Trial of Chinese Crime Gangs in Italian Fashion Stalls amid Sabotage Fears

Italian Guardia di Finanza (Tax Police) carry out a search at a textile firm during an investigation, in the Tuscan city of Prato, Italy, in this handout photo obtained by Reuters. Guardia di Finanza Press Office/Handout via REUTERS
Italian Guardia di Finanza (Tax Police) carry out a search at a textile firm during an investigation, in the Tuscan city of Prato, Italy, in this handout photo obtained by Reuters. Guardia di Finanza Press Office/Handout via REUTERS
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Trial of Chinese Crime Gangs in Italian Fashion Stalls amid Sabotage Fears

Italian Guardia di Finanza (Tax Police) carry out a search at a textile firm during an investigation, in the Tuscan city of Prato, Italy, in this handout photo obtained by Reuters. Guardia di Finanza Press Office/Handout via REUTERS
Italian Guardia di Finanza (Tax Police) carry out a search at a textile firm during an investigation, in the Tuscan city of Prato, Italy, in this handout photo obtained by Reuters. Guardia di Finanza Press Office/Handout via REUTERS

A landmark trial in Italy of Chinese crime gangs has suffered so many mishaps - from the disappearance of documents to the resignation of interpreters - that a senior prosecutor suspects it's being sabotaged to protect the criminals' grip on Europe's fashion industry.

The case, launched after two Chinese men were hacked to death with machetes in 2010, is aimed at dismantling an illicit network accused of controlling the logistics of the continent's multi-billion-euro garments sector from the city of Prato in Tuscany.

Instead, it has become a cautionary tale about the obstacles Italy's justice system faces when confronting international organized crime without the tools it has used effectively to fight home-grown mafia groups, prosecutors say.

Reuters spoke to two of Italy's most senior anti-mafia investigators, and more than half a dozen textile workers, union representatives and defense lawyers, to gain a rare glimpse into the challenges of tackling alleged Chinese organized crime.

"The suspicion is that there is interference from the Chinese community and Chinese authorities in this matter," said Luca Tescaroli, a veteran of Italy's war against the mafia who is now Prato's chief prosecutor and leading the charge against Chinese crime gangs.

The Chinese embassy in Rome did not reply to emails requesting comment on Tescaroli's remarks. China's foreign, public security and justice ministries did not immediately reply to Reuters' requests for comment for this story.

When the latest court interpreter failed to show up to a hearing at the end of September, a quick check revealed she had returned to China and her transcripts were "incomprehensible and unusable", Tescaroli said.

The translator was the second to walk off the job and no other Chinese interpreter in Tuscany has agreed to take over. Tescaroli has opened an investigation into the possibility that someone is looking to sink the trial.

The violence prosecutors hoped to curb has only intensified as the trial flounders, with the battle for control of coat hanger production and fast-fashion freight spawning a string of bomb and arson attacks in Italy, France and Spain.

There have been at least 16 attacks, including cases of the destruction of property, since April 2024, according to a Reuters tally of official reports.

The Prato prosecutor and his colleagues are pressing the judges in the so-called China Truck trial to define the Chinese gangs legally as mafia groups – a designation that would unlock sweeping powers, asset seizures and stiffer sentence.

However, in Italy that label is difficult to secure, even more so if the organizations are rooted abroad, making them harder to penetrate than home-grown crime groups such as Sicily's Cosa Nostra.

Wedged in the hills northwest of Florence, Prato is billed as Europe's largest textile manufacturing hub, hosting more than 7,000 textile and garment companies that register some 2.3 billion euros ($2.68 billion) in official annual exports. Over 4,400 of firms are Chinese owned, local authorities say.

Almost a quarter of its residents are foreigners, the largest ratio in Italy, but the percentage is likely much higher as many newcomers are illegal immigrants without work permits.

