Apparel M&A
Industry Insights
Early Winter 2023

Apparel Industry Insights
Executive Summary
While the macroeconomic and geopolitical backdrop resulted in a general sense of uncertainty that has slowed growth in 2023, we have observed
clear signs of improved consumer sentiment and overall market conditions as we near the end of the year. U.S. GDP grew at a 5.2% annual pace in Q3
2023, a meaningful increase from the growth observed in the second quarter. Meanwhile, inflation continued to moderate down to 3.2% for the 12months ending October 2023 vs. 7.7% the previous year. Capital markets also rebounded with the SPX index up 18.6% year to date as of November
29, 2023. Lower volatility and the anticipation of a pause (or slowing of) rate hikes drove several issuers to test the IPO market, prompting others toconsider accessing the public market later this year and into 2024.
Although M&A activity declined in 2023, we expect deal volume to pick up in Q4 2023 and into 2024. Companies have regained confidence inestablishing defensible near-term outlooks, and we have seen both strategic and private equity buyers continue to be active in the market. They remain
receptive to exploring new opportunities despite the recalibration of the financing markets, which have resulted in private investors taking a bit more ofa cautious approach to capital deployment. Nevertheless, we are optimistic on M&A, bullish on the consumer and confident that apparel companies
with strong, demonstrable growth and margins will create a “scarcity value” that will be highly attractive in the market.
As of the date of this report, median LTM EV/EBITDA multiples for apparel and retail were at 9.1x and 6.9x, respectively. Within the apparel space, theactive subsector garnered the highest valuation at 13.5x, closely followed by the footwear category at 11.5x.

All trademarks, trade names or logos referenced herein are the property of their respective owners.
See page 28 for data sources.

2Trends and Insights

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Trends and Insights
Generation Zest

Fashion Fluidity

Gen Z is the largest generation, accounting for around 25% of the world’s population, and has

Driven by evolving cultural and social attitudes toward gender, a growing number of consumers

an outsized impact on culture and economy. In the U.S. in particular, Gen Z is coming into its

are buying across gender-specific categories. Silhouettes, fabrics and colors no longer need toown with a purchasing power of $360 billion. As the first digitally native generation growing up

conform to traditional dress codes to sell to these consumers. For brands, the shift may be at anunder the lens of technology, social platforms have given companies across categories theinflection point, prompting industry leaders to consider how to best act on changing consumer

ability to connect with Gen Z and access some of that available purchasing power.1

expectations.

Notably, clothing and shoes is the category that Gen Z purchases the most online and theInterest in gender-fluid fashion is driven by younger generations, particularly Gen-Z consumers, as

second most offline, only behind groceries.2 It is critical for fashion companies to capture young

around half of Gen-Z globally have purchased fashion outside of their gender identity. This shiftconsumers early, as shoppers spend less on fashion as they get older.1

toward gender neutrality in fashion is not only visible on high-fashion runways, but also ineveryday shopping, with online searches for “genderless” and “gender neutral” fashion increasing
year over year.3

Gen Z Online Shopping Habits2
Clothing and shoes

57%% of Respondents Who Have Purchased a Fluid Fashion Item4

Gen Z Offline Shopping Habits2
Groceries

90%

Entertainment

44%

Clothing and shoes

61%

Electronics

40%

Pharmaceutical products

60%

Leisure, sport and hobby

35%

Beauty55%

Beauty32%

Leisure, sport and hobby

40%
38%

Jewelry and accessories

28%

Electronics

Groceries

24%

Home and garden

37%

Automobile parts or accessories

21%

Jewelry and accessories

36%

Pharmaceutical products

21%Entertainment

35%Children products

21%Children products

33%

Home and garden

19%

Automobile parts or accessories

27%

All trademarks, trade names or logos referenced herein are the property of their respective owners.
See page 28 for data sources.

