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Changing tastes whipsaw fashion fortunes

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Bernard Arnault (left) of LVMH is worth US$79.3 billion while Amancio Ortega of Inditex SA is worth US$69.7 billion.

London

BERNARD Arnault and Amancio Ortega are both major shareholders of multinational fashion businesses, and the only European citizens today with more than US$50 billion to their names.

Their fortunes, though, are diverging amid growing demand for luxury goods and low growth among fast-fashion retailers.

Mr Ortega, 82, the Spanish founder of Zara-owner Inditex SA, has seen his wealth drop by more than 7 per cent this year to US$69.7 billion, including a US$3.5 billion fall on Wednesday, according to the Bloomberg Billionaires Index.

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Mr Arnault, 69, chairman of Paris-based luxury goods-maker LVMH, is worth US$79.3 billion, after a 25 per cent increase in 2018, which saw him overtake Mr Ortega as Europe's richest person.

Fuelled by demand from China, the luxury goods market will grow as much as 8 per cent this year to 281 billion euros (S$448 billion), according to a June report from Bain & Co. Fashion retailers with brick-and-mortar shops like Inditex face more competition from online rivals as consumers feel more comfortable receiving clothes at home.

"For mass-market fashion, the peak margins are in the rear-view mirror," said Charles Allen, a senior analyst with Bloomberg Intelligence. "With the luxury brands, the margins seem more resilient."

Shares of Inditex tumbled 5.7 percent on Wednesday, the most in more than six months, after Morgan Stanley analysts Geoff Ruddell and Amy Curry cut their recommendation on the stock to underweight, the equivalent of sell.

"Inditex is still a world-class retailer, but its investment proposition has been weakening for some years," the analysts wrote.

Changing consumer tastes and behaviours are reordering the rankings for other billionaires.

Giorgio Armani, the founder of his eponymous Milan-based fashion house, has added 11 per cent to his fortune this year.

The wealth of Stefan Persson, the largest shareholder of Inditex rival Hennes & Mauritz AB, has tumbled 25 per cent to US$14.6 billion, according to the Bloomberg index.

Philip Green, majority owner of Arcadia Group, the UK's largest closely held clothing retailer, has seen his fortune slide almost 9 per cent to US$2.9 billion. "While fast fashion had a huge run obviously, luxury is really coming back," Jan-Hendrik Schlottmann, CEO of New York-based fashion house Derek Lam International LLC, said in May.

"Young women are much more knowledgeable about quality." BLOOMBERG