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BFD Expert Voices - Retail Deals

BFD Expert Voices

Permira-backed Reformation isn't on the market or prepping an S-1 just yet, CEO Hali Borenstein told Kimberly on the sidelines of Shoptalk.

Why it matters: Market conditions are improving and the global IPO market is at an inflection point for companies with optimal financials and a good story.

By the numbers: The sustainable clothing brand Reformation aspires to be a billion-dollar company and to get there, it may need to pursue some kind of financing in the future, Borenstein says.

The company booked more than $350 million in sales last year.

Catch up quick: Permira acquired a majority stake in 2019 for an undisclosed price.

Borenstein expressed confidence in an IPO as a potential exit last year.

The latest: The PE owner isn't in a rush to offload its stake. "They feel they have a lot of value already in the business and can continue to realize value," Borenstein says.

What's next: Approximately 20% of Reformation's revenue comes from outside the U.S., and Borenstein says the company will continue an international push.

The company also aims to expand its stores by 10 to 15 a year, Borenstein says. It also plans to work with more wholesale partners.

Swimwear is also back in the catalog, as Reformation relaunches its swimwear line made of biobased textiles.

Reformation scrapped its first line in 2019 because the fabric that it was made from — Econyl nylon, a regenerated textile that comes from ocean and landfill waste — wasn't deemed sustainable enough because of the plastic component, Borenstein says.

This time around, Reformation partnered with Italian fabric manufacturer Fulgar to make EVO, a renewable textile that is plastic free and made from the castor plant.

Zoom in: Reformation says it works with emerging startups and NGOs to identify technologies and companies making sustainable fabrics.

Reformation regularly makes investments in these companies. Typically the agreement is structured without any equity attached, but Reformation helps bring the new material to market.

"Anytime we introduce a new material, it goes through very strenuous testing with our supply chain with our sustainability team to get approved," Borenstein says.

1 big thing: Reformation not looking for an exit just yet

Illustration of a clothing hanger size tag with an infinity symbol in place of a size number

Kendra Scott, an Austin, Texas-based lifestyle brand, is seeking capital to fund its expansion plans, CEO Tom Nolan tells Richard exclusively.

Why it's the BFD: The company has one of the most compelling financial profiles in fashion and accessories and is certain to attract suitors.

Zoom in: It would not be surprising if Kendra Scott enters into a transaction this year, which would give it "gas" to put on the "fire," Nolan says.

"We would make a great public company," he notes.

He declined to comment, however, on which options it is exploring, such as a sale or a transfer of shares. Nolan also declined to say if Kendra Scott is working with or interviewing investment banks.

Catch up quick: PE firm Berkshire Partners announced in 2016 plans to acquire a significant minority stake in the business, which valued the company at $1 billion.

Norwest Venture Partners remained a minority investor at that time.

What they're saying: "We look at best in class public companies and operate that way as a private company," Nolan says.

"We are private today and not worried about what future looks like," he says.

"For us to do the things we want to do and achieve, we need capital," he adds. "Right now we have a strong financial balance sheet, low debt, and free cash flow. When/if we need access to different forms of capital, we will evaluate."

By the numbers: Kendra Scott's revenue increased nearly 20% year over year to around $500 million, the CEO says.

It grew EBITDA — already at a healthy margin —  by more than 30% last year, he says.

E-commerce traffic grew 26% year over year, while the company plans to expand its store count from 138 to 200 over the next three years, Nolan says.

The company has also given back $65 million since 2010 via its philanthropic efforts.

What's next: Kendra Scott expects sales will continue growing by double digits for the foreseeable future. The company plans to open at least 15 stores this year.

Driving the news: Kendra Scott has been introducing new products, including a Southwest-inspired jewelry collection called Yellow Rose.

It teamed up with Mattel to produce a second collaboration with Barbie last year.

Kendra Scott unveiled a line of fragrances for the first time.

And it began selling products at Target, with pieces priced under $40 each, a side of the business it is carefully growing, Nolan says.

