British fashion retail group AK Retail Holdings acquired Australian-listed firm City Chic Collective‘s plus-size brand Evans, its intellectual property and the customer base as part of an £8m ($10m) agreement signed and closed on 3 August 2023.

The deal includes the closure of City Chic’s UK warehouse and the sale of all inventory in City Chic’s EMEA (Europe, Middle East, and Africa) business.

The Australian firm has agreed with its 3PL provider to close the UK warehouse which also supports its European operations. As a result, the Navabi business will cease trading.

However, City Chic retains the right to trade under the City Chic, Avenue and other non-Evans brands in EMEA down the line.

There will also be a transition period for AK Retail Holdings to sell all non-Evans branded products and for City Chic to sell its remaining Evans-branded product in ANZ (Australia and New Zealand) and North America.

Here’s why the deal matters

City Chic is a collective of customer-led brands specialising in plus-size women’s apparel, footwear and accessories. Its brand portfolio includes City Chic, Avenue, CCX, Hips & Curves, Fox & Royal and Navabi.

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Evans, formerly an Arcadia Group brand, was acquired by global omnichannel retailer City Chic Collective Limited in 2020 for £23.1m ($30.7m).

At the time when City Chic took over the operations from Arcadia Group, it said Evans’ store portfolio had been shrinking for a number of years with customers transitioning to the digital channel.

Phil Ryan, managing director and CEO of City Chic, believed back then that Evans in addition to providing a launching pad into a new market, could be deployed with City Chic’s lean, customer-centric operating model to drive revenue growth and cost efficiencies in the existing business.

However, three years later City Chic has decided to sell Evans as part of its ongoing strategic review to simplify and streamline its business.

The omnichannel retailer’s board determined that in light of prevailing economic conditions, the investment required to deliver profitable trading in EMEA would be better allocated to other parts of the City Chic Group.

City Chic says the Evans sale will have the following immediate benefits:
• It will strengthen the Group’s balance sheet
• It will accelerate the reduction in its debt facility
• It will further reduce its inventory to allow for a clean inventory position sooner than planned.

City Chic points out the proceeds from the sale of Evans will be used for working capital purposes and to pay the Group’s remaining $1.5m acquisition facility. As a result, its debt facility limit has been reduced to $20m (from $30m) and will reduce by a further $5m at the end of June 2024, reducing the company’s funding costs.

Ryan explains City Chic has seen a significant deterioration in the EMEA market over the past two years which has hampered its ability to sell the expanded product range, compounded by global supply chain constraints.

He states: “The focus of the strategic review has been on our online and international businesses to determine the most efficient way of returning to profitable growth.”

Ryan adds City Chic is continuing with the rationalisation of its product offering, streamlining the supply chain and focusing on cost management.

In fact, he says he is confident City Chic can return to a more agile operation that quickly responds to changing needs and puts it in a much stronger position when market conditions improve.

Meanwhile, AK Retail Holdings, which also owns plus-size fashion brand Yours Clothing and Long Tall Sally, believes Evans’ commitment to providing fashionable and high-quality clothing for plus-size women perfectly aligns with its mission to cater to a diverse range of customers.

Neither City Chic nor AK Retail Holdings could be reached for comments by Just Style at the time of going to press.

However, GlobalData apparel analyst Pippa Stephens tells Just Style exclusively that AK Retail Holdings’ Evans acquisition is a positive move, and notes the robust performance of the new owner should allow it to place more investment into improving the brand’s ranges and overall proposition.

Stephens says: “Its significant expertise in plus-size clothing through the ownership of Yours Clothing also means that it has good knowledge of what consumers desire, putting it in good stead to successfully turn Evans around.”

She cautions that particular attention needs to be paid to its product designs going forward to become more fashionable and boost its appeal among plus-size shoppers.

Key takeaways for the fashion industry

A 2017 report by GlobalData suggested rising obesity levels were powering plus-size womenswear market growth, with more retailers recognising that size 18+ females were under-served.

In 2018 US fashion retailer Old Navy jumped on the trend with its “Size YES” campaign. The brand brought its speciality plus-size line only available on its website into 75 of its stores in a bid to tap into this growing and under-served sector of the market.

Since then many fashion brands, including Spanish retailer Mango have integrated plus-sizes into their general collections.

Only last year (2022) investment firm L Catterton announced its investment into BloomChic, a digital-first, plus-sized fashion brand with the managing partner of L Catterton Scott Chen stating at the time the brand has a culture of ensuring the plus-size voice is heard, and added: “We look forward to partnering with its management team to deepen the brand’s presence in the market and create greater value for its customers.”

Plus-size clothing has entered the mainstream with marketing campaigns featuring models in magazines and on catwalks becoming a regular occurrence thanks to consumers demanding inclusivity and varied size ranges to be made available.

However, a recent survey conducted by GlobalData in April 2023 suggests 71.1% of consumers still feel not enough retailers stock niche ranges. Meanwhile, 76.1% feel there are fewer options available for niche clothing ranges than there are for standard sizes.

GlobalData’s May 2023 report titled Niche Clothing Trends in the Global Apparel Market explains it is crucial for mainstream players to invest in their inclusivity and niche range expansion. In fact, even though brands tend to have separate niche ranges with a limited number of options, 73.8% of consumers would prefer niche clothing sizes to be an extension of a brand’s core range, as this gives them greater choice.

Stephens remarks that while an increasing number of fashion brands are now launching plus-size ranges, this segment is still relatively unsaturated, meaning there is potential for brands like Evans to grow.

However, she adds that with inflationary pressures still impacting shoppers in EMEA, many are remaining cautious about their purchases, potentially dampening Evans’ short-term performance in the region.

Each week, Just Style’s editors select a deal that illustrates the themes driving change in our sector. The deal may not always be the largest in value, or the highest profile. But we select it because of what it tells us about where the leading companies are focusing their efforts, and why. We pick apart the deal itself, and the industry theme behind it. This new, thematic deal coverage is driven by our underlying Disruptor data which tracks all major deals, patents, company filings, hiring patterns and social media buzz across our sectors.

More research:

Apparel Industry Mergers and Acquisitions Deals by Top Themes in Q1 2023 – Thematic Intelligence

Niche Clothing Trends in the Global Apparel Market