Prato's streets are lined with Chinese-owned workshops, warehouses, and businesses that have transformed the city into a global fast-fashion production center, and a flashpoint for violence linked to criminal networks.

The China Truck investigation closed in 2018 with prosecutors alleging that the 58 suspects had formed "a criminal association equipped with very significant financial means ... with support and resources abroad".

Seven years on, not a single defendant or witness has been called to testify.

Meanwhile, the alleged mastermind Zhang Naizhong, described by investigators as a "boss of bosses", slipped back to China in 2018 after he was released from pre-trail custody and prosecutors doubt he will ever return to Italy.

His Italian lawyer Melissa Stefanacci declined to comment on any aspect of the case. Zhang and the other suspects have pleaded not guilty.

The case emerged from what Francesco Nannucci, then head of Prato's police Flying Squad, described to Reuters as a war between two rival gangs, one made up of Chinese originally from Zhejiang and the other of Chinese originally from Fujian, for control of territory in Europe.

Despite keen police interest and multiple investigations in Prato, the gang violence has escalated in the past two years.

In July 2024, a Chinese businessman based in Prato was stabbed multiple times by a group of six men, including a former soldier, who had flown in from China "to protect, through violence, the business interests of the monopolistic group in the coat-hanger sector," prosecutors said in a statement.

All six were arrested and sentenced to 7.5 years in jail for attempted murder.

In April of this year, Zhang Dayong, Zhang's alleged right-hand man who was also charged in the China Truck case, was shot dead in Rome alongside his girlfriend. No-one has been arrested for those killings.

Tescaroli said emerging companies often with the prefix "Xin" - meaning "new" in Chinese - were trying to undercut established players, selling hangers at about 6 cents each compared to the previous market rate of about 27 cents.

"Since the volumes are vast, a few cents of margin on each piece guarantee gigantic profits," he said.

Chinese businesses in the textile district have long operated within what investigators call the "Prato system", marked by corruption and irregular practices, including labor and safety abuses as well as tax and customs fraud. These companies can appear and disappear overnight, engaging in a cat-and-mouse game with authorities to dodge taxes and avoid having to give workers proper contracts, according to Arturo Gambassi, a representative from the Sudd Cobas union, which defends workers' rights in the textile sector.

"In all the firms where we have initiated labor disputes, we saw that their business name had changed in the previous two years," he told Reuters. Police say fabrics are often smuggled in from China to avoid customs duties, while profits are sent back through illicit money-transfer channels, with up to 4 million euros shipped out of Rome's Fiumicino airport each week, according to prosecutors and police.

To maintain their competitive edge, the industry depends on cheap, round-the-clock labor, largely from China and Pakistan, with workers facing a backlash if they seek legal contracts.

On November 17, more than 15 Chinese citizens assaulted a union demonstration in Prato. Plain clothes police who were observing the protest were also attacked, with two officers needing hospital treatment, a police statement said.

Italian prosecutors succeeded in dismantling major Italian mob networks, notably Cosa Nostra, in part thanks to legislation introduced specifically to tackle the mafia.

The official mafia designation carries stiffer sentences and lets courts infer membership from conduct, a key advantage when prosecutors must overcome silence and intimidation.

Tescaroli is trying to get the courts to brand the Chinese gangs as mafia groups, but Barbara Sargenti, Italy's national anti-mafia prosecutor, questioned whether this would happen.

To establish that there is a Chinese mafia, Italy needs to map these organizations either from inside sources or with help from judicial and police authorities in China.

Sargenti said cooperation with China was proving "very difficult" and, so far, only one Chinese citizen had turned state witness within Italy, in a drug-related case.

Sargenti said China's police and judicial authorities had been in touch with Italy's justice ministry in recent months, saying it was willing to send officers collaborate with the Italians but there had been no follow up.

"Investigations are, let's say, very complicated," she said. Without the mafia designation or Chinese cooperation, Tescaroli's case in the China Truck trial relies on the fragile scaffolding of Italian procedure, and the willingness of translators to show up.

