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.
Inside the potential Reiss deal
Reiss was founded in 1971 by David Reiss as a menswear brand. It is now an affordable luxury apparel brand, producing and selling high-quality classic and modern men’s and women’s clothing and accessories.
In May 2016, US private equity firm Warburg Pincus acquired a majority stake in the business, with the Reiss family retaining a minority holding.
Five years later (May 2021) UK clothing and homeware retailer Next Plc took a 25% stake in the business and at that time Reiss’s online proposition remained relatively underdeveloped, despite considerable investments. For example, its website lacked free UK fulfilment, a delivery saver scheme, or third-party pickup options, as well as any sizing assistance or personalised recommendations.
On the plus side, Reiss was grasping international opportunities, particularly in the US where it operated in wholesale locations such as Nordstrom and Bloomingdales.
Next integrated its online systems, warehousing and distribution into Reiss’ proposition via its Total Platform to help to drive efficiencies and boost customer experiences.
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In August last year Next upped its stake to a majority of 51% with GlobalData retail analyst Emily Salter telling Just Style at the time: “Reiss already operated on Next’s Total Platform, giving the brand greater agility and access to Next’s extensive infrastructure, improving its expansion prospects in both the UK and internationally.”
She was not surprised Next had taken a majority stake as it had snapped up stakes of, and joint venture deals with, a number of other brands to diversify its revenue streams and product offer. Plus, she said: “Reiss has high appeal among its target shopper base.”
Why a potential deal with Elliott Advisors matters
A Sky News report claims activist investor and private equity firm Elliott Advisors is among a group of prospective bidders expressing an interest in buying Reiss from its current shareholders – Next and Warburg Pincus.
Elliott Advisors already owns books retailers Foyle’s and Waterstones and is said to be one of three parties involved in an auction, which is said to be being overseen by bankers at Raymond James.
Sky News suggests Elliott Advisors has the upper hand given one of its senior London-based executives, Paul Best, was instrumental in Warburg Pincus’s acquisition of a stake in the chain in 2016, with Best saying at the time: “The business has built an enviable position in its core UK market, with a broad and loyal customer base, and we believe there is a significant opportunity to build on this success and accelerate development internationally.”
Plus, Sky News highlights that through its ownership of Bantry Bay, a specialist lender with exposure to Superdry and Asos, Elliott Advisors has a significant understanding of the UK retail sector.
GlobalData’s associate apparel analyst Alice Price tells Just Style she sees Reiss as an attractive proposition.
She says: “Reiss grew strongly in FY2021/22, reporting a 50.3% increase in revenue in the 52 weeks to 29 January 2022, with performance also up 37.7% versus FY2018/2019, demonstrating the strength of the brand in recent years, which has diversified its clothing ranges in response to shifts in consumer demand since the pandemic.”
She also points out that as a premium brand with an affluent customer base, Reiss has been largely protected from the effects of high inflation on consumer discretionary spend. As a result she believes Reiss represents a sound investment for the US private equity firm despite entering the market during a period of economic uncertainty”.
Next told Just Style it will not be commenting on rumours concerning any of the companies it co-owns in partnership with any third parties, as it thinks this is an important courtesy to its partners and an essential part of what it offers to others, as a partner.
Elliot Advisors also declined to comment.
United Kingdom (UK) Apparel Market Size and Trend Analysis by Category (Clothing, Footwear, Accessories), Retail Channel, Supply Chain, Consumer Attitudes and Themes, Key Brands and Forecast, 2021-2026