In­dus­try Deal­mak­ers Come Out of Hi­ber­na­tion

Ap­parel is get­ting more buzz in the in­vest­ment set right now, but not nec­es­sar­ily for all the right rea­sons.

WWD Digital Daily - - Front Page - BY EVAN CLARK

For bet­ter or worse, bankers and in­vestors are buzzing about ap­parel brands again — from newer names like Veron­ica Beard and Sézane to fa­mil­iar play­ers such as Proenza Schouler, Tory Burch and Open­ing Cer­e­mony.

While beauty has dom­i­nated in­dus­try deal­mak­ing over the past few years and ac­ces­sories and tech have also got­ten some play, ap­parel has largely been on the side­lines, with own­ers wait­ing for bet­ter days and buy­ers re­main­ing cau­tious.

Now that busi­ness in fash­ion is start­ing to sta­bi­lize (sort of ) and there is a bet­ter sense of what the brick-and- click fu­ture could look like, more brands are test­ing the mar­ket for money to fuel growth — while in­vestors are see­ing if it’s time to move on.

The di­vide be­tween those two groups can be stark.

On one side are newer play­ers clearly still at the be­gin­ning of their growth curve and gain­ing share, par­tic­u­larly in the con­tem­po­rary world.

The lat­est to cut a deal is Sézane. As re­ported ex­clu­sively by WWD last week, the five-year- old French brand just sold a 45 per­cent mi­nor­ity stake to New York pri­vate eq­uity firm Gen­eral At­lantic.

The ap­peal? Ac­cord­ing to sources, the com­pany is grow­ing at 75 per­cent and is res­onat­ing in the U.S., where it has a shop in New York’s NoLIta neigh­bor­hood and dis­tri­bu­tion in Nord­strom. Sézane’s fem­i­nine looks also cover dresses, jeans, jack­ets, shoes, hand­bags and ven­ture into home goods.

For a still-small com­pany, the com­bi­na­tion of that growth trend and that breadth of­fers in­vestors a rel­a­tively low buy-in and the hope for a lot of ex­pan­sion down the line.

The Sézane story rhymes with the tale of Veron­ica Beard, which was founded by sis­ters-in-law Veron­ica Miele Beard and Veron­ica Swan­son Beard in 2010, who based their busi­ness around the dickey jacket.

The brand took on an in­vest­ment from fash­ion in­vest­ing main­stays An­drew Rosen, John Howard, Lew Frank­fort and Kha­jak Keled­jian in 2013 and has been in growth mode since, adding its own stores, most re­cently open­ing a door in Los Angeles in Fe­bru­ary.

Sources said the brand has been out talk­ing to would-be in­vestors and look­ing

for a part­ner who could per­haps help give the com­pany a dig­i­tal boost. A spokes­woman for the com­pany said, “Al­though there has been a lot of in­ter­est in Veron­ica Beard, we are not ac­tively seek­ing in­vest­ment at this time.”

But the buzz con­tin­ues.

On the other side of the money di­vide are a set of more es­tab­lished busi­nesses that are gen­er­ally larger, with more clout and much more name recog­ni­tion. They are in sit­u­a­tions where they can’t prom­ise the same kind of growth or are in the process of rein­vent­ing in a fast-mov­ing mar­ket.

At Tory Burch, long-time in­vestor Tre­salia Cap­i­tal is con­sid­er­ing an exit after in­vest­ing in 2009 and stick­ing with the brand through years of ex­pan­sion. So far it’s un­clear whether the in­vestor will find a buyer willing to pay its price. Tre­salia is said to be work­ing with Gold­man Sachs.

Proenza Schouler has also made the rounds in the ru­mor mill. One source said di­rec­tor Ron Frasch, an op­er­at­ing part­ner at one of the brand’s key in­vestors, Cas­tanea Part­ners, ap­pears to be qui­etly check­ing the mar­ket to de­ter­mine in­ter­est.

Frasch de­nied that to WWD and said: “Peo­ple are al­ways go­ing to be lis­ten­ing to in­ter­ested part­ners, but we have noth­ing go­ing on at Proenza. We’re work­ing with the busi­ness, it’s what we do. But I wouldn’t say there’s un­hap­pi­ness or dis­sat­is­fac­tion, the team has been do­ing well. We’ve got a pos­i­tive strat­egy go­ing for­ward.”

Proenza, which like Veron­ica Beard also counts Howard and Rosen as in­vestors, has been ad­just­ing its ap­proach. The brand has shut­tered its store on Madi­son Av­enue and pulled its Paris fash­ion show, opt­ing in­stead to re­turn to New York.

It has also teamed up with Lancôme on a lim­ited- edi­tion makeup col­lec­tion for fall and has a fra­grance busi­ness that is li­censed to that com­pany’s par­ent, L’Oréal.

Adap­ta­tion has be­come the name of the game for the fash­ion es­tab­lish­ment, which is in­creas­ingly pres­sured by the rise of ecom­merce and In­sta­gram, less traf­fic in de­part­ment stores and ever-shift­ing con­sumer pref­er­ences.

Open­ing Cer­e­mony laid off 23 work­ers last month, in­clud­ing some of its de­sign staff, to right-size and re­fo­cus. The com­pany, which sold a stake to Berk­shire Part­ners in 2014, is work­ing with in­vest­ment bank Fi­nanco to ex­plore its op­tions after re­ceiv­ing some in­bound in­ter­est.

“We’ve worked with Fi­nanco in the past, so we are work­ing with them,” co­founder Carol Lim told WWD Fri­day. “I would say our process is not the nor­mal process. A lot of this started with in­bound in­ter­est from re­ally dif­fer­ent types of pro­files. These are con­ver­sa­tions that are in­ter­est­ing to ex­plore, that give us op­por­tu­ni­ties to grow dif­fer­ent stages of our busi­ness and we want to make sure it’s right.”

The ceo said the process is not be­ing driven by any timetable, other than the pres­sure of a fast chang­ing world, which fig­ured into last month’s staffing changes.

“We re­ally think about, we’ve got to shake things up and think about this in a dif­fer­ent way,” Lim said, not­ing the mar­ket­place seems to shift ev­ery two years. “We have to adapt and be a part of that so we can ex­e­cute against the pace at which every­thing is mov­ing. You have to love this be­yond breath­ing oxy­gen to stay in it at the pace that we do.”

A look from Veron­ica Beard’s pre-fall col­lec­tion.

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