Spiritual Gangster on Hunt for Capital Infusion
LOS ANGELES – Spiritual Gangster, the yoga brand that started off the mat, has enlisted a banker in its efforts to recapitalize as the business looks to kick into high gear and grow market share.
The company, started in Phoenix 10 years ago by Vanessa Lee and Ian Lopatin, counts some 2,000 retail accounts that place the brand in roughly 3,000 doors around North America. Chief executive officer Gordon Devin declined to give the company’s turnover but described it as a sub-$100 million business. The company in 2015 tapped Irvine, Calif.based La Jolla Group to handle back- ofhouse functions, such as warehousing and distribution — services it also provides to O’Neill and Hang Ten. Spiritual Gangster has now tapped Imperial Capital to raise money that would be deployed across the organization to “do what we do on a larger scale,” Devin said.
More specifically, that would entail company- owned retail, investing in technology, improving the product and getting into more fashionable offerings.
The competitive landscape demands that — not necessarily a fashion focus, but iteration of some kind from activewear players today.
“In the world of ath-leisure, you’ve got the 800-pound gorilla, Lululemon, and you’ve got everybody else playing second,” Devin said.
There’s certainly overlap of the customer bases, but the ceo described Spiritual Gangster’s core group of loyalists as a segment of the population that’s a “highfrequency shopper and high-frequency sweater. Our customer is up to a lot of stuff.”
With the ath-leisure market of incumbents such as Lululemon and fastgrowers such as Bandier and Carbon38, a certain saturation point has been reached where brands are now being pushed to layer in new facets to their businesses. That may mean any number of strategies, including building out the retail experience in the way of companies such as Bandier or Alo Yoga where commerce is almost an afterthought, to developing product for outside of the gym.
“We think about this every day,” Devin said of the competitive landscape. “What you won’t see from Spiritual Gangster is just another me too [brand]. Athleisure 1.0, as we call it, is the race that everybody’s running in at the moment. It’s really, if you break it down, how do I make athletic apparel that is pretty enough for me to wear every day? We are choosing to focus our attention not on that race, but the next race, which is how do we lead in defining what ath-leisure 2.0 is? That’s why you see us expanding in the way we are.”
The business is still dominated by women’s, accounting for between 80 to 85 percent of sales, with children’s fast-growing and men’s coming along. In the near term, Devin will continue to concentrate the company’s focus on building out women’s and kids with plenty of potential down the line to grow men’s, which is on track to have about doubled in size this year. Devin said he’s pleased with the current lineup of product categories.
He divides Spiritual Gangster’s assortment into what he called the foundational business, or “après product,” which was perhaps designed with yoga in mind but not necessarily used for said activity. About 18 months ago, the company began making active performance product actually aimed for yoga and being on the mat.
“The next area is two steps off the [yoga] mat, which is where we’re really taking those functional foundations and applying it to fashion,” Devin said. “We have started in that area, but this investment will allow us to put more resources into that.”
The shift in terms of what customers rely on the brand for is already happening. Two years ago, tank tops were over 80 percent of the business. That’s been scaled back to about 25 percent today. The introduction of a jumpsuit saw sales grow over a 12-month period to 15 percent of the online business, making that product just as large as Spiritual Gangster’s T-shirt business.
There’s also a question of companyowned retail and raising money would partly be funneled toward those aspirations. Spiritual Gangster has shopin-shops set to open in Bloomingdale’s. Freestanding retail is part of the plan to increase accessibility, although the company will scale carefully.
“It’s not being on every street corner, but having a physical retail presence on the best street corners in North America and internationally,” Devin said. “We currently stock and sell out just too quickly, which is a nice problem to have, sometimes, in retail.”
The 10-year-old activewear brand is going to outside investors for the first time to raise money.