Despite China’s slowing growth margins due to domestic and international macroeconomic trends, Rosso emphasised that he believes in the potential of the Chinese market and that soon OTB will have a ‘better space for a better price,’ which was previously unavailable.
Only The Brave (OTB) Group, which is the parent company of Italy’s denim giant Diesel and owner of other luxury brands like Maison Margiela, said that it is enthusiastic about the enterprise’s performance in China and will be increasing its investments in the country.
Renzo Rosso, Founder and Chairman, OTB Group, who is in China to mark the 20th anniversary of Diesel’s entry into the Asian giant’s market, said that along with continuing investments, there would be some reshuffling in business operations. Some outlets will be closed, but new stores will be opened in better locations, he said.
Despite China’s slowing growth margins due to domestic and international macroeconomic trends, Rosso emphasised that he believes in the potential of the Chinese market and that soon OTB will have a ‘better space for a better price,’ which was previously unavailable.
He also said that the company’s performance has been better than in previous years, especially at a time when industry peers are reporting lower growth and smaller profits; OTB’s performance is on an uptrend. China is a lucrative market for global brands, particularly high-end and luxury businesses, with Chinese nationals accounting for around one-third of global purchases.
OTB also owns the luxury brand Jil Sander and has reported a turnover of 1.8 billion euros last year, which was a 4.4% drop from the 1.9 billion euros it recorded in 2023. OTB Chairman also said in 2024 that the company was in no hurry to go public. Market conditions were highly volatile last year because of heightened geopolitical tensions and the uncertainty surrounding the impending Trump tariffs.
However, despite an improving IPO market, Russo has maintained that he is willing to wait another year at least before the Diesel owner makes its debut on the market.
OTB is not the only company which is enthusiastic about China. Fellow luxury and fashion retail brand Louis Vuitton Moët Hennessy (LVMH) also reported that share prices were at their best in over 20 years on Wednesday, citing improving demand from China. Shares jumped as high as 14%, with third-quarter sales rising 1% to 18.28 billion euros, beating analysts’ expectations.
Mainland China has always been the luxury sector’s primary target and has helped improve the luxury sector’s performance in the past year. Chinese shoppers have taken a liking to new experiences like Louis Vuitton’s ship-shaped boutique in Shanghai. While sales figures from travelling Chinese shoppers also improved, but are still negative YoY.
These luxury brands are taking efforts to improve demand in the world’s second-largest economy, and it was reflected in the Q3 sales. LVMH’s fashion and leather goods have traditionally been profit makers. While sales of these products improved from the previous quarter, there was still a 2% decline YoY.
This decrease in profit and growth margin has worsened in the post-pandemic years as consumption expenditure has consistently declined in China, which has been worsened by a prolonged property market crisis, lack of job security and the recent tariff war started by US President Donald Trump.
In September, it was reported that both consumer and producer prices fell owing to deflationary pressures, as Beijing officials are forced to deliver more policy measures. Despite improved export growth last month, a new wave of the tariff and counter-tariff war between China and the US has increased concerns over unemployment and deflation.
However, policymakers are still wary about launching any major stimulus packages due to the risk of creating a stock market bubble, which could result in a crash like 2015. According to data from the National Bureau of Statistics (NBS), in September, the Producer Price Index (PPI) was down 2.3% compared to the same time last year, which was still a lesser drop than the 2.9% in August.
OTB’s confidence in China’s potential could push its peers to increase investments in the country too. However, these luxury brands must be sure that economic conditions in the country will improve before they pour in investments during these volatile times.