36%

33%

31%

30%

29%

28%

26%

25%

23%

22%

22%

21%

19%

4

Trends and Insights
The Future of Generative AI in Fashion

Back to the Basics

As ChatGPT and other generative AI platforms have gained popularity over the last several

Turning to shades of beige, white, gray and black, consumers are looking to keep simpler andmonths, fashion companies are learning how to best take advantage of these sources. AI can be

fewer pieces in their closets. Heading into the fall, shoppers are increasingly buying basics andimplemented across the value chain, making fashion companies more efficient and aware of

intuitively implementing minimalism back into their wardrobes.7

customer needs in real-time.5

Brands like Khaite and Mango are launching lines with neutral knits and earthy shades. Gucci

Generative AI aids in bringing designs to life–transforming sketches or general descriptions intoeven joined in on the basic trends in the earlier part of the year, sporting brown blazers and

3D, interactive designs and animations.6 In terms of marketing, these platforms are capable ofloose-fitting jeans at various fashion events. Younger consumers are gradually turning to neutral

aggregating consumer data across a variety of channels and constructing viable marketingclothing and topping off their outfits with loud shoes or a statement bag.8 Since the pandemic,

campaigns. Although there are still some issues to work through as companies implement thisthe line between casual and formal clothing has blurred. Neutral pieces are perfect for daytime

technology, generative AI could add between $150 billion and $275 billion in the apparel,

outfits, with simple additions to turn them into “elevated basic” looks for a night out.

fashion, and luxury industries over the next three to five years.5

Uses for Generative AI in Fashion5
Merchandising& Product

Keeping It Simple for Summer and Fall

Digital Commerce &Consumer Experience

Supply Chain& Logistics

Store
Operations

Marketing

Organization &Support Functions

All trademarks, trade names or logos referenced herein are the property of their respective owners.
See page 28 for data sources.

Known for its uniqueand unusual forms offashion expression,
Gucci showed off
this basics-inspired
look during Milan
Fashion Week

Mango is popular for
its Mediterraneaninspired styles forboth men and women,
perfect for a casual,
yet chic look5Sector Spotlights

6Sector Spotlight | Brand Collaborations
Brand Collaboration Effectiveness

Whether a business is taking its first steps or is an established player,
partnering with another brand via collaborations can help expand brandreach and form stronger connections with new customers. Brand
collaborations involve the merging of resources and expertise to create
innovative products, services or marketing campaigns that leverage thestrengths of each brand, thereby reaching new audiences, enhancing brandperception and creating unique value propositions. In particular, brandcollaborations typically result in cost and resource optimization, as sharedcosts allow brands to optimize marketing efforts, product development orother operational processes to achieve significant results with less of aninvestment.9
There are several different types of brand collaborations that should beconsidered when evaluating the possibility of working with another

Brand collaborations can be
up to 25x less expensive
than traditional digitaladvertising while producing
similar outcomes10

64% of highly collaborative
businesses experienced

increased revenue growthover a 12-month span10

71% of consumers enjoy
when multiple brands cometogether to offer a uniqueproduct11

Recent Brand Collaborations

business or individual: product collaborations, co marketing and influencer
marketing. Product collaborations involve two brands creating a new andexciting product offering, such as LoveShackFancy’s collaboration with
Gap, which involved the creation of a fashion line that merges Gap’s iconic
styles with LoveShackFancy’s vintage-inspired florals. Co marketing efforts
take advantage of both brands’ reputations and customer bases to create ahybrid promotional effect, such as Forever 21 and Barbie’s recent
collaboration ahead of the blockbuster “Barbie” movie. The emerging but
effective influencer marketing occurs when a brand works with a content
creator to tout its products, such as Dunkin’s collaboration with TikTok starCharli D’Amelio, a partnership that led to a 45% surge in coffee sales.10
All trademarks, trade names or logos referenced herein are the property of their respective owners.
See page 28 for data sources.

Forever 21 and Barbie launched a glamorous
collaboration of pajama sets, graphic tees,swimsuits and more12

Gap and LoveShackFancy announced a limitededition, multi category capsule collection of
women’s, men’s, kids, and baby apparel andaccessories for every generation13
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Sector Spotlight | Rewards Programs
Importance of Customer Loyalty15

With ongoing inflation compromising spending power, consumers arejumping from brand to brand in search of the best deals. Retailer discountrates rose 12% year over year in the second quarter of 2023, according tocommerce data from Salesforce, illustrating the importance that consumers

65% of a company’s
revenue comes from repeat
business

It’s 5 – 25x more expensive
to acquire a new customer
than to keep an existing one

77% of consumers saythey’ve remained loyal to a
specific brand for 10 years
or moreCompanies have a 60% –70% chance of selling to
an existing customer vs. a
5% – 20% chance ofselling to a new prospect

