The focus at Tom Ford’s spring men’s show on Tuesday was on the fashion — but it’s the business prospects of Tom Ford International that are coming to the fore for the investment set.
This story first appeared in the June 21, 2013 issue of WWD. Subscribe Today.
The company, founded in 2005 after Tom Ford and Domenico De Sole exited Gucci, has been growing at a good clip and is rapidly expanding its store base to 100 stores by the end of 2014, up from the current footprint of 60-some doors.
And the firm’s ambitions are to keep growing. “We want to be the number-one luxury brand in the world,” said chairman De Sole at a luxury summit in April.
Now, an early investor might be looking to sell a stake in the business just as the market reawakens to the potential earnings power of high-end brands.
The Américo Amorim Group, a Portuguese cork producer, bought a 25 percent share in Tom Ford in 2007 and is now believed to be reevaluating the position. Amorim made the investment with an eye toward forming a broader luxury business, but has instead focused on other areas, such as oil.
Bankers were testing the waters recently, reaching out to wealthy families that might be interested in buying the stake. But that process seems to have been somewhat premature and appears to have been shut down once word started to leak out.
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Ford and De Sole still hold the cards. The designer owns 63.75 percent of the company that bears his name and De Sole holds the remaining 11.25 percent. They have the right of first refusal to buy out Amorim’s stake, although that would require a considerable investment. A source said the company has not been approached by any would-be investors — a logical step for someone wanting to buy a minority stake in the private company.
“We are not looking for new investors or new investment,” Ford told WWD. “We do not want to sell more of this company. We don’t want new investment.”
Amorim did not respond to repeated queries, and De Sole declined to comment on “rumors.”
By testing the market, Amorim or bankers hoping to work with Amorim might be trying to get a sense of what the stake is worth as investors zero in on luxe brands.
Michael Kors Holdings Ltd., which plays in an adjacent market and went public in 2011, has a market capitalization of more than $12 billion. In a similar vein, a stake of Tory Burch traded hands late last year, valuing the company at about $2.5 billion, according to a source.
Others are out testing the market as well. Coach Inc. hired Perella Weinberg to explore a sale of the Reed Krakoff brand, perhaps to a group of investors including the designer. There’s also been speculation that Marc Jacobs and LVMH Moët Hennessy Louis Vuitton could spin off the Marc Jacobs business in an initial public offering.
For now, Tom Ford’s management is focused on building out the brand and the retail presence. Apparel revenues are estimated to be in the neighborhood of $200 million and the company has licensing deals with the Estée Lauder Cos. Inc. for fragrance and Marcolin for eyewear, which help keep money coming in as the expansion rolls on.
Ford has moved to significantly raise the profile of the brand’s apparel in the last year, returning to the runway with shows for his men’s and women’s wear in London in January and February. In recent years, he had held presentations for his collections.
The company has the considerable benefit of not only a well-known brand, but deep experience in the world of luxe.
De Sole spoke about the challenges of brand building at American Express Publishing’s Luxury Summit this spring.
“It is a painful, long and expensive road, but it can be done. You need the talent first and great product second, but it can be done,” De Sole said of launching a new brand and retail stores at the same time. “With Gucci, we had 70 existing stores when Tom came on board, so we didn’t have to change too much at retail, we could focus on the product. But the reality for a small young company is you need financing for your stores.”
Ford told WWD in a recent interview that the business was still “nowhere near where I want it to be.”
Asked if a relatively new brand could break through and become one of the top five brands in luxury, Ford said, “I could and will, certainly within the next 10 years, if not sooner. But I think there are very few people in the world that could. I say that in the most humble way, meaning that I’ve had every advantage that anyone could possibly have. I had enough money to self-finance. I had a well-known name. I had 20 years of experience working for very big companies with no fear of scale, meaning when I was at Gucci I had a $70 million advertising and communications budget that I oversaw. The scale of things — I mean, we were a $3 billion company when I left, and the entire Gucci group was bigger than that. I have no fear of scale.”