The latest: Kendra Scott is now offering a lab-grown diamond collection to make fine jewelry more accessible price-wise to its customers, the company said today.

2. The BFD: Kendra Scott prospects for cash 

Photo description: A woman wear's necklaces and rings featuring lab-grown diamonds.

A woman wears necklaces and rings featuring lab-grown diamonds. Photo: Courtesy of Kendra Scott

MNC Capital, a Dallas-based family office, increased its takeover offer for sporting goods and ammunition manufacturer Vista Outdoor (NYSE: VSTO) to $3 billion, or $37.50 per share.

Why it matters: This could help Vista sidestep a U.S. national security review, which was launched after it agreed to sell its firearms and ammo division to Prague-based Czechoslovak Group for $1.91 billion, Axios' Dan Primack writes.

Yes, but: Vista has already rejected MNC once, questioning the firm's financing commitments and arguing that the spin-off plan would provide more value to shareholders. MNC's original offer was for $35 per share.

The bottom line: "CSG has faced tough scrutiny before. The Czech company's C.E.O., Michal Strnad, said in 2022 that it took his company 'seven long months' to win CFIUS approval for its acquisition of Fiocchi, another arms maker .. MNC asserted that the CSG deal would give a foreign-owned company commanding control of the West's supply of primers, the propellant in ammunition." — NY Times

3. MNC raises its bid for Vista Outdoors to $3B

Illustration of a suited person's hand pointing a finger gun with a one hundred dollar bill dropping from their finger

🔔 Ibotta, a Denver-based provider of cash-back rewards programs, has filed for an initial public offering on the New York Stock Exchange under the ticker "IBTA."

The company netted $38.1 million in profit on $320 million in revenue in 2023, up from a net loss of $54.8 million on $210.7 million in revenue in 2022.

🐕 Advent International and CVC Capital teamed up to bid for Cinven-owned Partner in Pet Food, FT reports.

Talks are ongoing and there is no certainty a deal will be struck. Cinven previously wanted about €2bn for the business, FT says.

Cinven acquired PPF in 2018, adding to it through acquisitions. The company booked €800 million in 2023 sales, FT reports, citing a source familiar.

🍨 Unilever CEO Hein Schumacher says the Netherlands has "a good chance" of hosting a potential €17 billion listing of its ice cream unit.

"The most likely route is to split off with a separate stock exchange listing and its own head office," Schumacher said in an interview with the Buitenhof TV show.

 The government will present an outline to the parliament this week on alternatives to the bank and share buyback taxes as well as to the winding down of the expat tax break, people familiar with the matter told Bloomberg.

🖥️ Fast-fashion giant Shein plans to make its supply chain technology available to outside brands and designers, the Wall Street Journal reports

In a letter to investors, executive chairman Donald Tang called the initiative "supply chain as a service." 

The premise would let outside brands leverage Shein's system to test new fashion items in small batches and track their popularity.

4. Retail therapy

an illustration of a hand in a meditative pose holding four orange shopping bags

• OTB, parent of clothing brand Diesel, acquired a majority stake in luxury men's and women's footwear manufacturer Calzaturificio Stephen. https://axios.link/3IQrHqL

5. Retail transactions

• Jonathan Tibus, a managing director at Alvarez & Marsal and a turnaround specialist, has been named CEO of Red Lobster, replacing Horace Dawson, who served in the role for less than six months. https://axios.link/3PDdPE9

• Rob Lynch, the CEO of Papa John's International, will be the new CEO of Shake Shack effective May 20, the burger chain announced. He replaces Randy Garutti. https://axios.link/4asmQIh

6. It's Personnel

🌱 What we're doing: Kim just added a really big peace lily and monstera to her plant collection. She's not sure if she'll go as far as dressing in Martha Stewart's gardening apparel line, but hey, she'll look.

✏️ Big thanks to editor Claire Rychlewski and copy editor Mickey Meece for today's edits.

March 25, 2024

1 big thing: Reformation not looking for an exit just yet