Sarah Curran, Founder and CEO, my-wardrobe.com

LONDON, United Kingdom — The Business of Fashion can exclusively reveal that my-wardrobe.com, the London-based fashion e-tailer positioned at a mid-level pricepoint between Net-a-Porter.com on the high-end and Asos.com on the low-end, has just closed its second round of investment.

My-wardrobe continues to grow at a rapid pace, having achieved an extremely healthy 169 percent jump in sales in its third year, growing from £1.56m in sales in 2008 to £4.23m in the fiscal year ending March 2009.

It may not be surprising then that a group of high-net worth investors have injected an undisclosed sum of money to further the site’s expansion into menswear and international markets, amongst other initiatives. Perhaps as a sign of the times, the new funding valued shares at the same price as in the first round, as opposed to achieving a higher share price as would have normally been the case in the past. That said, the investment opportunity was heavily over-subscribed, demonstrating the market’s continuing belief in the online fashion retail segment.

It’s been a busy few months for my-wardrobe’s CEO Sarah Curran, who has also just brought in a new Chairman, Jean-Marc Bouhelier and concluded a first-ever shop-in-shop concession deal with BCBC Max Azria, but I caught up with her quickly after our panel discussion in Vienna to bring you this BoF exclusive.

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Small Cap M&A activity on the rise, courtesy of mkpress.com

NEW YORK, United States — Just before the madness of fashion week started, I read an interesting study by KTA Capital, an independent investment bank based in New York. The report analyses small-cap market activity for the month of January 2009 globally, as well as in selected national markets.

The first section is not a surprise: “There has been a substantial reduction in the amount of corporate finance activity internationally, not only compared to the same period last year, but also compared to December 2008,” says KTA, which noted a significant drop in the number of M&A transactions. “However, several distinct trends have emerged in specific national markets,” most notably, the United States.

“Despite the decrease in the number of transactions, the total US M&A volume in January 2009 was US$110 billion, greater than the January 2008 volume of US$104 billion and the December 2008 volume of US$35 billion,” says KTA.

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MILAN, Italy – Is Diesel’s Renzo Rosso on the prowl again?

Word on the street is that Rosso is in talks to acquire Superfine Jeans, the hot London-based premium denim brand, founded in 2003 by Lucy Pinter and Flora Evans. Superfine has become well known for its directional silhouettes and popularity amongst the global style A-list, including Kate Moss, Gisele Bundchen and Mary-Kate Olsen.

While Mr. Rosso has been acquisitive in the past, he has tended to focus more on the fashion end of things, acquring stakes in  Maison Martin Margiela, DSquared2, and most recently, Sophia Kokosalaki, through Diesel’s Staff International subsidiary.

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NEW YORK, United States – In recent days, NexCen has experienced a meltdown unlike anything the fashion world has seen, leaving Bill Blass,  its star brand, in play as vulture investors circle to assess what value remains. NexCen’s failure to disclose a $30m debt that must be paid back by October has sent its stock reeling and could very likely result in the company going bankrupt. Its CEO Robert D’Loren’s job is at stake and the company’s investors and other stakeholders are furious.

The dramatic turn of events underlines the fact that even culturally important brands like Bill Blass can suffer collateral damage in the new era that has brought fashion and finance together.

In February, Lauren Goldstein Crowe investigated NexCen’s business model in the FT. Having spent several days with D’Loren and his team, Lauren saw the inner workings of the company, its team dynamic and business model. I asked Lauren if she would answer a few questions about what might lie behind the dramatic headlines and what could be in store for NexCen in the weeks to come.

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Apax Partners, the London-based private equity firm, has abandoned its bid to take a stake in Escada AG, the embattled German fashion company.  Citing deteriorating market conditions, Apax stated that

“the recent evolution of the stock price and the weakness of the international financial market do not give a basis for pursuing the project.”

This is absolutely the right decision. Not only has Escada become somewhat of an industry basket-case in recent years, on Wednesday the company also revised its earnings projections for year ending October 31 downwards yet again. EBITDA margins are  expected to fall by about 25% compared to 2007. The company cited recessionary conditions in the USA and other key markets as the reason behind the revisions. Escada’s shares fell by 10.8% on Wednesday to 14.35 euros.

