Precarious as the economy is, Gilles Mendel has proven there is money to be had — his designer label, J.Mendel, has lined up a significant investment by The Gores Group.
J.Mendel executives declined to disclose whether the Los Angeles-based equity firm has taken a majority stake in the company or any other terms of the deal. J.Mendel, which has four freestanding stores and permanent retail space in four other key outposts such as Harrods, is believed to be a $30 million wholesale and retail operation.
Fashion and the luxury sector is new territory for The Gores Group., which has acquired 50 companies — Stock Building Supply, Lineage Power and Autolog, among others — with worldwide revenues of more than $15 billion since Alec E. Gores started the company in 1987. The firm, which also has offices in Boulder, Colo., and London, has a current private equity fund with committed capital of $2.9 billion.
Mendel, who describes his new role as “a substantial shareholder,” will continue to serve as chief executive officer and chief designer. Having spoken with six potential investors over the past year, he said beyond being “an extremely savvy business person,” Gores runs a firm with a family atmosphere. That means something to Mendel, who has been the driving force in evolving his label from a notable fifth-generation French fur house to an international luxury fashion brand.
“I really liked the fact that, besides the interest they have in my company, they really have the muscle to make other acquisitions,” Mendel said. “I know if there is anything that will bring more synergy and growth to my business, they will be there with it. That was something none of the other investors were able to bring to the table.”
Ariel Ohana of Ohana & Co., a Paris-based investment banking firm, first connected the two parties.
The Gores Group plans to delve deeper into the fashion world, according to Mendel. “I like that I am their l’eclaireur into the luxury sector,” he said. “I am the first of hopefully what will be many great business transactions that The Gores Group will do in the future.”
The Gores Group also expects this deal to be the first of many in the luxury fashion sector, said managing director Jeffrey Schwartz. The company was eager to jump in due to the current limited investments in the fashion industry, the need for better management skill sets for designers and the anticipated return to more discretionary spending, he said. The firm specializes in improving the back office and cost side of businesses run by individuals “who are not true business people,” Schwartz said.
“There are many, probably hundreds, of fashion companies that are run by very talented creative people, but they are not as focused on running their businesses for profitability as they are for designing clothes,” he said.
Well aware that most financial institutions recently have been reluctant to invest in the underperforming fashion business, The Gores Group views that as an opportunity. In addition, executives there believe consumers eventually will want to indulge in high-ticket fashion items. That is especially true of those who have feigned restricted spending out of respect for those who have been blasted by the economy, the ailing housing market and tighter credit lines, Schwartz said.
The company is not a complete stranger to fashion. Gore’s daughter, Rochelle Gores Fredston, owns the Los Angeles boutique Arcade by Rochelle Gores.
By teaming up with The Gores Group, J.Mendel plans to build on the momentum it has gained in the past 18 months, said the label’s president and chief operating officer, Susan Sokol. In that time frame, wholesale distribution has expanded from 14 doors to 70, and from 12 countries to 21, she said. The company has extended its reach beyond the modern fur pieces, evening gowns and cocktail dresses that initially wooed socialites and Hollywood actresses to the label. (“Modern Family” actress Julie Bowen wore a strapless blue J.Mendel gown to Sunday’s Emmy Awards in Los Angeles.)
Now that J.Mendel has broadened its assortment, introduced late-day-into-evening dresses, bulked up wholesale distribution and tightened pricing, the company plans to continue to fine-tune those areas and is considering others, such as fur accessories, luxury outerwear, knitwear, suits, tops, daytime dresses, knitwear and sweaters. “Clearly, perfume is a number-one choice and opportunity,” said Sokol, adding that leather accessories, eyewear and possibly shoes may be opportunities down the road.
“Over the next year, we plan to stay very focused and steadily grow and support the strongest parts of our business,” Sokol said.
Asked if relinquishing some of the company’s ownership was bittersweet since, until now, it has been an independent, family-owned business for decades, Mendel said: “I think my dad would be very proud of me. I wish he were here to see the success we’re going to bring to this new venture,” he said. “I don’t feel at all that I am losing anything. I am gaining so much through these people and this opportunity. And I am living my dream.”
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