Paper author:
Robin Mellery-Pratt
With the industry slowdown, the fashion industry giants are eyeing the acquisition driven growth mode. BoF points out the most valuable acquisition targets for you.
London, England - a certain brand to change the design of the rumors in the fashion world is never short. But now there is another rumor dominated the headlines: due to the slowing of the market, the industry's largest number of companies for expansion are looking to mergers and acquisitions, whether it is Burberry a number of acquisitions or refused to negotiate, cheap replica Louis Vuitton handbagsMH group (LVMH) has denied that its purchase of Supreme Coach Kate Spade, the pursuit of the acquisition rumors the rampant.
The largest group of luxury goods companies are most likely to promote growth through mergers and acquisitions. "The acquisition of the most active areas of course is the luxury goods group," Sanford Bernstein (Sanford C. Bernstein) senior analyst Mario Ortelli said, "the group has created a good capital expenditure cycle, and iterative business in the global scope, so they can not put too much in organic growth. "Last year, Ortelli BoF said Richemont group (Richemont) and replica Louis Vuitton onlineMH has the ability to value over 10 billion euros acquisition.
Coach is also very active in mergers and acquisitions, after the acquisition of Stuart Weitzman in January 2015, but also hope to build itself into a U.S. multi brand fashion conglomerate. Coach CEO Victor Luis said: we believe, Coach group (Coach Inc.) can be greater than the brand...... Our priority is to make use of the professional knowledge of the Coach brand to create a great brand, and Coach is particularly outstanding in the development of international and domestic brands. "
Paris Bank Securities (Exane BNP Paribas) luxury business leader Luca Solca Coach said: "this market competitors began to invest in mergers and acquisitions, probably because they think their core business has matured. Mergers and acquisitions have become one of the ways to get free cash flow to operate and increase average growth. "
In general, mergers and acquisitions are mainly larger, better financing companies to buy high potential brand ownership, and use its deep capital, international operations expertise, the existing support network to accelerate its development. But buyers must be very careful to avoid damage to existing business, timing is everything. In fact, the most attractive acquisition target is traditionally in the development stage, no longer need to continue to invest heavily in brand positioning and customer acquisition, the price is still attractive brand. "
Ortelli said: "but in today's market, the acquisition of more practical things than the acquisition of only the brand, more attractive. "
"The brand will decline and die, but if the company can build such a platform, can extract synergies from the additional target meaningful cost, then they can open the path to growth, whether they can design handbags hit the trend cycle," Armistice Capital hedge fund founder Stephen Boyd said, "when it comes to what are good targets, generally the distribution gap between significant cost savings, the calculation will be far beyond the imagination. "
In today's rapidly changing world, mergers and acquisitions can also provide buyers with the opportunity to quickly open their own business can not meet the needs of emerging consumers. For example, cheap replica Louis Vuitton handbagsMH acquired German high-end luggage maker Rimowa last year, and the recent Francois Francis Kurkdjian brand niche fragrance. The two are able to supplement the existing assets of the group, access to the rapid growth of the rapid growth of the group positioning.
Sportswear category can be applied? "There are two major trends in the fashion industry is very clear: first, leisure clothing; the other is sportswear. Therefore, for large groups, any company can establish a symbolic position in these two trends will be very interested in the acquisition target, "said Ortelli.
So, what companies have become the biggest competitor in the fashion industry? BoF for internal research and analysis, and with a number of industry experts to identify the following ten fashion M & a goals.
Acne Studios - founded in 1997 - Revenue $215 million
The brand comes from Stockholm, has a strong brand identity, Scandinavia style and the new street aesthetics. Acne's product pricing is lower than the traditional luxury brands, providing opportunities for luxury brands to explore new markets outside the core business. Although Acne Studio sold a minority stake in 2006, but the brand retail expansion is completely organic, only through the cash flow generated by the business financing, which is impressive. At present, the brand is a major global department store, the retail network includes 50 stores operating in 13 countries. But Acne in the previous fiscal year, the brand revenue is only less than 200 million euros, belonging to the growth potential of small businesses.
replica Burberry online - founded in 1907 - revenue of 2 billion 510 million pounds
Although the leadership is not steady, the market demand for products is getting cold, Burberry displayed in the digital domain skills make it still become replica Louis Vuitton bagsMH interest acquisition target, because in this field, LVMH is still backward, still working through its appointment of former Apple high layer Ian Rogers as chief digital officer etc. try to catch up. In addition, due to the lack of other British luxury market, Burberry's British ancestry has become a unique brand positioning, will get a higher premium.
