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Savile Row Suit Retailer Says Coal Spurs China Growth

Trinity Ltd., owner of China retail rights for Savile Row suitmaker Gieves & Hawkes, will add at least 50 stores in smaller Chinese cities as incomes from booming coal and car industries spur demand for luxury clothes.

The additions will give the company more than 500 stores in the Greater China region next year, after a similar expansion in 2010, Managing Director Sunny Wong Yat Ming said in Hong Kong. Locations will include Inner Mongolia, China’s largest coal supplier, and the eastern province of Zhejiang, he said.

“The biggest spenders in China are young and don’t care about discounts,” Wong said in an interview. “They love European brands.”

Trinity, also the retailer of Cerruti 1881 suits and Salvatore Ferragamo products in Korea, forecasts second-half sales will rise 15 percent as China’s economic growth spurs demand for coal and other commodities. Coal mining helped Inner Mongolia’s per-capita urban household disposable income rise 10 percent to 8,814 yuan ($1,300) in the first six months, narrowing the gap with major Chinese cities.

“Opening stores in smaller cities with cheaper rent will help Trinity lower operating expenses” while tapping residents’ strong purchasing power, said Jessica Xue, an equity analyst at OSK Asia Holdings Bhd. in Hong Kong. She recommends buying the company’s stock.

Big Spenders

Trinity, the luxury menswear division of Li & Fung Group, fell 1.2 percent to HK$6.82 at the 4 p.m. trading close in Hong Kong, compared with a 0.4 percent gain for the benchmark Hang Seng Index. The stock has surged fourfold from its initial public offering price of HK$1.65 in November.

The company sells Salvatore Ferragamo products in South Korea, Singapore, Malaysia and Thailand through joint ventures. It holds the rights for Gieves & Hawkes and Cerruti 1881 in China.

In a country where fake goods are rampant, the big spenders, typically between the ages of 30 and 40, head to Trinity’s outlets for authentic products and good service, Wong said Sept. 3. They also “sit, relax and chat” on the in-store sofas and ask about products. “This is what we call increasing sophistication,” the executive said.

The clothier plans to acquire brands and is in talks with European labels that want to use Trinity as a platform in mainland China, Wong said, without identifying them. Mainland China excludes Hong Kong, Macau and Taiwan.

Zhejiang Income

The new stores will include 17 in Inner Mongolian cities such as Baotou and Ordos, each with a population smaller than 2 million. Trinity already has three outlets in the provincial capital, Hohhot, Wong said.

It also plans to expand in Zhejiang’s Zhoushan, a city with fewer than 1 million people that counts shipbuilding and marine- product processing among its main industries. Wong didn’t specify the number of stores there.

Zhejiang urban households’ per-capita disposable income rose 12 percent to 14,919 yuan in the first half, overtaking Beijing to be placed second after Shanghai, government data showed. China replaced the U.S. last year as the world’s largest auto market.

Trinity was founded in 1969 as a clothes maker and exporter in Hong Kong and began licensing brands in the 1970s, according to its website. It expanded in the next two decades in luxury menswear and has stores in at least 50 cities in China, Hong Kong, Macau and Taiwan.

Luxury Goods

“In China, sales of luxury goods have never declined, even during the 2008 financial crisis,” Wong said. Economic growth in smaller cities is more than 10 percent, faster than the national average, he said.

As of June 30, almost 70 percent of Trinity’s stores were outside China’s so-called first-tier cities, which include Beijing and Shanghai, according to a company financial statement. First-half sales climbed 20 percent from a year earlier to HK$925 million.

Trinity also designs, makes and sells D’urban and Kent & Curwen menswear in China. While the brand heads are from Italy, England and Japan, the local teams comprise designers from Hong Kong who are better attuned to specific needs of Chinese customers, Wong said.

“We have more folds in our pants to accommodate pot bellies and make shorter sleeves as Chinese arms are shorter than Europeans’,” he said.

Closely held Li & Fung Group is owned by the billionaire Fung family. Its affiliates include Toys “R” Us Asia and Li & Fung Ltd., the biggest supplier to retailers such as Wal-Mart Stores Inc.

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