Lanvin, the luxury fashion brand under the ownership of Chinese conglomerate Fosun, might encounter obstacles in its expansion strategy due to the plummeting share price of Fosun. Fosun, known for its ownership of other renowned brands such as Sergio Rossi, Wolford, and Club Med, had previously set a goal of returning to profitability by 2024 and even contemplated a potential listing on Wall Street. Nonetheless, recent developments in Asia have raised doubts about the realization of these plans.

Fosun International Limited, the parent company of Fosun, witnessed a substantial drop in its share price on Wednesday, reaching its lowest level in nearly ten years. The sharp decline was triggered by reports suggesting that regulators were scrutinizing Fosun’s debt, despite the company’s denial of such allegations. Fosun’s stock experienced a decline of up to 9.6% during mid-session trading on the Hong Kong stock exchange, marking its lowest value since November 2012. Investors were unsettled by a report from Bloomberg News, which indicated that Chinese authorities, including the banking sector regulator, had urged major banks and state-owned enterprises to assess their financial exposure to Fosun.

Alex Gong Ping, Fosun’s Chief Financial Officer, promptly refuted Bloomberg’s report, categorizing it as “completely false.” He clarified that neither the China Banking and Insurance Regulatory Commission (CBIRC) nor the Shanghai Banking and Insurance Regulatory Commission had requested commercial banks to investigate Fosun’s financial exposure. Nevertheless, this statement failed to allay investors’ concerns.

Fosun has been an active acquirer of global assets, acquiring the French leisure brand Club Med in 2015 and holding exclusive distribution rights for the BioNTech Covid vaccine in China. However, the company’s substantial debt, particularly in the real estate sector, has come under increasing scrutiny. Several major construction companies, including Evergrande, have grappled with debt repayment and have been compelled to undergo significant restructuring. Bloomberg has reported that Fosun is facing the repayment of approximately $8 billion worth of bonds by 2023.

Moody’s recently downgraded Fosun’s rating due to its limited liquidity and a decline in its portfolio resulting from various asset sales. These developments imply potential challenges for both Lanvin and Fosun’s ambitions for expansion. The fashion industry will closely monitor how Fosun manages its debt obligations and whether it can restore stability in the market.

Useful Links:
1. Wall Street Journal – Fosun Denies Regulators Request Asset Check
2. South China Morning Post – Indebted Fools? How Thought of Fosun Put a Signal on China Property Stocks