The middle ground in fashion seems to be shrinking — these days it’s monobrand or multibrand.

This story first appeared in the November 2, 2016 issue of WWD. Subscribe Today.

And everyone stuck in between finds themselves having to pick a team.

Among those playing on the multibrand side are LVMH Moët Hennessy Louis Vuitton, Kering, PVH Corp. and VF Corp., all of which have grabbed market share by building portfolios of brands that balance growth. It’s not an easy or inexpensive approach, but it’s a model that’s over the years created industry leaders who are diversified enough to withstand most of the challenges wrought by the whimsies of economics and style.

Then there are the focused players: Michael Kors Holdings Ltd., Ralph Lauren Corp., Burberry, Kate Spade & Co. and more. They found a good thing and ran with it, building brands that resonate deeply and connect with consumers through many product categories.

In the past, these companies could eke enough out of their main brands (and in some cases their closely related offshoots) to move the growth needle and keep the almighty shareholder happy.

That approach is no longer so clear cut.

“Brands are no longer destinations, they are more like pit stops,” said Adheer Bahulkar, a partner in A.T. Kearney’s retail practice, pointing to the many consumer studies showing that younger shoppers today are less loyal to brands than their parents.

Shoppers today simply might not want everything from a single maker.

“The opportunity to upsell the lifestyle brand on consumers is reducing,” Bahulkar contended.

And so the costs of operating a megabrand — which could span apparel, outerwear, bags, jewelry, home goods and more — are escalating, analysts caution. When one brand cuts across many categories, it becomes more complicated and much more expensive to run since disparate merchandise categories all need to work together, from design to marketing.

Bahulkar suggested brands focus on the goods they’re best known for and collaborate with other experts in other merchandising areas to provide a broader offering to shoppers.

Think of J. Crew, which is still working to fix its core brand while it manages a $1.5 billion mountain of debt, but carries other brands, such as New Balance, in its largely J. Crew-branded stores. This helps give the stores a broader offering, while keeping the company away from the back end of the sneaker business.

While there might be a need for hip sneakers in J. Crew stores, the sneaker market does not need J. Crew to get into the business.

Not everyone has gotten that message, or at least there seem to be more brands making a go of it than fashion can handle right now, leading to a lot of smaller, less-than-profitable players.

“There’s definitely product pollution,” said designer Diane von Furstenberg at the recent WWD CEO Summit in New York. “Too many things in the same price, too much is being offered…so at the end, people don’t want anything.”

Von Furstenberg, president of the Council of Fashion Designers of America, said she tells designers: “Don’t worry. Don’t look at the way things were done, just focus very much on who you are, what are you bringing, what is your point of view, how different is your product.…Everybody has to pull back a little and go back to maybe slightly a more human dimension in everything. I think it’s time for pruning. I think it’s pruning season for everybody.”

That pruning can be seen under way at brands large and small in both the U.S. and abroad. Most recently, Sonia Rykiel laid out plans to shutter its Sonia by Sonia Rykiel diffusion line, but there are plenty of examples. Last year, Marc Jacobs pulled the plug on its Marc by Marc Jacobs line and Kate Spade & Co. closed its stand-alone Kate Spade Saturday and Jack Spade stores.

On a larger scale, Ralph Lauren Corp., which arguably built fashion’s first lifestyle brand, cut 8 percent of its workforce this year as part of an effort to zero in on its three core collections — Ralph Lauren, Polo and Lauren — and shrink in order to grow more profitably.

Stefan Larsson, who took the title of chief executive officer from Lauren himself last year, has been making his case for the cutbacks to Wall Street, noting that strengthening the assortments, closing stores, pulling back on inventories and cutting lead times will be “some of the most important drivers in getting us back to sustainable, profitable growth.”

Larsson said executives in charge of the collections are “intensely centered on refocusing our core product offering and evolving from that core. And in doing that, we have not only been able to improve our classic iconic styles, but we have also been able to start cutting the long trail of unproductive styles. So far, we have been able to partially impact what we bought for spring 2017 with a double-digit percentage reduction in the number of sku’s across our biggest brands.”

That ultimately means a more concentrated version of the brand, which is perhaps just what the customer wants and what the business consultant ordered.

“When you’re a premium fashion brand…if you charge a premium for your brand, you absolutely have to protect your core business,” said Olivier Abtan, leader of The Boston Consulting Group’s global luxury and fashion sector. “You need to be fully focused on your iconic products, you need to be fully focused on your core customer.”

Abtan said the luxury market, which has been growing at a rate of 8 to 10 percent for 20 years as it broke into China and other new markets, is facing growth of 2 to 4 percent.

That’s a slowdown forcing players across the spectrum to try new things. Many companies that are closer to monobrand than multibrand could start to play the mergers and acquisition game in a bigger way. But Abtan said companies need to stabilize before expanding.

“It’s a bit dangerous when your core is not doing so well to try to look for new sources of growth,” he said. “Fix the core and then extend.”

Ralph Lauren is still in the “fix the core” mode.

Ike Boruchow, equity analyst at Wells Fargo Securities, said, “Where’s the growth come from once you’ve resized? [Ralph Lauren] has the potential to be a very sexy turnaround story, but I think it’s too early to make that call.”

That’s a valley Coach also had to march through. Having tightened up its main business, the company is now heading in the other direction and expanding.

“It took a year and a half to two years for people to really understand where [Coach] was going,” Boruchow said.

Now Coach is openly on the hunt for other strategic acquisitions that could help it grow, moving it more into the multibrand camp.

Chief executive officer Victor Luis pivoted in May 2015, moving the firm beyond its core brand known for its accessibly priced handbags and buying Stuart Weitzman for $530 million, up front. Weitzman has become a vigorous growth vehicle and effectively silenced the deal’s initial skeptics. That has the company betting on a broader base.

But the multibrand strategy is not without its risks.

There are myriad examples of large brands that sought safety in numbers only to find themselves with a host of businesses that grew to become too similar and collapsed under their own weight and management missteps, such as Liz Claiborne Inc. (once home to Kate Spade) and Jones Apparel Group (briefly the parent company of Weitzman).

Still, it’s a path other companies are either headed toward or committed to already. Most recently, Brooks Brothers Group Inc. acquired designer jewelry brand Alexis Bittar as part of its efforts to build the women’s side of its business.

Michael Kors Holdings is considering expanding via acquisition, diversifying away from its Michael Michael Kors megabrand. PVH Corp. already has Tommy Hilfiger, Calvin Klein and other smaller brands, but ceo Emanuel Chirico is looking to reel in another big fish sooner or later.

Rumors repeatedly bubbled up out of fashion’s back rooms this summer that PVH might try to buy Kors, giving it control of three of the largest American designer names. While no deal appears to be in the works, no one dismisses the rationale behind such a combination. If a PVH-Kors deal is viewed as a long shot, analysts still expect a significant PVH deal to happen in the near future.

For its part, Wall Street generally likes the stability that comes with a strong stable of brands and is giving companies with single brands that are either fixing themselves, going it along or working toward an acquisition a wait-and-see valuation.

Michael Kors’ total enterprise value, which includes debt and stock value, totals just 6.3 times its earnings before interest, taxes, depreciation and amortization and Ralph Lauren has an EBITDA multiple of 7.6 times.

Team multibrand generally scores higher. PVH’s EBITDA multiple stands at 10.5 times, while LVMH goes for 11.5 times and VF goes for 12.4 times.

If the game were tennis, it’d be advantage multibrands, which is where many of the monobrands are headed and where Wall Street’s showing its love.

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