comparable sales dropped 9% in the second quarter.
Tariffs will make further improvement hard to accomplish, Gap estimated a net tariff impact of $150 million to $175 million in 2025 operating income. In this period of transforming of its business and the fixing of the fundamentals hopefully can build up the momentum to allow Gap to move forward.
Giorgio Armani’s Will – FT, September 13, 2025
Giorgio Armani’s will have named LVMH, Luxottica, and L’Oréal as the preferred buyer of his fashion empire. Armani died on September 4 and left with a handwritten will which he drafted in April was made public.
He instructed the heirs and his right-hand man, Leo Dell’Orco, to sell an initial 15% stake in the group to one of the three rivals. Then the will specified that an extra stake of 30 to 54.9% should be sold to the same buyer within five years of Armani’s death. If the sales failed, his heir should opt for a market listing.
Armani was the sole shareholder of the group, which includes the Emporio Armani brand, hotels, restaurants and a beauty line. L’Oréal and Armani had a licensing agreement for the sale of products including popular perfume Acqua di Glò since 1988. Eyewear group Essilor-Luxottica produces and distributes Armani’s glasses line.
Armina’s intention is to safeguard strategic continuity, corporate cohesion, and financial stability for long term development. He had communicated with the press his thinkings.
Earlier on, he expressed his intention to avoid the takeover by the French luxury conglomerate, and he commented that wanted to avoid being dominated by the “mega structure that lack personality.” He would want to have the footprint that would resemble “il signor Armani.”
Two of the three groups named in the will are French. Luxottica, founded by the late Italian billionaire Leonardo Del Vecchio, who is Paris-listed. We have mentioned earlier that it is actually the eyewear group Essilor-Luxottica who produces and distributes Armani’s glasses line. To select this group is a sensible choice because of their business collaboration already.
Another group is L’Oréal who is a French multinational company that is the world’s largest cosmetics and beauty products manufacturer and seller. L’Oréal had a licensing agreement for the sale of the popular perfume Acqua di Glò and this went back to 1988. They had a long relationship.
Both groups expressed their interest and their gratitude toward Giorgio Armani and would seriously evaluate the opportunity.
Armani’s handwriting is the suits that are structured to look unstructured. It is also combining elegance with slouch. With a sale of €2.3 billion and the successor of the business will have certain challenge to carry it forward. Furthermore, Armani was known for his tight control of the company until his death at 91. For an outsider to come onboard and take the rein could be difficult.
The named acquirers, at least the two would lack the skill to run the fashion business. LVMH would be at best to bring in the skill and it is flexible in owning the company, either in minority or majority,
It is too early to make any judgement unless we can see the bidder to come forward. It is not an easy situation.
Giorgio Armani was born July 11, 1934, in the northern town of Piacenza in Italy and he has an older brother and a younger sister. He was aspired in his youth to pursuit a career in medicine and enrolled in the Department of Medicine at the University of Milan. But after three years, in 1953 at the age of twenty, he left and joined the army. And because of his medical background, he was assigned to the Military Hospital in Verona. While he was there, he attended the shows at the Verona Arena.
After he left the army, he took up the job as a window dresser at La Renascente, a department store in Milan in 1957. He went on and became a salesperson for the menswear department and learned the technique and gained invaluable experience.
In the mid-1960s he joined Nino Cerruti, another Italian businessman whose family is famous for the textile mill for producing the wool fabrics.
It was in the late 1960s, Armani met Sergio Galeotti, an architectural draftsman and began a personal and professional relationship that led to his opening of a design office in Milan in 1973. Armani started an extensive freelance collaboration with a great number of fashion houses. The experience gave Armani an opportunity to develop his own style. In July 1975 he founded Giorgio Armani S.p.A. in Milan with Galeotti. In that same year in October, he presented his first collection of men’s ready-to-wear for Spring/Summer 1976. He also produced a women’s line for the same season. In 1977, Armani entered the womenswear market using the cutting of the menswear, and it was well received by the career women in the U.S. market.
Giorgio Armani passed away at the age of 91 on September 4, 2025, in Milan.
We used one of his quotes as, “Jeans represent democracy in fashion,” among many of his quotes. The picture that we have chosen is the one we would like to remember him.