Etam Developpement is preparing for an eventual face-off with Victoria’s Secret by injecting more glitz into its DNA, but sees European competitors and the need to be more nimble as its biggest short-term challenges.
The $1.42 billion Paris-based textile company, which designs and sells lingerie and women’s apparel through its Etam, 1.2.3 and Undiz retail chains, has adapted the glamour-based marketing strategy of Victoria’s Secret and is ramping up e-commerce in a push to be “the European leader in lingerie,” said Laurent Milchior, co-managing director of the Etam Group.
Milchior acknowledged the company needs to inject a “new mentality” into its conservative corporate culture, an approach that embraces fast-fashion and quickly identifies trends in both fashion and retail.
“The European retail landscape has changed dramatically in the past 10 years with companies such as H&M and Inditex, where price and fashion are so important,” he said. “This is a bit of a challenge for us. We have a 10 percent share of the [estimated 3.2 billion euro, or $4.3 billion at current exchange] French lingerie market. While the competition is building in the lingerie industry, our market share makes it easier for us. However, we are feeling more challenged in [ready-to-wear], because we haven’t been reactive enough in the past several years.”
Taking a page from Victoria’s Secret, part of the strategy is focused on projecting more glamour. Eva Herzigova, a former Wonderbra model, unveiled her rtw collection, Eva Herzigova Pour 1.2.3, this month. Natalia Vodianova, a former Calvin Klein Underwear model, has a three-year deal to design a signature line of lingerie for Etam called Natalia Pour Etam.
The company will launch a 1.2.3 Web site in July with items from Herzigova, which will be similar in format to the Etam site that features Vodianova and her lingerie. And the company plans more glitzy runway shows that coincide with fashion week in Paris.
Industry executives, including Marie-Laure Bellon-Homps, chief executive officer of trade show giant Eurovet, believe Etam wants to have the clout in Europe that Victoria’s Secret has in the U.S. “Etam is looking to be the Victoria’s Secret of France,” she said.
Milchior said the company posted a 5.5 percent increase in its 2009 sales of 1.02 billion euros, or $1.42 billion. Etam does not break down group sales for Europe and China, but Milchior said there had been 10 consecutive quarters of disappointing results for its European business, an area that will get an overhaul.
The company said this month that it will buy back 26.4 percent of its capital for 100 million euros, or $136 million, and a proposal was filed with French financial market regulator AMF to buy back 2,857,142 shares at 35 euros a share, starting June 2. The operation will be financed partly through an existing loan of 245 million euros, or $334 million, and through an additional credit line of 50 million euros, or $68 million.
Milchior said the buyback would free shareholders who could not sell their Etam holdings because of insufficient liquidity on the stock market. Industry executives said the move will give a larger stake to major shareholders during the reorganization, providing the opportunity for smaller shareholders to get out if they disagree.
“We are at a moment where the business is really split in two, with an opportunity in China and risks in Europe,” he said. “We think that, in Europe, there is a need for an important reorganization of our stores that will not allow a very rapid recovery in sales.”
Etam operates 3,700 stores worldwide, with 750 Etam intimate apparel and rtw units, 250 1.2.3 rtw locations, a 26-door chain of fast-fashion intimates and related products and Etam China.
In China, Milchior said the brand has “2,700 points of sale, many of which are [rtw and intimates] shops in major department stores. “One sure thing is we will be expanding in China. In 2009, we opened 400 stores in China.”
For the short term, Milchior said the biggest concern Etam faces is the growing number of European retailers competing for market share. Stockholm-based H&M has 2,000 stores, Spain-based Inditex has 1,595 Zara units and 400 Oysho lingerie boutiques and Women’Secret, a Madrid-based lingerie chain, has more than 520 doors. Another competitor, Intimissimi, a retail division of the Calzedonia Co., with headquarters in Verona, Italy, maintains 1,191 intimates shops.
Predicting the arrival of Victoria’s Secret in Europe, possibly in five years, Milchior acknowledged Etam wants to broaden its global reach, but said it will be done with a more upscale presentation and brand content, saying Etam’s image is “more sophisticated.”
“We want to be the European leader in lingerie and we have a very strong brand awareness in France,” he said. “That’s why we’re working on brand content with Natalia. We have a French way of doing things. We feel that the history we have is not connected to Victoria’s Secret.”
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