The perfect storm swirling through the global fashion supply chain has left online U.K. fast fashion retailer Missguided seeking investment to bolster its balance sheet.
Once a darling of female Gen Z consumers, leading to it opening a number of expensive flagship stores, Missguided has been hit by recent cost increases and delivery disruption, with widespread media rumors of potential banking investment or a takeover by a rival retailer.
The news comes in the week that fallen fashion icon French Connection has returned to private hands following a $39 million takeover and as discount fashion retailer Matalan returns to profit but warns of more disruption ahead.
According to digital television network Sky News Alteri Investors, backed by private equity giant Apollo Global Management
Alteri Investors, which has invested in a number of European retailers, including CBR Fashion Group and Bensons for Beds, is understood to be interested in investing “tens of millions of dollars” for a significant minority shareholding in Missguided.
Discussions between Alteri and Missguided’s founder, Nitin Passi – unconfirmed by either party – form part of the latter’s search for external investment, thought to have become increasingly urgent amid growing financial pressures on the business because of supply chain challenges and rising costs.
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Missguided, which is being advised by banker Rothschild, was founded by Passi in 2009 when he was just 26, and its existing shareholders are also expected to inject at least $13.6 million as part of the company’s recapitalization plan.
Retail Rivals Watch Missguided
While external investment currently looks the most likely way forward for Missguided, it has been the subject of a number of rumors around potential suitors. In September, U.K. athleisure retail chain JD Sports Fashion – which has just been told it needs to sell Footasylum by the U.K.’s competition authority – held takeover talks with Passi before negotiations fell through.
In the meantime, Missguided founder Nitin Passi is also thought to be in exploratory talks with financing specialist AlixPartners to review restructuring options, according to reports in the Sunday Telegraph and Sunday Times, seeking $68 million in emergency funding.
At its height, Missguided opened a number of flagship stores, including at London’s Westfield Stratford City shopping center and Birmingham’s Bullring, but closed them amid high operating losses.
A spokesperson for Missguided said Rothschild continued to manage the firm’s investment process and said of the weekend reports: “While we continue to talk to a range of parties as part of that process, this kind of incorrect speculation is more than disappointing and disrespectful to our partners and staff.”
French Connection Takeover
French Connection shareholders yesterday backed the $39 million takeover of the fashion brand, placing the company in private hands for the first time since 1983.
Apinder Singh Ghura bought a 25% stake in French Connection from Mike Ashley’s Frasers Group in February and has teamed up with Manchester-based Amarjit Singh Grewal and KJR Brothers, to complete the deal. The trio also acquired the Bench fashion brand in March, via a group called Wraith Holdings International
Stephen Marks, French Connection’s 75-year-old chair and chief executive, who co-founded the chain in 1972 and owns around 42% of the company, is to receive about $16.3 million for his stake in the business.
French Connection, highly sought after in the 1990s because of its popular FCUK branding, operates 67 stores and concessions in the U.K. and 161 locations overseas under franchises and licences, but has faced years of trading issues and has not made a pre-tax profit since 2012.
Matalan Rebounds, Urges Caution
Last month U.K. discount fashion retailer Matalan saw its profits rebound in the second quarter of the year amid an uptick in revenue, but warned of continued supply chain challenges.
The Liverpool-based company made a second-quarter profit after tax and exceptional items of $15.8 million compared with a loss of $30.9 million a year earlier. For the first half, it announced profits of $3.1 million compared to a $104 million loss last year.
However, executive chair Steve Johnson warned the company has been “feeling the impact of disruption within the inbound product supply chain”, which has held up stock and added logistics costs.