Will Moncler’s First Acquisition Win China Sales?

    Moncler has announced that it will acquire the luxury brand Stone Island, perhaps signaling that it wants to compete with rivals LVMH and Kering.
    Moncler has announced that it will acquire the luxury brand Stone Island, perhaps signaling that it wants to compete with rivals LVMH and Kering. Photo: Courtesy of Moncler
      Published   in Finance

    What happened

    : Italian luxury group Moncler has announced that it will acquire the casual luxury brand Stone Island in a cash-and-share deal valued at $1.39 billion. Under Chief Executive Remo Ruffini, Moncler has become an industry favorite and, following this news, the company’s shares went up 4 percent. The company, listed since 2013, had a pre-pandemic market value of over $13 billion.

    For many labels, 2020 has been a struggle for Moncler: H1’s financial results reported revenues of $473 million, which was down 29 percent compared to the previous year - mostly due to store closures and declining foot traffic. A bright spot, however, was the brand’s double-digit growth in Mainland China.

    The Jing Take

    : The deal is Moncler’s first purchase and, on its face, a smaller rival like Stone Island seems like an unlikely target for purchase. If anything, industry insiders expected Moncler itself to be bought. This is just the latest in a line of deals to be agreed upon this year despite the catastrophic conditions facing brands. Farfetch, VF Corp, and Launchmetrics, to name a few, have all recently inked deals. Stone Island now becomes a feather in the cap for Moncler, but with talk of Italian resilience and solidarity, does the brand have loftier ambitions? It may well be the first step in setting up another luxury conglomerate to rival France’s major players: LVMH and Kering.

    But highest on Moncler's agenda, naturally enough, is China. It will move its yearly flagship show from Milan to the Mainland to reach more consumers (or should that be citizens?). In October, it launched a China-exclusive Moncler Young Icons collection as a way to keep younger luxury consumers engaged. And, it's working: Moncler's most recent Weibo post with ambassador Song Qian received 13,000 likes and 1638 comments.

    On the other hand, Stone Island has a modest Weibo following of only 60,000 and little traction thus far. Earlier this year, Ruffini told Jing Daily that China is the perfect place for experimentation. Could it be planning to use Stone Island to trial new strategies in the market? The acquisition alone is enough to raise its profile among savvy shoppers.

    As vaccines are slowly being rolled out across the West, all eyes remain focused on China’s market, which accounted for 90 percent of the luxury sector’s growth in 2019. Moreover, the country is predicted to carry the weight of luxury spending into the near future. For most brands, 2020 is the year they will want to forget. But they are far from safe. 2021 will see more casualties. As Ruffini said, Moncler is not waiting around for a recovery. It is setting a course to accelerate.

    The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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