Nanette Lepore

Could Reconsider

Private Equity

By Richard Collings

Published: September 16, 2009

Updated: September 21, 2009

   Nanette Lepore, the private New York-based apparel company, could reconsider private equity investment in the future, but has shelved plans for the time, said Robert Savage, the company’s co-owner.

   Savage, who is also designer and co-founder Nanette Lepore’s husband, said the company came very close to inking a deal in 2008 after two years of due diligence. He described the process as running another business.

   But the deal fell through as the financial crisis unfolded and the investment firm attempted to renegotiate the terms, particularly the valuation. Savage said at that point Nanette Lepore declined to do so, as it was not in a financial situation in which it needed the money.

   The apparel business in 2006 likely had about $56 million in revenues and rang up $120 million in sales at the cash register. In 2007 it was on track to achieve $75 million in revenues according to previous reports, and generated up to $150 million at retail, or at least $140 million, also according to previous reports. It may have generated numbers close to its 2007 figures in 2008. The company’s EBITDA back in 2006 to 2007 was roughly between $13 million to $14 million.

   Although the company could reconsider future investment, Savage said there is no timetable. A number of industry insiders have indicated it could be until 2011 before investment activity picks back up. Savage added that as the company is a profitable concern, it is not reliant upon the loosening of the credit markets to conduct a transaction.

   It was previously reported that Sage Group was mandated as the company’s investment bank, but that was never confirmed, and it was something the company denied back in September of 2007, though it did say it had discussions with Sage. According to the company, by the middle of 2008, it had attracted plenty of buyer interest.

   A number of suitors were said to be circling the fashion business, primarily private equity firm Global Reach Capital. Other firms mentioned included Soros Private Equity Partners.

   In September of 2007, Savage said the company would be interested in selling either a stake in the business or the whole company, as it needed a partner to provide it with an extra set of hands to run it.

   In other news, the company proceeded with two store openings, one in New York City on Madison Avenue and one in Bal Harbour, Florida, both of which turned out to be good decisions, Savage said. According to the company’s Web site, Nanette Lepore now has a total of 10 boutiques.

   The company, meanwhile, works with Neiman Marcus concerning e-tailing efforts, but could consider launching it’s own e-commerce effort, agreeing that it could boost the company’s revenues five-to-ten percent, adding little overhead.

   Although the downturn has been difficult, Nanette Lepore is seeing a bit of an uptick in numbers for fall. While there may be some more turbulence ahead, it is generally optimistic as the company can now see an end to the recession or recession-like conditions, in one or maybe two-to-three years, Savage explained.

   The company has already launched a line of footwear in-house and licensed its name to Elizabeth Arden for fragrance. The apparel business has indicated it could additionally launch a line of handbags in-house and license out its name for sunglasses.

   The company also continues to push for retaining the New York City Garment District, as it is vital to incubating young designers.
   Without the Garment District, New York City will cease to be a center for design and it will have a negative impact on everything from the city’s fashion schools to the companies that are headquartered there, undermining an important industry leading to a loss in tax revenues and a less diversified economy.
   The end result could be that the industry dries up, not in the short-term, but over the next couple of decades, and everyone in New York City has to go to China for fashion week.

   Nanette Lepore has indicated in the past that it manufactures 85 percent of its clothing in the New York City Garment District, but zoning changes by the city could change that, though the company would not be in favor, as having local production allows it to directly oversee and ensure quality production.
    The company does outsource some production such as some sweaters and knitwear to Hong Kong, Savage has previously noted.

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