These are powerful tools and fashion’s masters wield them to great effect. When a brand or a designer is particularly good at getting attention, customers follow. And when the business is well run, profits soar.
Then a different kind of dance begins.
Investment bankers come knocking with hundred-million-dollar ideas, suggestions on how to take the company “to the next level.” Through their efforts, designer businesses have come to the market at a rate not seen in years. Prada, Salvatore Ferragamo and Michael Kors all took the plunge last year. Bruno Cucinelli followed this year. More could be in the offing.
Tory Burch is of perpetual interest to the investment set. And Diane von Furstenberg’s business is being “professionialized” with the help of former Tommy Hilfiger executive Joel Horowitz, who has joined the firm as cochairman. Given Horowitz’s track record, an initial public offering could be in the cards, or at least an option as the business develops.
In Italy, there are a host of companies laying the groundwork or believed to be considering offerings, including jewelry firm Pomellato, men’s wear brand Stefano Ricci, Pianoforte, Ermanno Scervino and Dirk Bikkembergs.
Each of these businesses has its own story to tell to investors.
Michael Kors was sold as the next Coach. Tory Burch would likely be sold as the next Michael Kors. DVF could play on the designer’s broad recognition, but would need to back that up with some serious sales projections. Pomellato is being set up as another Brunello Cucinelli, but with a twist since it focuses on jewelry rather than apparel.
This is the age of the monobrand concept, but it isn’t only brands that are looking at an IPO — retailers are, too. However, retailers that carry a variety of brands have a more diffuse story to tell, which might ultimately be a harder sell for investors.
Hudson’s Bay Co. went public in Toronto in November, raising 365 million Canadian dollars, or $367.4 million — 8.8 percent less than the 400 million Canadian dollars initially projected. Private equity-owned Neiman Marcus Inc. is expected to return to public hands at any time, although experts note the chain will have to rely on the strength of its cash flow to attract investors given concerns about the strength of the luxury market.
The IPO payoff can be huge, but to get there, companies have to be ready to make some new friends.
Firms usually orchestrate a traveling “roadshow” to convince large investors to buy their stock at a set price. Those investors then turn around and sell their shares on the open market. As with all things finance, it’s a process driven by numbers, at least on the surface. Growth is what investors want — a highly profitable women’s brand with 100 stores and plans to add 200 more, while expanding into e-commerce — and perhaps men’s — is seen as a gold mine. A small chunk of that company bought early on will be worth all the more when the business expands.
But how does one convince jaded Wall Street types that the business plan is more than a PowerPoint presentation? That a brand is guided by a steady hand and clear vision? That growth is not just a possibility, but almost an inevitability?
That’s the art of the IPO and that’s when designers are often called upon to bring on the charm, to convert investors into believers.
Kors — with nine years as a judge on “Project Runway” and 71 percent brand recognition in the U.S. — needed to do very little to get onto Wall Street’s radar. The roadshow was left to chief executive officer John Idol. Behind the scenes were Lawrence Stroll and Silas Chou, who, along with Horowitz, engineered the enormous wealth creation at Hilfiger in the Nineties.
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