David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

You'd think, judging by LVMH's plans to sell Donna Karan International after a 16-year struggle to relive its glory days, that investors were giving up on the rag trade.

The French luxury house, whose full name is LVMH Moet Hennessy Louis Vuitton, spent $243 million buying the label back in 2001. With a passive investment in the S&P 500's apparel sub-index instead, it would have made nearly double the capital gain that will come from Donna Karan's $650 million price tag.

The sale follows downbeat second-quarter results last week from Skechers and Timberland owner VF Corp., which underlined fears that political jitters in Europe and the U.S. are denting consumer confidence.

Don't lose heart too soon -- Asia is coming to the rescue.

Trendy International, a Chinese business that sells Miss Sixty jeans in Asia and counts LVMH's L Capital Asia as a shareholder, is seeking a valuation of about $5 billion from an initial public offering as soon as the end of next year, people familiar with the matter told Bloomberg News.

Some $6.75 billion of IPOs and primary share offerings have been announced in the Chinese and Hong Kong apparel sector over the past 12 months, not including Trendy. That's equivalent to about 98 percent of all such transactions globally during the period, Bloomberg-compiled data show.

In Fashion
The bursting of China's stock market hasn't slowed the flood of money into apparel IPOs
Source: Bloomberg

Investor enthusiasm for such stocks, even after China's equity bubble popped in June last year, is somewhat surprising. The struggles of mainland-focused fashion firms, such as shoe retailer Belle International and jewelry chain Chow Tai Fook, have been well documented, and clothing has been trailing the broader consumer price index all year as producer-price inflation catches up.

Ain't Getting Any Cheaper
Chinese consumer price inflation for clothing is trailing the broader index, while producer prices are picking up
Source: China National Bureau of Statistics, Bloomberg

Still, China does remain on track to overtake the U.S. within the next few years as the world's biggest retail market. And while Beijing's mooted rebalancing toward consumer-led growth has been shunted aside in favor of an old-fashioned capex boom in recent months, that's not necessarily a bad thing for retail spending in the short term.

Big Spender
China's retail market is on track to overtake the U.S. by the end of the decade
Source: Bloomberg
Note: U.S. adjusted retail and food service sales data series is seasonally adjusted. Chinese data isn't: 12-month moving average has been taken to smooth out seasonal effects.

For all the flaws of an investment-fueled growth spurt as a way of managing an economy already gorged on industrial capacity, it's a remarkably efficient way of putting money in consumers' wallets. China's push toward a more services-oriented economy under its 12th Five Year Plan starting in 2011 was accompanied by a slowdown, rather than an acceleration, in consumer spending.

Hitting Its Credit Limit
The growth rate of China's retail sales slowed and slowed throughout its services-oriented Five Year Plan from 2011
Source: Bloomberg

There are signs the investment splurge is already percolating into the attitude of households. A survey of Chinese consumer confidence run by ANZ Bank and Roy Morgan reached a 14-month high in April and two important sub-measures -- showing willingness to spend on major items now, and expectations for households' financial situations next year -- are also running hot.

Confidence Trick
Chinese households' views of their financial situation have improved markedly over the past few months
Source: ANZ-Roy Morgan, Bloomberg

As you'd imagine from Chinese apparel companies' willingness to sell new shares to the public, valuations aren't particularly cheap at the moment. Bloomberg Intelligence's index of Chinese apparel, footwear and department store companies is trading on a blended forward 12-month price-earnings ratio of 18.6, not much less than the 19.5 reading from the comparable subset of the S&P 500.

Still, it's a mistake to think the country's shopping craze is over just because Beijing is switching its focus back to massive infrastructure investment. The government might have given up on consumption growth, but that doesn't mean households have.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
David Fickling in Sydney at

To contact the editor responsible for this story:
Katrina Nicholas at