After the Tuscan interpreters made themselves unavailable, two new translators were appointed on November 17 - Chinese citizens from the northern port city of Genoa, outside Tuscany.

But court officials aren't claiming victory, yet, with the new translators saying they could not guarantee they would understand the dialects captured in phone taps that form crucial evidence in the case. The next hearing is scheduled for May 15.



Lululemon Forecast Cut Hits Shares, Underscores Challenge for Next CEO

FILE PHOTO: A logo is displayed inside a Lululemon outlet retail store at Bicester Village in Oxfordshire, Britain, August 21, 2024. REUTERS/Hollie Adams/File Photo
FILE PHOTO: A logo is displayed inside a Lululemon outlet retail store at Bicester Village in Oxfordshire, Britain, August 21, 2024. REUTERS/Hollie Adams/File Photo
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Lululemon Forecast Cut Hits Shares, Underscores Challenge for Next CEO

FILE PHOTO: A logo is displayed inside a Lululemon outlet retail store at Bicester Village in Oxfordshire, Britain, August 21, 2024. REUTERS/Hollie Adams/File Photo
FILE PHOTO: A logo is displayed inside a Lululemon outlet retail store at Bicester Village in Oxfordshire, Britain, August 21, 2024. REUTERS/Hollie Adams/File Photo

Shares of Lululemon Athletica fell about 18% in premarket trading on Friday after the sportswear maker cut its full-year forecast for a second time, underscoring the hurdles awaiting incoming CEO Heidi O'Neill.

Lululemon, known for its high-priced stretchy pants and athletic tops, has been grappling with declining sales for several quarters as it seeks to recover from merchandising missteps, an overreliance on promotions and intensifying competition, Reuters reported.

The firm's shares fell ⁠to $100.1 premarket, and ⁠if losses hold, it would wipe out more than $2.5 billion from Lululemon's market value and deepen the stock's year-to-date decline to about 41.5%.

O'Neill, a former Nike executive who takes the helm on September 8, will ⁠be tasked with reviving demand in North America, Lululemon's largest market, and restoring growth.

Revenue in the Americas, the company's largest market, fell 8% in the second quarter, compared with a 1% increase a year earlier, as the firm struggles to reignite demand amid inflationary pressure on consumer spending.

Morgan Stanley said that sales could deteriorate further in the second half, ⁠with ⁠limited visibility on when demand might recover, raising the risk of continued pressure on margins.

Following the results, at least 12 brokerages lowered their price targets on the shares, with Piper Sandler setting the Street-low target of $80, according to data compiled by LSEG.

The company trades at about 11.50 times forward earnings, compared with ​20.76 for Nike ​and 13.41 for Adidas, according to LSEG data.


One Year After Its Founder’s Death, Armani Faces Challenge of ‘Inevitable Evolution’

People walk past a Giorgio Armani store in Galleria Vittorio Emanuele II, in Milan, Italy, September 5, 2025. (Reuters)
People walk past a Giorgio Armani store in Galleria Vittorio Emanuele II, in Milan, Italy, September 5, 2025. (Reuters)
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One Year After Its Founder’s Death, Armani Faces Challenge of ‘Inevitable Evolution’

People walk past a Giorgio Armani store in Galleria Vittorio Emanuele II, in Milan, Italy, September 5, 2025. (Reuters)
People walk past a Giorgio Armani store in Galleria Vittorio Emanuele II, in Milan, Italy, September 5, 2025. (Reuters)

One year after the death of founder Giorgio Armani, the Italian fashion house is entering a pivotal period as the clock starts ticking on plans for an initial stake sale, after the group spent the last year focused on governance.

Armani, who died aged 91 on September 4, 2025, stipulated in his will that a first sale of around 15% of the company should take place between 12 and 18 months after his death, followed by the disposal of a larger stake or a bourse listing.

