financial
financial

Boom and Gloom

The economy swung all over the place, from the stumbles of Wal-Mart and the subprime mortgage crisis to the continued strength of the luxury market and a flood of private equity money in search of fashion properties in which to invest.

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WWD Year In Fashion issue 2007/12/11
The economy swung all over the place, from the stumbles of Wal-Mart and the subprime mortgage crisis to the continued strength of the luxury market and a flood of private equity money in search of fashion properties in which to invest.

From the business and financial perspectives of retail and fashion, this was a year of transition.


View the full coverage of  WWD Year in Fashion 2007 at www.wwd.com/yearfashion07

Among the bigger macroeconomic developments was a tectonic shift in the global M&A market. Dramatic swings in consumer spending and confidence also marked the year, as did rising energy and raw material costs as well as hints that the aspirational luxury consumer could be pulling back after five years of robust spending.

And, due to the collapse of the adjustable-rate mortgage market, 2007 included rabid volatility on Wall Street, with many retail stocks setting 52-week lows in the second half, as well as the ongoing devaluation of the dollar against other currencies, especially the euro. On the bright side, the weak dollar brought hordes of shoppers and investors to these shores, trawling for bargains.

Some surprises included VF Corp.'s selling of its founding namesake intimates business and a string of investments in the designer world. A report surfaced last summer that KKR might be interested in acquiring Macy's Inc., and Barneys New York became caught in a bidding war. Subprime market woes forced KKR to reconsider its strategies, while Middle Eastern investment firm Istithmar beat out Fast Retailing for Barneys. Fast later vowed to hunt for other targets.

Here's a wrap-up of the booms and busts that characterized 2007.

M&A Mania Slows, Shifts

The implosion of the credit markets due to soaring foreclosures from homeowners unable to keep up with rising adjustable-rate mortgages had a chilling effect on the global M&A market. Private equity firms, faced with tightened lending from banks, rethought their acquisition strategies. The result was a halt to three solid years of leveraged buyouts that involved high multiples of eight and nine times pretax earnings.
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