57% of consumers spend
more on brands orproviders to which they areloyal

A 5% increase in customer
retention correlates with a
25% increase in profit

place on saving money. A solution for brands is to invest more in retaining
existing shoppers rather than acquiring new ones. Brands can leverage
loyalty programs that offer gentle discounts and other perks to build anengaged customer base without hurting margins. A 2022 study bymarketing software platform SAP Emarsys found that of more than 4,000
people surveyed, 58% were more loyal to retailers that offered themdiscounts, incentives and rewards, up from 51% of respondents theprevious year.
However, conventional point-based rewards programs and welcome deals

An Innovative Rewards Program Landscape14

have become less effective and redundant as nearly every brand has
adopted some version of the same offering. According to Denia Ebersole,
Co-founder and COO of payment startup Catch, “there’s almost been an
over-saturation in typical loyalty programs … and there probably needs tobe some changes in how rewards are delivered to customers.” As a result,new and innovative rewards programs are on the rise. For example, Catchhas pioneered multi brand rewards programs where shoppers can pool
their points and spend them across different brands.
Beyond joining a multi brand rewards program, emerging brands are
cutting through the noise by rethinking how they allocate points,
personalizing incentives and emphasizing products rather than discounts.14
All trademarks, trade names or logos referenced herein are the property of their respective owners.
See page 28 for data sources.

Ready-to-wear label Tayground
doesn’t have signage on its
e-commerce site asking
customers to join its rewards
program. Instead, the company
automatically enrolls repeat
customers and sends small giftswith each subsequent purchase.
The program, launched in 2021,
is on pace to account for ~10%of sales this year.

Beauty brand Ourself grants
members of its rewards program,
Ourself Society, points for simply
signing up, leaving productreviews, opting to receive text
message marketing campaigns
and following the brand on social
media platforms. Members canredeem points on an ongoingbasis for credits toward a newpurchase.

E-commerce jewelry label Jencks
Howland will be piloting a newfeature to its rewards program
allowing members to receive
early access to product drops
rather than points toward futurepurchases. The brand is hoping
this initiative will condition
shoppers to be excited about
new products rather than
discounts.
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Recent Apparel M&A
Activity

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Notable Apparel M&A Transactions
has been acquired byreceived aninvestment fromhas been acquired byhas been acquired byhas been acquired byhas been acquired byhas been acquired by

Investor GroupNov-2023

Oct-2023

Oct-2023

Oct-2023

Sep-2023

Sep-2023

Sep-2023

has been acquired byhas been acquired byhas been acquired byhas been acquired byhas been acquired byhas been acquired byhas been acquired by

Sep-2023

Sep-2023

Sep-2023

Sep-2023

Sep-2023

Aug-2023

Aug-2023

has been acquired byhas been acquired byhas been acquired byhas been acquired byhas been acquired byreceived aninvestment fromhas been acquired byAug-2023

Aug-2023

Jul-2023

Jul-2023

Jul-2023

Jul-2023

Jul-2023

has been acquired byreceived aninvestment fromhas been acquired byreceived aninvestment fromhas been acquired byhas been acquired byhas been acquired by

Jun-2023

Jun-2023

Jun-2023

Jun-2023

May-2023

May-2023

Unity Brands

Jul-2023

Apparel and Fashion
All trademarks, trade names or logos referenced herein are the property of their respective owners.
See page 28 for data sources.

Active Apparel and Footwear

Accessories

Retail10

Featured Transaction
Transaction Overview
Kroll’s Consumer & Apparel M&A practice advised Jaya Apparel Group (the “Company” or “Jaya”) on its sale to Brand
Velocity Group (BVG) in June 2023.

SELL-SIDE M&A ADVISOR“Brian and his team were critical to getting this deal done. Their knowledge of the apparel industry, hard work andcreativity allowed us to close this important transaction in a very difficult market.”–Jane Siskin, CEO of Jaya Apparel Group
About Jaya
Established in 2009 by industry veterans Jane Siskin and Jalal El Basri, Jaya Apparel Group (“Jaya”) quickly became aleader in the contemporary fashion space. The Cinq à Sept contemporary brand, launched in 2016, is reported to begenerating $100 million through its wholesale business, freestanding store and e-commerce operation. Having
previously built successful labels such as Elizabeth and James, Jaya later transitioned to focus on its owned brandstrategy under the Cinq à Sept and Likely labels. Jaya’s brands are sold at more than 400 points of distribution
worldwide, in addition to its e-commerce site. Cinq à Sept recently launched a beachwear line called À la Plage and has
a casual denim line, Tous Les Jours. Its Likely brand is an occasion-based dress line. Cinq à Sept opened its firstflagship freestanding store in SoHo in April 2023. Its wholesale accounts include Saks Fifth Avenue, Neiman Marcus,
Bloomingdale’s, Nordstrom and Bergdorf Goodman, along with numerous specialty stores such as Tootsie’s in Houston
and A Line Boutique in Denver. Jaya maintains offices and showrooms in Los Angeles and New York.

