victoria's secret swimwear

The world is only starting to reawaken from a year of coronavirus lockdown — but dealmakers are already running at full speed. 

Despite the turmoil of the pandemic, lingering health and economic uncertainty, trouble at the ports and rapidly changing consumer interests, there’s real money to be put to work and deals to be made as companies reset for a new competitive landscape. 

That has the lockdown-friendly innerwear category, for one, jumping — Victoria’s Secret and, according to sources, Tommy John and Saxx are all making the scene. Buyers have been busy consolidating in the U.K. and Italy. And the rumors that Kering is on the prowl for big game have resurfaced, with Compagnie Financière Richemont speculated to be the latest potential target (although Richemont’s founder and chairman Johann Rupert has publicly dismissed talk of a merger between Richemont and any company).

Some big deals have already come to pass. VF Corp. snatched up Supreme for $2.1 billion-plus and L Catterton reeled in Birkenstock.

Brick-and-mortar retail might not be the investment banking focus of the moment, but strong brands and tech-savvy concepts always have a place. And companies are looking to trim down and focus, making corporate carve-outs more common, from L Brands Inc.’s plans to spin off or sell Victoria’s Secret to Hudson’s Bay Co.’s move to separate the Saks Fifth Avenue store fleet and saksfifthavenue.com to Adidas’ plan to sell Reebok. 

Along with a similar increase in activity in other sectors, the dealmaking system is working at full tilt, with bankers struggling to find lawyers to pore over their deals or analysts at big investment banks complaining about crushing workloads. 

“There’s more activity than ever before,” said David Bassuk, coleader of AlixPartners’ retail practice. 

That’s because there’s both more money and more ideas on how to spend that money, he said. 

“Everybody’s been kind of locked down and a lot of money’s been on the sidelines because people have been waiting to see what the world looks like [after the pandemic],” Bassuk said. 

And as investors have more conviction, they have more lines of dealmaking to follow.

“Right now, if you believe in a business and it’s down from its highs and it’s weathered the storm, now’s a good time to buy, reshape and really capitalize,” he said. “There’s a buy low, sell high strategy. There’s a lot of opportunity to do that.” 

Meanwhile, other investors are looking to buy into more traditional businesses and reshape them for the future or make deals that expand the reach of a business by bringing in new customers, he said. 

Some will look to dealmaking to solidify or take advantage of some of the consumer changes brought about by the pandemic. 

“Everything easy is going to stick,” Bassuk said. “Easy is curbside pickup. Easy is delivery. Easy is, ‘This retailer knows me.’ We’ve gotten really comfortable and we’ve started to like the easy stuff. There are a lot of things that are going to stick. You can invest behind anything that’s making it easier for the consumer.”

Oddly, a bad year for the world is flowing into a good year to invest. Governmental supports for the global economy have helped send stock markets sky-high, while COVID-19 also gave many companies a chance to cut costs, pivot and refocus. 

Experienced buyers are looking anew at the market. Both Morris Goldfarb of G-III Apparel Group and American Eagle Outfitters’ Jay Schottenstein have hinted they could take advantage of the current climate to add to their portfolios, as has Fran Horowitz at Abercrombie & Fitch. 

Goldfarb told WWD this month: “We might look for a brand with a stronger digital presence. That’s not off the table for us at all. We look for talented people. And today we look at geography. Historically, we would not have had a huge interest in a European company. Today, maybe. I’m not sure I need another department store brand to hang in the same areas that we do with our brands. I think we would look to diversify distribution.”

Asked earlier this month if A&F would seek a brand catering to a demographic or a category that it doesn’t already cover, Horowitz replied, “Most likely it would be in an adjacent category.”

A&F doesn’t sell wellness, home, or high-tech performance wear, and has limited footwear and active offerings. Asked if any of those categories would be targeted, Horowitz replied, “It’s hard to say at this point.”

