Fashion brands going public

The latest fashion accessory every luxury brand wants to own is an IPO (Initial Public Offering). With the rumors surrounding Marc Jacobs going public with his fashion brand, there is a setting trend from being a privately-owned company to growing into a publicly-owned enterprise among major brands around the world. However, there have been other luxury fashion brands that have listed themselves on the stock exchange and enjoyed their share of profits in the past.

Brands like Ralph Lauren and Donna Karen have got listed on the stock exchange. But the last two years have generated interest from many fashion houses, who have made the decision to go public and experienced varying outcomes. Salvatore Ferragamo was one of the luxury brands that went public in its home city of Milan in the summer of 2011. Other fashion conglomerates like Brunello Cucinelli, Prada, and Michael Kors have joined the list of companies getting listed.

For some brands like in the case of Prada, going public in growing economies was a wise decision. By 2010, the sales of Prada in Asia out-paced Europe and North America, accounting for a whopping 43%. The brand managed to raise an IPO of $2.5 billion, the largest consumer goods IPO ever recorded on the Hong Kong Stock Exchange.

There are different reasons for luxury fashion brands to go public. Many companies like Loro Piana, who were looking for an exit and hoped that the business would run better in the hands of a new owner, also preferred going public as an appropriate option. Another trend among luxury fashion companies is partnering with a young brand to seek a long-term association. Budding designers and brands lack the infrastructure, capital, and scaling that a business requires for going public. Luxury groups in London and New York are always scouting for new talent with long-term potential. For instance, in January 2013, Kering took a 51 percent stake in Christopher Kane, just as the former supported Alexander McQueen and Stella McCartney in 2001.

The long absence of private equity firms is now being filled by new investors, especially from emerging economies. For example, Valentino Fashion Group is now owned by the royal family of Qatar. Some IPOs are done to raise capital, while some aim to raise debt, as in the case of Prada. But for many luxury brands, going from privately owned to a publicly owned company aids in increasing the scale and reach of the label, especially in growing markets.

Besides going public to raise capital to fund acquisitions and growth and entrusting investors to realize the value of the brand, luxury fashion companies are issuing IPOs to expand and venture into new markets. The consumers of luxury products are no longer concentrated in America and Europe. For many luxury brands, switching to Hong Kong rather than the conventional capital raising destinations like London, New York, and Milan is proving to be a profitable option. China and other Asian countries are prospective and fast-growing markets that will provide the much-required boost to their labels.