Activist investor James Mitarotonda — who helped shake up The Jones Group Inc. and Dillard’s Inc. as head of Barington Capital Group — is ready for his next venture and is bringing fashion veterans Frank Mori and Robert Mettler along for the ride.
Barington has teamed up with financial services company Hilco Global and raised $43 million for Barington/Hilco Acquisition Corp. — a publicly held blank check company that has up to two years to spend the money to acquire a consumer goods firm.
That means Mitarotonda and gang are on the hunt for a company with a valuation of $100 million to $500 million that would benefit from being a public company, but doesn’t want to bear the expense of an initial public offering.
“The economy is in pretty good shape,” Mitarotonda said. “[Lower] gas prices will help a lot of industries.” Although the stronger job market hasn’t boosted spending as some had hoped, he said, “Eventually I do think the retail industry will benefit from increased employment.”
An e-commerce company or a digitally savvy brick-and-mortar player could be of particular interest.
“Retail will continue to go through something of a transformation,” Mitarotonda said, speaking of the changes new technologies have brought to the industry. “If a retailer handles it well, they will certainly benefit from it.”
Ultimately, he said both channels are needed and noted that “it’s a combination of the two that will create the successful retailers of the future.”
As Barington/Hilco looks into that future it will have plenty of fashion experience to lean on.
Among the company’s directors are Mori, who served as Donna Karan International’s first chief executive officer and was also ceo at Anne Klein & Co., and Mettler, who held a series of high-powered jobs at Sears, Roebuck and Co. and then Macy’s Inc. According to regulatory filings, former Warnaco ceo Joseph Gromek is also an investor, although not on the company’s board.
Mori said it’s a good time to be on the hunt in fashion. “There are a fair number of opportunities and situations out there that we’re looking at,” he said.
The companies on the market generally fall into two groups, he said:
• Firms that have been successful and are growing, but aren’t terribly sophisticated and don’t have the experience or capital to get to the next level.
• Brands that have been around for a long time and are attempting to revitalize themselves.
Mori said brands in the second group require a lot of care.
“It’s a business where you’ve got to have a lot of top-of-mind awareness and you’ve got to be thought of as an aspirational product category or brand name, a Michael Kors or whatever it might be,” Mori said. “Once you’ve lost it and once you’re on the downside of the curve — and a lot of people stay at it — I think it’s harder.
“There are very few apparel brands — 10 or 15 or under — that have consumer loyalty,” he said. “The retailer or the consumer or both are always looking for the next big thing. It’s very rare in that business — if it exists at all — to have anything new. I have yet to see a three-sleeve jacket.”
Mettler added that, “The gap between outstanding performance and just so-so performance has gotten wider and wider over the last few years…Having a great customer relationship, whether that be online or in store, is the best formula for real growth.
“And the problem with real growth today is that real growth comes from, unfortunately, taking share from others, not necessarily an actual growth in the industry,” he said. “And we’re going through changes in customer behavior. Women’s apparel is certainly not the best performing at retail at the moment for lots of different reasons. For me, it’s an opportunity for people who understand how to do business in multiple categories.”