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Our colleagues over at Savigny Partners released their regular newsletter today, demonstrating just how tough things have been for many luxury and fashion stocks in recent months and highlighting an investment opportunity for those who believe in the long-term fundamentals of the luxury market.

The Savigny Luxury Index (SLI) has plummeted by 29% since its peak in June 2007, underperforming the overall market as measured by the performance of the FTSE All World Index. But, longtime industry watchers will recall that the luxury industry was one of the first to bounce back after the post 9/11 economic malaise.

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Not long after Valentino Fashion Group was acquired by Permira in 2007, Escada AG is the latest major European fashion company to find itself in the crosshairs of a private equity firm. The German newspaper Handelsblatt is reporting that Apax Partners is considering taking a stake in the the German fashion company — and possibly looking to execute an outright takeover.

Escada’s stock lost more than one third of its value in 2007, and another third of value was obliterated in the first few months of 2008, making it a very ripe target for acquisition. But any Escada-turnaround effort backed by private equity will not be easy, even if the price is cheap. Last week, Escada reported that its sales continued to slide in the first quarter of fiscal 2008: revenues across its Escada and Primera divisions dropped by more than 10% when compared to the same quarter in 2007, and EBITDA, a measure of profitability and cash flow, fell by almost 70%.

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LONDON, United Kingdom - Conventional wisdom is that the luxury sector is cushioned from the ups and downs of the overall economy because its customers are amongst the “happy few” who aren’t affected by such trivial matters as making mortgage payments and paying off credit card bills in the midst of a darkening macro-economic environment. But exactly how much padding does that luxury cushion have?

According to Luca Solca of BernsteinResearch, not a lot.

In his report “PPR: Worsening Macroeconomic Outlook points to slower Luxury Market Growth in 2008,” published today, Solca asserts that there is a strong correlation  between the general economy and the luxury sector (R-squared = 66%).

Therefore, any problems in the general economy are certain to spill over into the luxury sector, especially for companies who have tapped into the aspirational luxury market like Coach and Gucci.

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Over the past year, Canadian yogawear brand and erstwhile stock market darling Lululemon Athletica has often been cited as proof of the market opportunity in new-age fashion concepts which pick up on psychographic and attitudinal shifts — i.e. that people are looking for more from their clothing than just functional and aesthetic utility. Some people, it is argued, want healthy, ethically conscious, and environmentally friendly feel-good benefits as well. Lululemon was delivering this in spades, while also benefiting from a lifestyle craze centred around Yoga, building a business of close to $150m in revenues.

However, the news all over the North American press this week was dramatically different. The New York Times published a damning article suggesting that Lululemon’s claims about the seaweed content in one of its clothing lines were patently false.  Through its seaweed content, the VitaSea line claims to reduce stress and provide anti-inflammatory, antibacterial, hydrating and detoxifying benefits to its wearers, but the New York Times’ test showed no evidence of seaweed in Lululemon’s clothing.

This  sent Lululemon’s stock price on a rollercoaster ride. Previously, Lululemon had been enjoying stellar stock performance, reaching $60 a share after an IPO price of $25 in July. Yesterday the stock closed at $41.50.

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Rachel Roy, the New-York based designer and wife of hip-hop mogul Damon Dash, has announced that TSM Capital has taken a significant minority stake in her eponymous business. According to WWD, Roy’s business is generating $10m in wholesale revenues.

The Rachel Roy brand is carried in an impressive set of department store chains including Bergdorf Goodman, Saks 5th Avenue, and Neiman Marcus, and also in reputable international stores like Kuwait’s Villa Moda and Moscow’s Tsum.

With a respectable wholesale business in place, TSM says the capital injection will be used to open retail stores, spur expansion outside the USA, and expand into new categories, likely through external licensing deals. In an interesting twist that runs opposite to the flow of designers moving into the Contemporary segment, Roy’s business had originally been positioned as a Contemporary brand, but it was subsequently repositioned as a Designer brand, which meant raising prices by 40%. This was a move that was generally lauded by buyer and editors.

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