Industry executives and analysts warn, however, that one year on, the late designer's heirs and advisers must now focus on evolving, to keep the brand fresh and relevant.

"Continuity is the right choice to get through the first year. It becomes, or could become, a risk if it turns into inertia," said Francesco Fiorese, a partner at consultancy Simon Kucher.

The real test for the company, Fiorese ‌said, will be ‌to switch from "a succession model based on Giorgio Armani's legacy to a more autonomous system, capable of ‌making ⁠its own decisions while ⁠still preserving the brand's identity."

Armani group declined to comment.

NEW BUSINESS PLAN

Over the last year, Armani's sales declined 2.8% at constant currencies to €2.2 billion ($2.56 billion), and investors remain cautious about the luxury sector's health as the war with Iran drags on and Chinese consumer spending is faltering.

As he prepares a new business plan, CEO Giuseppe Marsocci, a group veteran now at the helm, told an event in July that Armani would not seek short-term fixes, while keeping faithful to the founder's long-term vision of an essential and elegant style with attention to detail and wearability.

He said Armani was still in a transition phase and looking for a new balance as the founding family worked closely with new board directors, ⁠including former Gucci CEO Marco Bizzarri.

Marsocci pointed to a joint venture to develop new Armani Hotels & ‌Resorts as an indication of future strategic moves.

"The great challenge will be maintaining ‌the balance between the identity that defines us and the inevitable evolution we will have to pursue," he said.

STAKE SALE

In his will, Armani listed ‌France's LVMH and licensees EssilorLuxottica and L'Oréal as potential buyers - or another luxury group of comparable standing.

The fashion house, which sources said is ‌working with Rothschild as financial adviser for the sale, had €500 million in net cash at the end of 2025.

Two people close to the matter said there was no pressure to clinch a sale and the deadlines set out in Armani's will are not strictly binding.

The process is expected to accelerate in the coming weeks, but a deal could be postponed if market conditions fail to support an adequate valuation, the sources said.

Bankers and advisers consulted ‌by Reuters put the group's valuation at around €5 billion to €7 billion.

LICENSING ACCORDS

For L'Oreal and EssilorLuxottica, a stake in Armani would help to protect licensing deals which last year netted almost €2 billion ⁠in revenue for the groups - and ⁠royalties for Armani.

"Licensing deals with L'Oreal and EssilorLuxottica have been profitable. With the market demanding more accessible entry points, like accessories and beauty, as consumer spending tightens, these areas show strong potential for continued growth," said Gonzalo Brujó, CEO of consultancy Interbrand Global.

EssilorLuxottica would be interested only in a small holding and could consider partnering with other bidders, two people close to the matter said.

L'Oréal has little interest in entering the fashion business but is keen to safeguard a beauty license that runs until 2050, according to another person close to the matter.

LVMH, large enough to incorporate fashion, eyewear and beauty, has closely studied the possibility of a stand-alone investment, according to a source with direct knowledge of the matter. But LVMH tends to control brands in its portfolio and an IPO could complicate its bid for Armani if the heirs decided to list the company, the source said.

EssilorLuxottica declined to comment, while LVMH was not immediately available for comment.

L'Oreal told Reuters in an emailed reply to queries that its position on a possible Armani stake had not changed and it was honored that Armani had mentioned the French cosmetic group. "L'Oréal will study this opportunity, which builds on our long-shared history, whenever the Armani S.p.A representatives choose to open the discussion," it added.


