On the heels of finalizing the previously-announced acquisition of Jil Sander from Japanese retailer Onward Holdings, OTB Group CEO Ubaldo Minelli says that the Breganze, Italy-based fashion group is looking to “accelerate its long-time project to create an Italian luxury hub,” something he claims that “many have tried but that only [OTB founder] Renzo Rosso has managed to do.” In other words, the recent inclusion of the minimalist fashion brand that Jil Sander launched in Hamburg, Germany back in 1968, appears to be only the beginning for OTB, which currently maintains a roster of brands, including Diesel, Maison Margiela, Marni, Viktor & Rolf, Paula Cademartori, Staff International and Brave Kid. 

OTB’s acquisition of Jil Sander is striking for a number of reasons, including in that it is the latest development for the brand, which has seen a string of ownership changes and creative director swaps since Sander first launched the company – which has been celebrated for its shapes, starkness, fabric innovation, and a deft understanding of fit – and listed it on the Frankfurt Exchange in the late 1980s. Sander used the influx of cash to expand the brand beyond the confines of Europe to the U.S. and Asian markets, and boost revenues to north of $100 million by the mid-1990s. By the end of the decade, the company embarked on its next stage of growth, which saw Ms. Sander sell a 75 percent stake to Gruppo Prada in 1999 with the goal of leveraging Prada Group’s leather goods and footwear expertise to grow the business by way of those channels. 

In furtherance of what would prove a consistent merry-go-round of leadership and ownership changes, Sander left the company shortly after the Prada takeover, only to return three years later – just to leave once again one year later. 

The early years of Prada’s ownership would turn out to challenging; the collections did not connect, and sales suffered. Prada took a risk in appointing young Belgium menswear designer Raf Simons to right the ship in 2005. Even with new artistic direction, the brand’s growth was slow, and just six years after taking a controlling stake, Prada sold off the Jil Sander label to Change Capital Partners, a management group founded by former Marks & Spencer Chairman Luc Vandevelde, a move that proved to help bolster the brand financially (and revert it back to a privately-held company), but yet again, the ownership was short-lived, with London-based Change Capital Partners selling the company after two years to Japanese apparel giant Onward Holding Ltd. 

Onward has been the longest-serving steward of the Jil Sander brand aside from Ms. Sander, herself, who Onward brought back for a short stint following Simons’ ouster in 2012. Since Ms. Sander’s most recent departure, former Prada designer Rodolfo Paglialunga took the top creative job for a few years followed by the appointment of current creative direction team of Lucy and Luke Meier. 

“The Visibility it Deserves”

Reflecting on the latest Jil Sander deal, the financials for which have gone undisclosed, OTB’s Rosso said last month that he has “admired and respected Jil Sander since it was first established,” noting that “despite the changes of ownership and creative direction, the house has always stayed true to its founder’s vision, maintaining an absolute commitment to beauty, quality and its signature minimalist approach.” 

Given Rosso’s well-known passion for the brands that fall under his growing umbrella, and “the financial, organizational [and] managerial tools” currently boasted by OTB, according to Minelli, Jil Sander’s new ownership should serve to renew the creative energy of the brand, and expand its footprint in order to give the brand “the visibility” that Rosso says that “it deserves.” Specifically, this will likely involve Jil Sander continuing to grow its collections, expand its sales categories, and boost its commercial assortments. Top of mind is, of course, leather goods. Nearly 30 years after the Prada takeover, which focused on leveraging the Group’s expertise in leather goods and shoes, Jil Sander still has a relatively small business in these categories, and thus, expansion in this area under OTB is almost certainly in the cards. Maison Margiela, for instance, has seen its footwear and small leather goods assortment grow in recent years to wide commercial success under the watch of OTB. 

Moreover, with the impact OTB has seen in the fragrance category in connection with its Margiela and Viktor & Rolf labels, it would not be surprising to see a revamping of the Jil Sander fragrance lines. 

A Larger Trend 

All the while, the Jil Sander deal is not only noteworthy in underscoring “the strength and ambition of the Italian fashion group,” as WWD wrote last month, it is also interesting in that may signal more moves of its kind by OTB. During a digital conference last week, Minelli – who took the chief executive role in January 2018 – said that the group is in M&A mode, “not only looking at acquiring fashion brands, but also at possibly buying firms in the production and distribution sectors.” This echoes earlier statements that he made in early March, saying that OTB – which generated revenues of €1.32 billion ($1.5 billion) in 2020 – “had been eyeing [Jil Sander] among other brands for a possible acquisition as prices had fallen due to the coronavirus crisis.” Reuters reported at the time that “Minelli said there was a window of opportunity as industry multiples were ‘a little more reasonable’ than they had been before the COVID-19 pandemic.”