In the anterior Wei cheap replica Louis Vuitton handbagsMH Group brands C line and Givenchy Marco Gobbetti at the helm successfully joined Burberry as chief executive of Burberry, or will become a potential target for the former rumors began to rise. In addition, LVMH group of independent directors, chairman and CEO of Bernard Arnault Albert Fr re long term business assistant, Groupe Bruxelles Lambert SA investment company through the acquisition of Burberry's 3% stake, to further expand the dialogue process between the two companies.
Finally, Coach and Burberry to discuss the relevant reports, as early as in October 2016 in newspapers. Luca Solca then said to BoF: if Coach and Burberry to merge, it is only a combination of the two issues. The history of mergers and acquisitions throughout the luxury sector, the acquisition will not help the brand appeal and the desire of the recovery, lack of motivation to enhance brand face down cost efficiency, but often think, "no action is better than action.". So, this possibility may have been ruled out.
Canada Goose - founded in 1957 - Revenue $219 million
According to Bloomberg News (Bloomberg s) Alex Barinka said that although the Canadian coat of professional brand in March 2017 IPO listing, valued at about $2 billion, shares rose nearly 40%, the expansion is still relatively young". The company has successfully created a coyote fur fashion product Evergreen Park windbreaker, in the media, opinion leaders and consumers to establish a strong attraction.
Indeed, investors and analysts are confident that the brand in the strong performance figures show high growth potential. According to the listing rules, in the fiscal year ended March 31, 2016, Canada Goose made $290 million 800 thousand in revenue over the past 3 years, the compound annual growth rate (CAGR) up to 38% in the last fiscal year, net income reached 26 million 500 thousand dollars, a growth rate of 196% over the same period.
Now Canada Goose has been listed, the private investor original capital (Bain Capital) has been the bane retreats, theoretically, luxury group issued its offer, by purchasing the initiative into its next stage of development will be more easily. The problem is that the big group is willing to be higher than the premium price of the acquisition of the brand, moving Canada Goose shareholders to sell their shares.
Kate Spade - founded in 1993 - Revenue $1 billion 400 million
On the structure, Kate Spade can bring obvious synergies for Coach and other companies, many analysts believe that Coach will soon be able to hear the news of the acquisition of the brand. 2016, Kate Spade net sales of $1 billion 400 million, adjusted tax rate depreciation and amortization of profit (EBITDA) has reached $259 million.
Combined with shipping channels and material purchase orders or to increase margins, Spade group or will re adjust the poor performance of the Coach retail, support Kate international retail expansion and cut costs.
"Kate Spade is part of the United States, mainly because it is an American brand. Currently Kate Spade 80% sales from the United states. Therefore, if the future buyers like Coach, in China and the rest of the world with infrastructure and expertise, Kate Spade as long as it can be inserted into the existing platform can immediately start selling, "said Boyd. However, the most attractive in terms of efficiency and cost savings may be due to the two companies are headquartered in New York, general and administrative expenses are more likely to have synergies.
Analysts said that the most likely to join the competition with Michael Kors still has the opportunity to use its stock on the acquisition of Kate Spade - but people are more eager to see or Coach M & a success.
Lululemon - founded in 1998 - $2 billion 300 million revenue
For all the people interested in the current development of sportswear market, Lululemon so pure single category market players can not be missed. Despite the recent poor performance of the brand, but has a strong high-end brand in the lack of qualifications, have permeability (especially the international market is experiencing exciting emerging market China sportswear) with experience in brand expansion of buyers, will see at attractive prices to buy the company value. 2015, Nike and Under Armour become its potential buyers.
Lululemon first explored the impact of popular fitness activities such as yoga and Pilates on lifestyle. But despite the rapid growth of the brand, the performance is not stable, sharp decline in revenue in recent years. In March this year, Lululemon shares plunged nearly 23%.
