Fashion has always been creative in the design room and in marketing, but now even dealmakers are finding new inspiration.
Designer businesses were once a hot commodity in investment circles; fashion-savvy financial types wanted to buy, grow, and create a roadmap for cash exit.
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Interest in fashion is ebbing and flowing among the investment group.
There was a surge after Michael Kors’ IPO in 2011 showed that a bet on a relatively small designer brand could turn into a multibillion-dollar valuation and a big payday. But deal flow has slowed as no other investors have pulled off the same trick, complicated by e-commerce booms, the rise of influencers, the pandemic and more.
Large, high-profile brands like Versace routinely attract attention. Some smaller brands also found buyers. New York growth capital firm Stripes took a stake in Khaite last year. But for every deal that closed, there were a handful of brands that were looking for money to help them get to the next stage but couldn’t find it.
There are signs that the market is changing, with more investors now playing with new approaches.
Witness Saks Global, which is not only in the process of acquiring Neiman Marcus, also linked up with Authentic Brands Group to form the Authentic Luxury Group joint venture last week.
An unusual pairing.
Saks is a brick-and-mortar luxury retailer and owns intellectual property from Authentic Brands, Barneys New York, Ted Baker, Brooks Brothers, Judith Leiber, Vince, Hervé Léger, and more.
It’s a deal that could help Hervé Léger expand beyond dresses at Saks, for example, or park Barneys stores in the Middle East. The joint venture also plans to step into a market with fewer buyers and acquire high-end brands.
It looks like anything can happen with the effort led by Richard Baker, the executive chairman of Saks, and Jamie Salter, president and chief executive officer of Authentic Brands, two of fashion’s most creative and aggressive deal-makers.
“As we acquire new brands and grow existing brands in our portfolio, we will be able to distribute them not only in our major stores and across our digital network, but also globally.” Baker told WWD last week.
Salter added: “We think we can build a multi-billion dollar platform in the next five years. “We’re taking Authentic’s playbook and applying it to aspirational and luxury brands.”
It’s still an open question how this playbook, which involves buying brands and then growing the business through partners that manufacture and distribute products, will play a role higher up the price scale.
But it’s worth remembering that Authentic Brands, which Salter founded in 2010, now has more than 50 brands and works with more than 1,700 partners to generate more than $32 billion in annual retail sales.
Such a force, if realized, could spark deals in the designer and luxury space.
Investment banker William Susman, managing director of consumer, retail and e-commerce at Cascadia Capital, said it was still difficult to understand where Authentic Luxury would go.
“I suspect [joint venture] “There are two other great deal makers who said, ‘Let’s partner,’” Sussman said, “Jamie and Richard.”
And this can go anywhere.
But Baker and Salter aren’t the only ones looking at designer fashion with fresh eyes.
Brendan Hoffman’s P180 this week planned to take a minority stake in Altuzarra, bringing some operational and leasing expertise to the business.
P180 has already invested in Elyse Walker, and Hoffman said he is actively looking for more “great brands with great followings that have the opportunity to grow their business.”
It’s a fast start for Hoffman, CEO of P180 and former chief of Wolverine Worldwide, Vince and Lord & Taylor. He launched the business this year with CaaStle founder and CEO Christine Hunsicker.
The idea here is not to drop partially unsold goods at a huge loss, but instead to put them into the rental ecosystem.
“We will help make the most money possible on every piece of clothing that Altuzarra designs,” Hunsicker said. “We focus on inventory and how to move it at the highest price possible.”
Susman described P180 as an investor with “a very specific purpose, with clear alignment and goals.”
“Brendan is building a platform with a simple premise,” the banker said. “Your first discount is your best score, so don’t get a second discount. Rent.”
There are some similarities between Authentic Luxury and P180.
Douglas Hand, a fashion-focused lawyer with a background in mergers and acquisitions, noted that both “look at retailers, not just brands, or more specifically retailers that have become viable brands themselves, like Barneys New York.”
“Vertical integration is always a smart play — as long as the FTC doesn’t tread on anticompetitive ground, as it did with Tapestry/Capri Holdings,” Hand said.
And both are also considering buying or investing in brands to not only help them run better, but also to run them differently.
Otherwise, these are radically different responses to a market in which designer brands are struggling, good at generating interest but struggling in business.
The Bottom Line is a business analysis column written by deputy editor Evan Clark, who has been covering the fashion industry since 2000. It is published every two weeks on Thursday.
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