More broadly, the Jil Sander deal comes amid a flurry of activity in the Italian fashion segment, in particular, with fellow Italian group Moncler snapping up Stone Island for €1.15 billion in December, and Made in Italy Fund acquiring Milan-based fashion brand Dondup from fellow private equity firm L Catterton in March. Most recently, LVMH revealed in late April that it will boost its existing stake in Italian footwear brand Tod’s to 10 percent by way of a new 6.8 percent increase, with Diego Della Valle hinting at a potential takeover. The Tod’s founder and chairman, who has long shut-down acquisition chatter, has seemingly changed his tune, stating that the recent transaction with LVMH is “an excellent reason to consider further opportunities to be taken in the future.” 

As for future targets, TFL reported in early April, that Exor N.V., the Netherlands-based holding company of Italy’s Agnelli family, appears to be the most likely buyer for the privately-held Giorgio Armani, whose eponymous founder recently hinted as a deal. At the same time, Valentino – which Qatari fund Mayhoola for Investments acquired from British private equity firm Permira in 2012 for $856 million – has been the subject of M&A speculation for several years. (The Italian fashion house’s new beauty venture may help it to boost its valuation). And still yet, Salvatore Ferragamo, which has also been tied to rumors of a potential acquisition or majority sale in recent years, is another potential acquiree, with some sources saying that the addition of former Goldman Sachs banker Claudio Costamagna to the Ferragamo Finanziaria board is a tell-tale sign that it may be looking for a sale. 

The Ferragamo family holding company revealed in late January that the board, which was appointed in April, “would have fewer members and more independent directors, indicating the family will be less involved in the running of the business,” per Reuters, and seemingly alluding to an impending sale. (Dealbreaker reported early this year that Ferragamo had “called off plans to sell a minority stake in the company.”)

The private label is a decades old concept from department stores’ in-house clothing collections to the burgeoning lineup of goods that are marketed under Amazon’s own brands, the private label is a decades-old concept that, on one hand, has been viewed as substandard by consumers and retailers, alike, but on the other, is an opportunity for companies to generate greater revenues and to boost their margins. Despite having a decades-long track record of acting as a linchpin of big box retailers’ businesses, private labels have rarely made much noise in department stores or specialty boutiques. Yet, as retailers have looked to disrupt their reliance on third party brands, grow their revenue streams, and generate hype paired with exclusivity, there has been a resurgence of interest in and attention on private labels and for good reason. 

The result of the creation of brands and/or products that are ultimately sold under a retailer’s own brand name and/or exclusively through their channels, private labels are something of a lifeblood for some retailers – big box stores come to mind. But the private label practice is not limited to players like Walmart or Target. Urban Outfitters, for example, revealed in 2018 that over 50 percent of its business was generated by way of private label brands. Buzzy e-commerce site Revolve had its own labels – from L’Academie to LPA – to thank for 36 percent of its $580.6 million in sales in 2019. 

Over the years, retailers have incorporated private labels into their portfolios in a variety of ways and to varying levels of success: some create new brand names, some trade under their name; others invest in third-party brands making them defacto private brands, with each of these variations potentially presenting a great margin-driving opportunity for retailers. Many big box and department stores utilize the segment as such, thereby, giving themselves the chance to boost the standard markups for fashion retailers. Instead of the traditional markup of 2.2 to 2.8 times the wholesale price of a garment, private labels typically see that markup double. 

Other retailers have not just leveraged private brands’ margins but used these labels as a way to grow brand equity in a way that elevates their brand as a whole beyond the scope of private label. A perfect example of this is London-based retailer Joseph, which launched as a private label venture in 1983. The brand – which shows their private label collection in their Paris showroom – is positioned as a bridge price luxury brand and is stocked in celebrated boutiques and department stores globally. As a result of the success of its eponymous label, Joseph has significantly grown the scope of its reach and name recognition. To be exact, the company has opened 23 mono-branded brick-and-mortar stores across the world, demonstrating how its private label brand has become the backbone – and financial driver – of the company. 

