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Richemont sells Shanghai Tang as China prefers foreign swank

Geneva - Richemont [JSE:CFR] has sold Hong Kong-based dressmaker Shanghai Tang, showing that a Chinese name still doesn’t have the same ring to luxury shoppers as a French or Italian one.

Italian fashion entrepreneur Alessandro Bastagli bought the brand, one of the first Chinese fashion labels to seek a global presence, according to a statement on Monday. It’s the first sale of a luxury brand by Geneva-based Richemont since 2007, and follows a pledge by chairperson Johann Rupert in November to fix or sell underperforming businesses.

“The disposal of Shanghai Tang is a logical step,” Rene Weber, an analyst at Vontobel, said in a note. “The brand was neither material in terms of sales nor of profit.”

Shanghai Tang, known for form-fitting qipao dresses worn in Wong Kar-Wai’s 2000 film “In the Mood for Love,” has struggled to gain international notoriety despite opening stores from New York to London, while consumers in China have preferred western luxury brands.

In a ranking by researcher Hurun of the top fashion brands for Chinese women, Shanghai Tang ranked 10th, behind nine European brands including Chanel, Dior and Gucci. It didn’t show up on the top 10 for men, which was led by Giorgio Armani.

Hong Kong handover

Richemont acquired a controlling stake in Shanghai Tang in 1998, a year after sovereignty over Hong Kong was transferred from the UK to China. It bought the rest in 2008. The luxury company is revamping its portfolio, having merged its Net-a-Porter online unit with Yoox SpA in 2015 after disposing of Italian penmaker Montegrappa in 2007. It now owns 18 brands, including Cartier, Montblanc and IWC. 

Richemont didn’t disclose the price for Shanghai Tang, one of four labels that Sanford C. Bernstein analyst Mario Ortelli said in 2013 he expected might be sold. The others were Dunhill, Chloe and Azzedine Alaia. Richemont said that year that it decided against any divestments, and has since reconsidered.

The company has restructured Dunhill and rejuvenated Chloe’s management with a new creative director. Other small Richemont brands include Purdey, a maker of luxury shotguns, and Lancel, a French pursemaker that the company considered selling in 2013.

Sir David Tang started Shanghai Tang as a bespoke tailor shop in 1994, combining Chinese and western design influences and expanding into accessories and housewares.

While the brand attracted stars such as Nicole Kidman and Kate Moss for its 1920s-inspired dresses - some costing more than $2 000 - its Mandarin collars and Chinese styling never caught on in a big way in Europe or the US. 

The original Shanghai Tang location in Hong Kong closed in 2011 due to high rents, and the brand also shut a New York shop. The brand now has about 48 stores and offers online sales in many markets. Rival Hermes International has provided competition with stores under the Shang Xia brand since 2010.

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