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Fashion’s IPO Roadshow Grinds to a Halt

This week, everyone will be talking about uncertainty in financial markets and the release of BoF Insights’ new report on the handbag market.
Zegna’s chief executive Gildo Zegna rings the Opening Bell of the New York Stock Exchange as the luxury group went public.
Zegna’s December 2021 IPO may be the last from the fashion industry for some time. (Getty Images)

Seemed Like a Good Idea at the Time

  • Numerous fashion companies, including brands, tech firms and media, have announced plans to go public
  • The actual number of IPOs has slowed to a trickle as stocks enter a bear market, and a possible recession looms
  • Shares of many fashion firms that went public in the last two years are down 70 percent or more this year

For a period between 2020 and the end of last year, you couldn’t go more than a few days without seeing headlines about a fashion or beauty brand planning an IPO. Many did go public last year, including Allbirds, Olaplex and Zegna. But plenty of other companies hinted at an exit, or even filed the paperwork, late last year or in early 2022, and have yet to ring the bell at the New York Stock Exchange. It’s no mystery as to why: between soaring inflation, rising interest rates and a worsening economic outlook, investors are taking fewer risks. Many were also burned by the poor performance of the last wave of fashion IPOs.

Where does that leave all those brands, publishers and tech start-ups whose founders and investors are eager for an exit? For some it’s a matter of waiting out the current market turbulence; hot brands like Savage X Fenty or those in L Catterton’s portfolio will still appeal to investors once the economic outlook stabilises, whether that’s later this summer, early next year or even beyond. Others, including direct-to-consumer brands that relied on burning cash to acquire new customers, may have missed their window and will need to sell at a fraction of their peak valuation, or fold entirely.

The Bottom Line: For many, if not most of these companies, the future probably falls somewhere in between those scenarios. Their fate may resemble that of Klarna, which was forced to raise funding at a sharply reduced valuation but could still emerge as a big winner in the financial services category if it can ride out its current rough patch.

What Recession?

  • The latest report from BoF’s in-house research team on the $72 billion designer bags and small leather goods category launches July 20
  • Surveys of consumers in the US and China found demand for handbags is still strong despite economic turbulence and China’s lockdowns
  • Higher prices at some brands haven’t spooked wealthy consumers, and in some cases even add to a bag’s appeal

There may be signs of an economic downturn on the horizon, but that doesn’t seem to have dented the appetite for designer bags. A soon-to-be-released BoF Insights report finds that the category is set to grow from $72 billion in sales this year to $100 billion by 2027.

The findings, based in part on surveys of US and Chinese consumers conducted last month, are also a sign that luxury brands’ move to hike prices on their most desirable bags is paying off. At Chanel, for example, the popular 2.55 bag costs nearly double what it did five years ago. Among wealthy US consumers BoF surveyed, nearly half said price increases were justified by brands’ inflated costs, and 19 percent actually thought higher prices made the bags more desirable. Tellingly, 60 percent didn’t think prices had increased significantly at all. Some consumers interpret rising prices as a signal that they should see a wider variety of bags as investment pieces, an attitude once reserved for the Hermès Birkin and few other models.

The Bottom Line: Download the full report from BoF Insights on July 20 to access proprietary data to sharpen your bags and small leather goods strategy, then join us on July 21 for a special #BoFLIVE event in which we’ll break down the report’s findings.

- Hannah Crump contributed to this item

The Week Ahead wants to hear from you! Send tips, suggestions, complaints and compliments to brian.baskin@businessoffashion.com.

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