Try out fashion for size
The UK fashion industry was valued at £50bn in 2015 and is forecast to grow steadily at c.4% p.a. over the next three years. The market, dominated by womenswear (approx. two-thirds of the total market), has undergone something of an evolution over the past few years with some key sectors showing significant investment potential - Heritage Fashion and Fashion Sportswear.
Here’s what we would be trying on for size.
After years of mass-market, fast fashion provided by the likes of Arcadia, Inditex and the H&M Group, retailers with a strong heritage are striking back.
Consumers are increasingly seeking a more unique product and stronger brand ‘story’ that makes them feel emotionally connected to the brand. Heritage fashion retailers are in the perfect position to capitalize on this, with L.K. Bennett, for example, benefitting from its strong British credentials – as worn by the Duchess of Cambridge – and Acne selling its unique take on Swedish-style to consumers eager to get of slice of Scandi-chic.
What’s unique about heritage brands is their strong international appeal, transcending local trends and taste – and thanks to digital innovations they are more accessible than ever to aspirational shoppers around the globe (see below, growth of online fashion).
On your watch list
Laura Ashley. founded in 1953 by Laura and Bernard Ashley, the company started life producing printed textiles for furnishings before expanding into clothing design and manufacture in the 1960s. the business is now an international lifestyle brand spanning home furniture, décor and accessories as well as fashion apparel. It has 209 stores in the UK, alongside Ireland and France, and a boutique hotel showcasing its designs. 2015 sales totaled c. £290m, down from 2014. There is a big opportunity for the brand in Asia where its unique English-romantic style would be popular, meanwhile in the UK, the core brand needs revamping to appeal to a more style conscious customer than previously.
Acne Studios. Acne, based in Stockholm, was created through the founder’s interest in photography, art, architecture and contemporary culture and now enjoys a cult following among the fashion pack for its highly wearable, yet eclectic pieces. The brand has enjoyed global success with flagship stores across Europe and The US, with a further 650 international accounts and 2015 sales of c.€125m. As consumers’ desire for all things Scandi shows no sign of abating, there are great opportunities to continue to open more stores in target markets, particularly Japan and Korea, alongside continuing to build e-commerce sales.
Jigsaw. Started by a husband and wife team nearly fifty years ago, Jigsaw offers timeless, impeccably stylish clothing made from high quality textiles but at high street prices. Still privately owned, there were rumours earlier this year of a sale that for now seems to have been put on hold. However, growth continues apace with ten store opening opportunities and further overseas expansion on the cards for this year. Last year revenue was up 19% to £90m. Definitely one to watch.
Being fit and healthy has become the latest status symbol, with boutique gyms, wellness centres, restaurants and cafes all catering to this burgeoning audience. Underpinning this are a number of sports and lifestyle fashion brands allowing consumers to look, as well as act, the part. The global “athleisure” sector is estimated to be worth £190bn, with Morgan Stanley predicting growth of 30% through to 2020. In the UK alone, the sportswear market is estimated at c.£4bn.
The most successful athleisure brands are those that have managed to elevate sportswear from functional to high fashion, marrying highly technical fabrics and cutting edge design with flattering cuts and the latest season’s colours. This isn’t an entirely new phenomenon, with Reebok announcing its partnership with Stella McCartney back in 2004, but it is in the past few years that it has really taken off. As evidence of sport’s new status in fashion, global e-tailer Net-A-Porter launched “Net-A-Sporter” in 2014 but later incorporated it into the main website due to the huge number of customers buying sportswear for leisure as well.
Several larger brands such as Primark and H&M have since got in on the act, launching their own sportswear brands, however it is the smaller retailers leading the way.
On your watch list
Sweaty Betty. Founded nearly 20 years ago, the brand has evolved from merely retailing to selling the lifestyle to its customers, offering free gym classes in-store, workout videos, and a blog. Tellingly, the brand not only allows you to shop by activity or product but also provides a fashion edit and various different ‘looks’. Sweaty Betty capitalised on the Olympics earlier this year with a limited edition London edit that has managed to largely sell out despite the higher price points. Sweaty Betty had turnover of £31.4m in 2015 from 38 stores and 4 concessions, with clear scope for more stores and further online sales given the athleisure trend has far from peaked.
Peuterey. Inspired by the peaks of Mont Blanc, Peuterey, founded in 2002, has positioned itself in the luxury casualwear market, with a particular focus on outerwear. Taking the latest fabric technology and combining it with Italian design has resulted in a highly covetable product, generating sales of c.£65m (est.) in 2014. With a limited store footprint and online sales – and no UK presence – there’s a whole mountain to climb in terms of where the company could go.
For more information, please contact Siobhan Gehin, head of Kurt Salmon’s strategy and private equity service offer in the UK and Ireland.