received an investment from

About BVG
Brand Velocity Group (“BVG”) is an innovative and diversified investment platform focused on investing in businesses
that are well-positioned to benefit from its operational expertise, deep in-house marketing resources, and thoughtful
approach toward corporate culture. BVG has deep strategic partnerships with specialty brand marketing agencies thatdevelop and execute marketing plans across its investments. Portfolio companies also leverage BVG’s strong
entertainment networks to create accretive partnerships with celebrities, brands, and other businesses. In March 2022,
BVG launched its Fashion and Apparel industry-focused vertical in partnership with industry luminary Gary Wassner.
Gary Wassner, CEO of Hildun Corporation, has been providing factoring, financing, purchase order funding, back officesupport, and business guidance to the fashion industry for over 35 years. He has helped to launch iconic brands such
as Marc Jacobs, Alexander Wang, Jason Wu, Thom Browne, and Betsey Johnson. BVG Fashion & Apparel leverages thefirm’s core competencies of operational expertise, marketing execution and brand building—in addition to its thoughtful
approach toward human capital—by providing investment and support to accelerate the growth of leading fashionlabels.
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Sources
1.

“Gen-Z and Fashion in the Age of Realism.” Business of Fashion. October 11, 2022.

2.

Gen-Z Shopping Habits. Oberlo

3.

The State of Fashion 2023. McKinsey & Company

4.

A Deep Dive Into Fashion Trends. Klarna

5.

“Generative AI: Unlocking the Future of Fashion.” McKinsey & Company. March 8, 2023.

6.

“What Will AI Mean for Fashion?” WWD. February 24, 2023.

7.

“How to Be a Fashion Minimalist.” InStyle. May 25, 2023.

8.

“Fashion Trends 2023: What’s Worth Adding to Your Wardrobe this Year, According to Experts.” ABC News. January 6, 2023.

9.

“The Art Of Brand Collaboration: How To Thrive Through A Strategic Partnership.” Digital Silk. June 14, 2023.

10. “How To Find Successful Brand Collaborations.” Shopify. April 5, 2023.
11. “71% of Consumers Enjoy Co-Branding Partnerships, Encouraging More Companies to Market Products Together.” PRNewswire. August 24, 2021.
12. “Come on Barbie, Let's Go Shopping: Forever 21 Just Launched an Exclusive Barbie Collection.” E! News. May 18, 2023.
13. “Gap Partners With LoveShackFancy On A Limited-Edition Collection For Every Generation.” Gap Inc. August 1, 2023.
14. “Building a Rewards Programme That Keeps Fickle Customers Coming Back.” Business of Fashion. August 1, 2023.
15. “79 Staggering Statistics That Show the Power of Loyalty Programs in 2023.” Queue it. October 5, 2023.

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Our Awards and Rankings
Financial Advisory Recognition

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Review 2022
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for Global Announced Fairness
Opinions for Full Year 20221
1Based on 51 Credited Deals per Refinitiv’s

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For more information, please contact:
Brian Little, CFA

Joshua Benn

Bob Bartell, CFA

Dr. Howard E. Johnson

Managing Director,
Consumer & Apparel M&A Advisory
Los Angeles(310) 598-4358
brian.little@kroll.com

President of Corporate Finance
Chicago(312) 697-4654
bob.bartell@kroll.com

Global Head of Consumer, Food,
Restaurant and Retail M&A Advisory
New York(212) 450-2840
joshua.benn@kroll.com

Head of Canadian M&A and Canada
Market Leader
Toronto(416) 597-4500
howard.johnson@kroll.com

Robin Kim

Director,
Consumer & Apparel M&A Advisory
Los Angeles(310) 570-5190
robin.kim@kroll.com

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