Wednesday’s announcement that Global Icons has acquired a majority stake in Fred Segal came with news that the business planned to continue growing through more stores and more branded product, peddling its version of “L.A. style and culture.” It’s banking on an international consumer’s affinity for Los Angeles to do so with a three-pronged approach: More branded product, more stores overseas and more product licensing deals.
The company is set to open a store in Malibu next month and believes that should now cover — at least in the near term — the U.S. with its flagship on Sunset Boulevard and a store at Los Angeles International Airport. The rest of its fleet is in Taipei, Taiwan; Kuala Lumpur, Malaysia; Zurich; and Basel, Bern and Lausanne, Switzerland.
“I don’t think that there’s not an opportunity to grow Stateside,” said Fred Segal chief executive officer Allison Samek. “We just think that the opportunity to bring California, L.A. specifically, culture abroad, there’s a really strong demand now.”
Added Fred Segal president John Frierson: “I do feel like in some markets the idea of experiential retail is a little more evolved internationally and there’s just a tremendous demand for the experiential retail that we’re bringing.”
More exposure to mixed-use environments and shopping as a destination is more prevalent outside the U.S., he said, expanding on his comment.
Markets initially identified with strong potential include the U.K. and Germany, a potential deal in Korea, along with a re-entry back into Japan, a country where “they clearly had the wrong partner and the wrong locations,” said Global Icons chairman Jeff Lotman.
The executive said there are currently two people bidding for the license to bring Fred Segal stores back to Japan.
“I think for us, what we really need to do — because this really preceded John and myself; this was an old investment team five-plus years ago — we really need to find the best operator,” Samek said. “We have a couple of people that we’re speaking with. Japan is absolutely a market that thrives and really hungers for Fred Segal, so we have to be back there in a significant way.”
The company did quietly re-enter Japan about five months ago through a licensing deal for kids products called Fred Segal Fun. The clothing line is being sold direct-to-consumer with some pop-ups and plans to open its own stores. Frierson said there’s interest in bringing the concept to the U.S., likely next year.
The Global Icons deal’s announcement, with terms undisclosed, appeared to happen quickly. Lotman had been on the hunt for a brand to buy, looking across food, electronics and came close to a fashion acquisition. It wasn’t until his banker invited him to a casual breakfast with Frierson that the idea of a majority stake in the nearly 60-year-old retailer was floated. Sixty days later, it’s now closed. Fred Segal marks the first brand and retailer Global Icons has owned.
Evolution Media, which retains a minority stake in the business, declined through a spokeswoman to comment on why it decided to sell or whether the business had met financial performance targets since the firm came on board.
The privately held retailer does not share financial data. Samek, who joined the business in 2016, confirmed the Sunset Boulevard store — what the executive team continues to call its ‘halo product’ that it hopes to use to woo new licensees — beat the company’s sales goals expectations last year. She also confirmed January and February sales were up year-over-year. The LAX store, opened in 2014, ended with its best year ever, she said.
What’s giving management the confidence to continue to pursue a seemingly aggressive growth strategy rests in a few factors different from when the company first began making it clear it planned to expand the number of doors and Fred Segal-branded product back in 2014 under former ceo Paul Blum. At that time, he told WWD that plans called for 10 stores over the next five to seven years.
“Now, the big difference is we have an incredible flagship store and that’s been a real key to our growth plan, and it’s an important part of what we show and say to the world,” Frierson said.
Driving home that point, Samek added: “I think since we opened up our flagship Sunset store, we’ve seen the success of the brand in the city and with the global customer that comes in,” Samek said. “We were able to successfully open six stores last fall and, obviously, we have our store in Malibu opening in two weeks….We feel like we can grow it further with this capital investment.”
Marisa Ma, who runs Los Angeles reworked denim brand Atelier & Repairs, said the retailer has helped bring plenty of exposure to the brand, which has been inside the Sunset store since it’s opening and was sold on the idea of being a part of the next-gen Fred Segal.
“It’s interesting when we talk about licensing that it’s not a product, but it’s a retail concept,” Ma said. “It adds a different dimension in each country. When it comes to retail, it will be interesting to see how each of these international partners interpret Fred Segal as their own, but also referencing the history.”
The brand certainly has gone through plenty of changes to get here: Stepping away from its original Melrose Avenue location (now in the midst of a legal battle before the U.S. Court of Appeals with the building’s new owner to have the Fred Segal signage removed); shuttering stores in Santa Monica and Vegas in more recent years; planning to go into Playa Vista and then not going into Playa Vista, along with some shifts in merchandise assortment.
“The new Fred Segal has done a good job of identifying with the Millennial — a good job, not a great job,” said California Fashion Association president Ilse Metchek. “If you reflect on what’s in Fred Segal now with what’s in Fred Segal 10 years ago, totally different branding. So they have brought themselves up to the current fashion look that seems to be reflected in what the changeable Millennial taste is. Is that the same taste on a transnational basis? I’m not sure.”
To go from good to great, Metchek cited what’s now become branding 101: greater focus online where the Millennial customer is and a much stronger Instagram presence.
Market watchers are waiting to see how the growth plan shakes out, but many agree international is the way to go, citing the economic climate, demand from Asian markets and challenging times for U.S. retail.
“It’s not the first company to revamp or breathe new life into Fred Segal,” said Syama Meagher, owner and chief retail strategist of retail consultant and services firm Scaling Retail.
Still, growing outside the U.S. could work in the company’s favor, she said, pointing to Le Bon Marché’s Rive Gauche pop-up in Paris last year, filled with L.A.-made product, as indicative of the appetite abroad.
“You’re seeing and hearing more about brands taking that Los Angeles vibe and pushing it internationally. Fred Segal is really good at exploring this L.A. lifestyle and it’ll be less competitive for them internationally and more of a novelty,” Meagher said. “At one point, it was a really strong brand and it’s kind of fallen off.”
The cautionary note is on the subject of branding and brand equity, she added.
“These kinds of big expansion plans, it used to be that you could have a U.S. team go overseas and open up a retail space, but now brands and consumers in other markets really look for that very emotional, on-the-ground consumer interaction and space,” Meagher said. “And being that this would be an L.A. export, Fred Segal has to have the right on-the-ground teams in order to get this going, making sure there’s the right blend of respect to culture and communities. It’s important, from a cultural sensitivity standpoint, each market is treated seriously and it’s not popping up and opening stores based on a cookie-cutter formula.”