Nearly a month after furloughing its entire employee base and igniting bankruptcy rumors, Stila is headed back into business.
As reported, the Glendale, Calif.-based brand was acquired by private equity firm Patriarch Partners LLC, based here, in a deal expected to be finalized today. Patriarch acquired the brand in a foreclosure sale from Wachovia Corp. and CIT Group after Stila defaulted on a loan. Stila’s future had been uncertain — multiple sources told WWD that employees were let go as of March 27, and Monday afternoon, Stila’s e-commerce site still sported an “under construction” sign, warning customers that “any orders that were place [sic] on 3/23/2009 – 3/24/2009 may be canceled.” That message has been in place on the Web site for at least two weeks.
Enter Lynn Tilton, chief executive officer and principal of Patriarch. Founded in 2000, Patriarch specializes in acquiring and rehabilitating distressed brands. The firm also owns Dana Classic Fragrances, which markets English Leather, Taboo and Canoe, among others.
“We don’t believe this brand is deeply distressed,” said Tilton on Monday. “If you cut off the working capital of any company [as happened with Stila] you’re going to have problems — they had no way of moving forward without funding. This is a company we think we can get back on its feet quickly. When we acquire brands, we look at two things: do they have a great product, and do they have strong brand recognition? We think we’re two for two with Stila.”
Added Tilton, “We are a rebuilder of American brands.”
She declined to discuss what she paid for the brand. One industry source pegged the deal at under $10 million.
Tilton said her immediate plans include rehiring core Stila employees and readying the brand for a strong push into China. “I think we can double our revenues in China in the first year,” said Tilton, noting Patriarch has an “exceptionally strong Chinese media platform” which the firm will leverage in building the brand there. One of her business partners lives in Beijing and can oversee things locally, she added. “My goal is to associate this brand with highly intelligent women, and one of the ways I’d like to do that is by promoting it on college campuses in China — perhaps with a component where women compete with their GPAs to win part of their college tuition.”
That ties neatly into another of Tilton’s aims for the brand: an increased focus on the direct-to-consumer model. She cited higher margins and an increased ability to tell the brand’s story directly to the consumer via infomercials and other vehicles, including Facebook and Twitter. Another possibility is a program on college campuses here, where students can earn part of their tuition by working with the brand.
One place where Stila might have gone off the rails, suggested Tilton, was a large push in the recent past focused on international affiliate strategy. “They tried to build their own operations overseas, and that’s expensive — and it’s hard to control things so far away,” she said.
At least in the short term, Tilton said she plans to keep Stila ceo Deanna Kangas and her team on board.
Stila’s current distribution includes 236 freestanding Sephora doors, as well as 105 of the retailer’s store-in-stores at JCPenney. The brand does not currently operate any freestanding stores. The brand is also carried in Ulta, Fred Segal, Anthropologie and Kitson, and entered select Macy’s doors in January, said Kangas.
Retailers contacted Monday spoke favorably of the deal.
Adam Bernhard, ceo of HauteLook, a Los Angeles-based organizer of online private sales, which executed three sales with Stila over the past year, said the brand continues to resonate strongly among young consumers, as evidenced by YouTube videos posted by HauteLook customers upon receiving their Stila items. “There is this freakish cult following of these girls that are passionate Stila purchasers,” he said.
Shawn Tavakoli, ceo of Beauty Collection, which has three locations in the Los Angeles area, said Beauty Collection picked up Stila in two of its stores earlier this year and was hoping to spread it to Beauty Collection’s third store. “We are new with Stila, but in the short period we have been working with them, we have seen a great deal of brand loyalty with them.”
— Julie Naughton, with contributions from Rachel Brown, Los Angeles