Patagonia - founded in 1973 - expected revenue: $700 million
In addition to the sustainable development practice into the business for decades, the growth potential, the brand can also bring a wealth of expertise in the field of sustainable development for large enterprise groups. Patagonia CEO Rose Marcario said: "we live in this planet is less and less resources, a large number of raw materials are not always have. So you have to work hard now to figure out how to solve these problems. "
As the principle of recycling economy in Private Companies, Patagonia is not too obvious acquisition targets, it is not easy to convince the company owner to sell abroad. But because of its niche in the field of environmental protection luxury positioning, has become an attractive target in the eyes of analysts. In addition, coupled with the current market preference for sports apparel, and particularly relevant environmental consumerism trend, the brand's appeal has gone beyond fashion.
Puma - founded in 1948 - Revenue: 1 billion euros
Kering is not only a potential buyer but also a potential seller. Henri, chairman of the board opened Francois Pinault in April 12, 2017 decided to withdraw from the board of directors of Puma, further strengthening the market is about to sell Puma speculation. In December 2016, Solca described the brand as "on a brighter path", and its first quarter results in 2017 showed an increase of $1 billion to $15%. For this reason, Puma to improve its earnings forecast for 2017, the stock rose more than 5%, reaching the highest level in nearly 10 years.
Although the open cloud after the acquisition of Puma is considered to open the beginning of a new generation of brand strategy, way of life, but Solca said: "but Puma and cayenne's luxury brand portfolio generated between the" synergy "never expected. Since the acquisition of the brand, the introduction of the Cloud Star Rihanna (Rihanna) as its Fenty series of designers in the form of hiring a new management team, buy licenses and improve distribution. Potential buyers or interested in the brand new track at the beginning of the acquisition.
Salvatore Ferragamo - founded in 1927 - revenues of EUR 710 million
As one of the few from the world's three largest luxury goods group controlled great family business in Italy, Salvatore Ferregamo is a rare opportunity to open cloud or LVMH: increase in footwear field a lot of revenue at the same time, the current fashion and leather goods business in trouble. In distribution, material procurement and even manufacturing production will also have an important synergistic effect.
Ferragamo brand itself, but also provides a very strong foundation for growth. Luca Solca was in the "why" Sleeping Beauty "Salvatore Ferragamo is about to wake up? "In China, the brand enjoys popularity and desire, and in France is one of the three most powerful brands in the market," he said. "In the United States, the product has gone beyond its competitors. "
Solca also analyzed the brand development strategy in February this year, wrote: the company's platform is very strong, but to narrow the gap between the industry leader in brand awareness and desire to work hard. "Since 2015 with the brand sales growth slowed, but the industry giant, who can give Ferragamo anterior guidance?
Supreme - founded in 1994 - expected revenue unknown
Kim Jones in Paris in January this year, men's fashion week flyover unveiled Louis Vuitton X Supreme joint cooperation, more media have speculated that the French fashion house acquisition of the latter. If it is not part of a larger deal, why would the companies that own such a valuable brand suddenly agree to work so closely together? Or, at least, that's what people love.
Although LVMH denied that Supreme is being acquired, has a "street tide brand sector Chanel said Supreme is obviously the acquisition target. The brand in North America, Asia and the European market, a total of only 10 stores, in addition to Dover Street Market there is no wholesale business, huge growth opportunities. Although the global expansion of the existence of a certain degree of challenge to the existence of the Supreme brand (how to continue to expand the brand but do not dilute the local manufacture of a small cult aura?) In terms of their potential targets, Supreme is indeed supreme.
Tiffany - founded in 1837 - $4 billion revenue
French Paris Bank Securities Department a report entitled ": the rise and fall of luxury flower briefly as the broad-leaved epiphyllum America" (The Meteoric Rise Fall of American Luxury) the Tiffany mentioned in the report, that the "strong brand equity" and "European luxury business model", and other "after the success of the amazing flower briefly as the broad-leaved epiphyllum fall" of the United States fashion and luxury brands apart, so it can become the main target Open Cloud and LVMH. To acquire the market valuation of nearly $7 billion 800 million Tiffany, the price is not cheap; although Tiffany in the recent period of the creation of shareholder value difficulties, but there are other opportunities to create value has not yet developed, including the development of brand watches products, to spin off silver ornaments and senior jewelry retail model etc..
Tamison O 'Connor contributed to the investigation of this paper.
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fashion
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