“We see companies come across our desk all the time that are up for sale,” added Scott F. Lipesky, A&F’s chief financial officer.

There’s just too much money floating around to not go somewhere. Private equity buyers have $865 billion burning a hole in their collective pockets, according to EY. 

And the boom in special purpose acquisition companies has SPAC management teams racing to cut deals and spend the $82 billion they raised last year and the roughly $90 billion raised so far this year, according to Dealogic.

This new SPAC money is targeted at mostly of-the-moment businesses that could stand as public companies.  

“Retailers have been noticeably absent from the SPAC frenzy,” said David Shiffman, co-head of global consumer retail at investment bank PJ Solomon. “The money has flowed toward consumer, health, wellness and tech-centric businesses. It has flowed away from traditional retail. And private equity still hasn’t reactivated in the space. You basically have seen hybrid models evolve, replacing traditional retailers.” 

That has investors looking for strong brands and strong categories, such as intimates or active or outdoors, and companies that are on the move, evolving to meet the emergent needs of the consumer. 

“At the end of the day, good companies always have buyers,” said William Susman, managing director at Threadstone Advisors. 

But there’s still the matter of price. 

“How are you valuing your business in March of 2021 when you have a projection, but you have to base it off of what you actually did in 2020?” Susman said. 

“I see a lot of catalysts for transactions with the exception of those traditional contemporary fashion brands that have historically been very aggressively bid by private equity,” he said. “Those deals will come back, but not for another nine to 12 months. The fashion cycle has not kicked in yet, people aren’t back to work yet, they’re not sure what clothes they’re going to replace yet. Accessories will lead apparel. There’s a sentiment of less risk, it’s a safer approach.”

For now, the spotlight seems to be companies in categories that thrived during the pandemic — like innerwear — or firms that were already eyeing a sale but had to put their plans on hold during the pandemic. 

Two financial sources singled out innerwear brands Tommy John and Saxx as out in the market looking for investors. (A Tommy John representative declined to comment and several queries to Saxx were not returned Tuesday). 

They join the much larger Victoria’s Secret in the market. 

The boomlet in intimates makes sense. 

With consumers stuck at home for months on end — and still in need of underwear and other comfortable work-from-home threads — revenues at a number of men’s and women’s direct-to-consumer basics and lingerie brands have surged since the start of the pandemic. Many people are shopping online. Others are using big-box retailers to fulfill their underwear needs. 

At the same time, sales of ready-to-wear apparel and more structured fashions have fallen during lockdown. In women’s, total apparel revenues were down 19 percent in the second half of last year, according to The NPD Group’s Consumer Tracking data. Total intimate apparel sales were only down 1 percent during the same period. 

That means consumers continued to stay in replenishment mode when it came to innerwear, said Todd Mick, executive director of The NPD Group’s fashion practice. 

“This intimates industry is doing well,” Mick said, adding that the market research firm expects intimate sales to be roughly the same in 2021: down about 1 percent for the year. 

Self-care and wellness were also big trends in the middle of a global health crisis. That could explain why, along with basic underpants and bras, sales of sexy lingerie have risen during the pandemic. 

It’s a trend everyone seems to have noticed. 

Zara, Karl Lagerfeld, Dia & Co. and swim and resortwear designer Miguelina added intimates looks in the last year. Others are expanding into new markets. Kim Kardashian West’s Skims just launched in the Middle East. Victoria’s Secret has plans to open in Israel in the back half of 2021. And brands like Rihanna’s Savage x Fenty and Frederick’s of Hollywood — traditionally known for women’s lingerie — have recently launched men’s wear collections. 

Investors have already gotten in on the action, too. 

Mindd Bras, founded by Victoria’s Secret alum Helena Kaylin, recently received a $1 million investment from Canadian financial platform The51 and investment firm WVL Capital. MeUndies secured a $40 million investment from Provenance. 

Clearly, the getting is good and might only get better across the dealmaking world.

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