The Business of Fashion: The Investment
It would be a premature to write off a $200 billion industry - fashion. Bigger than books. Bigger than movies and even bigger than music. Global sales of luxury brand, not surprisingly reached more than 106 billion Euro.Fashion is not limited to high street brand dresses or clothing lines. Take into account accessories like handbags in which contribute at least $5 billion in sales.
The embodiment of characteristic representation makes fashion appealing to the masses. Cultural theorists may claim that fashion reflects on the ideal social status representation.
Economists attempt to define their assumptions of fashion demand or even better to come out with the consumption and conformity - an economic theory of fashion.
However, for investors, fashion is just another business to acquire, buy out, merge, consolidate, grow and sell. Too often, the business cycle of fashion is longer considering the building up of the goodwill and branding. Even so, the mechanism is still the same. Get in, grow it and get out.
Needless to say, the risk is as subjective as the industry itself.
Little that 'we' know many fashion brands are actually backed by private equity investors. British's New Look was backed by Permira and Apax Partners. German's Frontline has Acton Capital Partners on the board.
You have to mention 'the economy of Milan'.
Permira, in 2007, completed the buyout of Valentino Fashion Group for $3.5 billion. One of the most talked-about acquisition in the fashion industry. The acquisition included labels Valentino, M Missoni and MCS Marlboro Classics as well as 51% stake in +HUGO BOSS. Of course, Valentino Garavani resigned afterwards.
The buyout or acquisition is usually taking place on more established and luxury consumer products. Others are more on finding the underexposed or emerging brands into global phenomena. Focus is more on the brand expansion, increased product breadth and depth, and the penetration of new distribution channels.
The acquisition of Warnaco Group, Inc, the maker of the largest global branded lifestyle apparel companies by PVH Corp proved the investment of fashion should not be taken lightly. Warnaco Group has +Calvin Klein and +Tommy Hilfiger under its roof including +Van Heusen, +IZOD, ARROW, Bass, +Speedo USA, Olga and Warner's. You know the pro-forma revenue of those brands? Over $8 billion.