Fast-Fashion Giant Shein Plunges 10% on Hong Kong Debut

Carlson Tong (C), Chairman of Hong Kong Exchanges and Clearing Limited, attends SHEIN’s listing ceremony at the Hong Kong Exchanges and Clearing Limited (HKEX) in Hong Kong, China, 01 September 2026. (EPA)
Carlson Tong (C), Chairman of Hong Kong Exchanges and Clearing Limited, attends SHEIN’s listing ceremony at the Hong Kong Exchanges and Clearing Limited (HKEX) in Hong Kong, China, 01 September 2026. (EPA)
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Fast-Fashion Giant Shein Plunges 10% on Hong Kong Debut

Carlson Tong (C), Chairman of Hong Kong Exchanges and Clearing Limited, attends SHEIN’s listing ceremony at the Hong Kong Exchanges and Clearing Limited (HKEX) in Hong Kong, China, 01 September 2026. (EPA)
Carlson Tong (C), Chairman of Hong Kong Exchanges and Clearing Limited, attends SHEIN’s listing ceremony at the Hong Kong Exchanges and Clearing Limited (HKEX) in Hong Kong, China, 01 September 2026. (EPA)

Fast-fashion retailer Shein fell 10 percent on its long-awaited Hong Kong trading debut Tuesday, having raised US$1.7 billion in a high-profile initial public offering.

The flotation comes after the company's plans to list in New York and London were derailed by regulatory scrutiny, but it won approval from Chinese officials in July for the sale in the southern financial hub.

However, its shares fell to as low as HK$43.72 soon after the open, compared with its listing price of HK$48.56.

The IPO put the company's valuation at around US$26.3 billion -- well short of the nearly US$100 billion during private fundraising rounds in 2022.

Shein, known for its ultra-low prices and rapidly produced clothes, said proceeds from the sale would be used to finance its technological capabilities and boost its international presence.

The online retailer moved its headquarters to Singapore between 2021 and 2022, which analysts say was intended to avoid increasing global scrutiny of Chinese firms.

Its European customer base rose to 156 million average monthly users by the end of 2025, making it one of the continent's biggest e-commerce platforms alongside China's AliExpress and US titan Amazon, which have 193 million and around 180 million users respectively.

The company has faced scrutiny over its environmental footprint and allegations of human rights violations, and faces growing competition from low-cost e-commerce companies such as Temu and AliExpress.

Executive chairman Donald Tang told AFP last year that the company has "zero tolerance" for forced labor.

Morningstar analyst Lorraine Tan said in an August note that revenue growth "has converged to the pace seen by the fast fashion industry at below 10 percent in 2025".

She added the fall in valuation "does reflect that drop off in investor appetite for Shein's shares".

The company pioneered a formidable model that is hard to replicate, said Ken Pucker, a sustainable fashion expert at Tufts University.

- Chinese roots -

But its unprecedented growth also invited challenges of "newly imposed taxes and duties, compromised sustainability, privacy and copyright practices and competition", he added.

"Timing is not ideal given the company's slowing growth. That said, it has been trying to go public for around five years, and I am guessing that many of its investors were eager to get paid out."

In 2025, Shein reported a full-year net profit of US$2.06 billion but swung to a US$99 million loss in the first three months of this year after the United States scrapped an import duty exemption on small packages.

In a similar move, the European Union last month imposed a duty of three euros (US$3.50) per item for packages valued at less than 150 euros.

And France will impose a fee on ultra-fast fashion items from Tuesday that could eventually reach almost 20 euros per garment, as the government targets major Asian e-commerce platforms.

"Shein's near future is going to be marked by negative growth," e-commerce analyst Juozas Kaziukenas told AFP.

The retailer needs a "mid-air engine swap" to rebuild its supply chain on diversified inventory sources beyond shipping directly from China, he added.

Shein's CEO Sky Xu made a rare public appearance this year in the southern Chinese province of Guangdong, pledging to allocate greater resources in the country, which was seen by analysts as an attempt to realign the company with its roots.

The Hong Kong listing represents a "new Asian story for the company", as it redefines itself institutionally with "roots in China", said Lawrence Loh, a professor specializing in ESG markets at the National University of Singapore.

"The listing opens a new chapter for Shein to access new capital to resolve the sustainability issues, but this comes with a price of even higher levels of public scrutiny."