Big Names in e-Commerce

Despite the margin-boosting and equity-inducing benefits that can come hand-in-hand with private label ventures, many luxury and specialty boutiques have been somewhat slow to the game. Nonetheless, it seems that that is not only changing, but it is changing quite rapidly. The move by Farfetch in 2019 to acquire production and licensing firm New Guards Group, for instance, has been viewed by some as an opportunity for Farfetch to get into the business of private brands. New Guards Group has, after all, shown an ability to create brands from scratch rapidly and successfully. Over the last several years New Guards Group has played a pivotal role in launching several big-name brands, with its current roster including the likes of Marcelo Burlon County of Milan, Palm Angels, Ben Taverniti, Unravel Project, Heron Preston, and Alanui, among others. (It also is the primary licensee of Virgil Abloh’s label Off-White). The burgeoning Milan-based group’s expertise in this arena will be pivotal to how Farfetch experiments within the private label sector. 

More recently, Stadium Goods, which Farfetch acquired in 2018, announced this past week that it is launching a brand new in-house label, Stadium. The launch of Stadium – which is expected to offer up a branded assortment of ready-to-wear – is an example of the opportunities presented by New Guards Group coming to fruition. While not a luxury product, per se, the impending offerings of Stadium shows a willingness by Farfetch leadership to experiment with growing their brand equity and opening themselves up to new revenue streams. Whether the shoe resale platform will be able to entice consumers with self-branded apparel is yet to be seen.

At the same time, SSENSE has also entered the private label landscape – albeit in a different manner. The large luxury fashion e-commerce platform-cum-editorial tastemaker’s entry is through SSENSE Works, a branded platform for collaborative products. It also comes by way of a series of investments in several brands that SSENSE currently stocks. Against this background, one of SSENSE’s first impactful moves in the private brands sector has been through their investment in and launch of former Yves Saint Laurent and Ermenegildo Zegna creative director Stefano Pilati’s brand, Random Identities. Leveraging its well-known content creation expertise, SSENSE launched the label through an impactful presentation in its Montreal headquarters in March 2018, which was shown digitally via SSENSE’s online platform. 

In much the same way as the New Guards Group brands are not runoff-the-mill private labels, neither is Random Identities. Both mark a new facet of this segment. While SSENSE and Farfetch have differing approaches to building – and maintaining – private brands, both have invested heavily in infrastructure that can support the brands’ growth. For Farfetch, this comes in the form of its acquisition of New Guards Group, and for SSENSE, in its editorial platform investment, not to mention both business’ native field, e-commerce. In both cases, the retailers’ unique strategies are enabling them to take a stake in the private label business in a manner best suited to their expertise, and potentially reap sizable benefits as a result. 

Specialty Boutiques Double-Down

Meanwhile, on the opposite side of the spectrum, small, specialty boutiques, such as Machus in Portland, Oregon, are adjusting their approach to the practice of private labels. In business for coming up on a decade in November, Machus has experimented with its private label on and off for years. In 2020, however, owner Justin Machus began committing more time, energy and budget into the company’s private label brand, and it has paid dividends. 

The retailer’s in-store brand, Machus Private Label, provides customers with unique styles that complement the designer brand assortment in the store at an accessible price point. This past year has seen Machus’s private label expand beyond t-shirts and hoodies into a more robust assortment, with Machus adding the likes of cargo pants, flannel shirts, and candles into the mix. The Machus Private Label brand products currently experience high conversion rates even when designer brands hit the sale rack. In fact, Mr. Machus says that he has experienced strong enough sell-through on the private label goods that the company has committed to expanding the assortment with the target of 20-30 percent of its seasonal buys to be dedicated to the in-house brand.

A look at the variety and evolving uses of the private label model across a number of different retailer platforms seems to clearly demonstrate that this is a quiet – but important, impactful, and growing – trend in the fashion retail landscape. The relationship between retailers and customers allows for retailers that have adopted this model to exhibit a nimbleness to create product that is highly likely to resonate with their client base and swiftly respond to the shifts in their desires and needs. 

As retailers continue to diversify their budgets, looking for impactful opportunities to grow their brand equity and revenue, private labels are an avenue to keep an eye on. In terms of which of these unique approaches will have the greatest overall impact, we will have to wait and see.