The investment landscape for fashion and consumer companies has see-sawed dramatically over the past few years, tipping from a growth-at-all-costs mentality to a laser focus on the bottom line.
While the new emphasis is welcomed by many, it’s also prompting companies to reprioritize, reposition and maybe even merge to compete.
Enter investment adviser M. Klein & Co. and consultancy Elm Street Advisors, which have formed a new partnership to help consumer and retail companies figure it all out.
The strategic tie up will be led by retail veteran James “Jim” S. Scully, founder of Elm Street, and M. Klein’s Michael Eck, senior adviser, and Nicholas Johnson, managing director.
M. Klein and Elm Street are joining forces.
The idea is to step in and help companies figure out their future and carry out the plan — whether that be some operational change, a corporate takeover or a capital raise.
The strategic partnership continues a thread that Scully and Eck first picked up in the late ‘90s when Proffitt’s bought Saks Fifth Avenue. Scully worked at Saks at the time and Eck was an investment banker on the deal.
Both of them went on to have busy, parallel careers, with Scully serving C-suite stints at J.Crew, Avon, J.Jill and Neiman Marcus Group while Eck rose to be global group head of the consumer and retail investment banking practices at both Morgan Stanley and Citigroup.
The two reconnected about seven years ago when they both served on the board of J.Jill and then worked on a SPAC platform that brought together committed capital, investment banking chops and a network of operating partners.
“That model is also very applicable to the strategic advice banking side of the business as well,” Scully said. “What you have is a fully integrated platform of consulting, strategic advice, operational, transactional, coupled with a global investment bank that has tremendous expertise.
“And we can walk into a company and provide seamless advice, from strategy through potentially an investment banking outcome, but not solely investment banking,” he said. “It can come with strategy, operational and transactional support.”
Scully specializes in guiding companies through key inflection points in their growth or maturity and said many don’t need “some grandiose growth strategy,” but need to get back to “brass tack execution.”
After some of the industry detoured into a direct-to-consumer route that didn’t work, Scully said: “We’re back to what we always knew, which is multichannel — wholesale, stores and e-commerce. [Having] healthy brands and a balanced business is the best way to get to profitability. It’s the best way to acquire and retain customers, which is ultimately at the heart of the business.
“Retailers and the brands are both going to feel a need to consolidate to be more relevant with one another,” he said.
That was already being seen last year, when Tapestry agreed to buy Capri Holdings for $8.5 billion, including debt; in the renewed deal talks between longtime rivals Neiman Marcus Group and Saks, and beyond.
Michael Eck
Eck said: “The market is beginning to understand that with moderate growth or slow top-line growth, the emphasis on profitability, having low leverage, returning capital to shareholders — that is a really acceptable way to generate shareholder value.
“It may create it in a different form in a different way, but that’s a driver of M&A,” Eck said. “There are some really obvious places where consolidation makes a ton of sense.”
Now companies looking to find their way through it have a new place to turn for help, whether or not it leads to an acquisition.
