Tod’s delisting reflects luxury’s appetite for private ownership

With the Milan-based Tod’s Group set to go private under the stewardship of the LVMH-backed private equity firm L Catterton, could we see a new trend emerge in the luxury goods sector? Earlier this month, Tod’s Group — owner of Tod’s, Hogan, Schiaparelli, Roger Vivier, and Fay — announced plans to delist from the Italian Stock Exchange after 24 years and go private through a partnership with L Catterton. The move marks a significant shift away from the stringent demands of public markets and could aid Tod’s Group in enhancing strategic flexibility in key markets like Greater China, where the company reported €356.7 million ($386.1 million) in revenue in FY 2023, a 24.2 percent increase year-over-year. Should stakeholders accept the proposal to take Tod’s private, the controlling Della Valle family is poised to hold a 54 percent stake in Tod's capital. Meanwhile, L Catterton will acquire a 36 percent interest, and Delphine SAS, a wholly-owned subsidiary of LVMH, will maintain a 10 percent share. According to the Financial Times, the deal would give Tod’s a valuation of around €2 billion ($2.15 billion) including debt. This acquisition will be a significant addition to L Catterton’s luxury and fashion portfolio, which currently includes majority stakes in A.P.C. and Ganni, along with minority stakes in Giuseppe Zanotti and Savage X Fenty. The linkup between Tod’s Group and L Catterton comes as the former reports robust global financial performance in 2023. All of the company’s portfolio brands achieved double-digit revenue growth compared to the previous year, with the group’s consolidated sales reaching €1.13 billion ($1.21 billion), an 11.9 percent increase on a comparable basis to the fiscal year prior. Pros of going private The move to delist Tod’s Group is driven by a strategy aimed at reinvigorating its portfolio and reinforcing its market position in the fiercely competitive luxury landscape. For smaller, global luxury brands like Tod's and Roger Vivier, transitioning from public to private ownership can bring strategic benefits. It allows for greater operational freedom, enabling the brand to make decisions that prioritize long-term brand equity and customer experience over short-term shareholder expectations. In the private realm, brands can more easily invest in craftsmanship, innovation, and bespoke services that define luxury branding without the constraints of quarterly financial disclosures and public market volatility. In the private realm, brands can more easily invest in craftsmanship, innovation, and bespoke services that define luxury branding without the constraints of quarterly financial disclosures and public market volatility. Partnering with L Catterton in a position of relative financial strength provides Tod’s with the capital needed for strategic initiatives, along with access to a wealth of industry expertise and a global network. The move also builds on the long-term relationship between Tod’s and LVMH, three years after the former (by way of Delphine SAS) increased its shareholding in Tod’s to 10 percent, up from 3.2 percent, reinforcing a two-decade-long friendship between the Arnault and Della Valle families. A deeper alliance with LVMH could give Tod’s the ammo it needs to refine its market positioning, enhance brand desirability across its portfolio, and expand its global footprint with a focus on key markets like China at a time when that market is arguably more challenging than ever. A wider trend? The big question for 2024 is whether the move by Tod’s marks a wider trend, and whether we may see a wave of listed luxury brands, groups, or retailers go private. In a similar vein, the acquisition of Farfetch by South Korean e-commerce giant Coupang in December 2023 — which rescued Farfetch from the brink of bankruptcy — provided the operational flexibility needed to recalibrate and realign Farfetch’s business model toward more sustainable growth (and possibly set the tone for what we can see more of this year). The rescue of Farfetch came shortly before the São Paulo-based cosmetics group Natura & Co. announced plans to delist from the New York Stock Exchange (NYSE), aiming to streamline its operations and simplify the company’s structure. Natura’s announcement came after the company sold The Body Shop to Aurelius Investment for £207 million ($254.32 million) and Aesop to L’Oréal for more than $2.5 billion. According to a company release, Natura’s divestitures were designed to show the company’s focus on strategic priorities and desire to enhance operational efficiency within its principal Latin American market. For Farfetch, the transition to private ownership under the aegis of Coupang underscores a broader industry narrative where independent or smaller luxury brands and retailers may seek acquisition or delisting to better navigate the increasingly volatile global luxury landscape. At the same time, this trend could present challenges for brands deeply associated with their founding CEOs, as these arrangements often result in the departure of such pivotal figures — as exemplified by José Neves stepping down from Farfetch one month after its acquisition by Coupang. While its new ownership promises Farfetch the resources it needs for a renewed focus on improving the experience for its clientele, and possibly provides a competitive edge in key markets like South Korea, the departure of Neves highlights the cultural and operational shifts that can accompany such transitions, which for founder-led luxury brands can impact brand identity and continuity. Strategic flexibility, especially in China At the most basic level, going private provides luxury brands, retailers, and groups — even those in a strong financial position — with strategic flexibility, allowing them to invest and innovate without the short-term performance pressures from public markets. This is critical for brands aiming to deepen their engagement with Chinese consumers, who are increasingly looking for unique and personalized luxury experiences and are becoming more price-conscious amid a murky economic picture in 2024. With Bain & Company projecting a mid-single-digit growth rate for China’s luxury market in 2024 and acknowledging that the market has not fully recovered to its 2021 levels, luxury brands face a crucial question this year: whether to invest in expansion within mainland China or focus on enticing Chinese tourists to stores outside of China. Publicly listed companies face two key complications in the China market this year, both of which require unique solutions. First, China’s $81 billion (600 billion RMB) daigou market and global web of gray-market shoppers continue to bite into company profits and thwart brand efforts to increase revenue at mainland China boutiques, which brands have spent the last several years building or renovating. Add to this the issue of growing price sensitivity, as Chinese consumers hold back on big-ticket purchases amid a challenging economic outlook and high unemployment among younger demographics. This means pricing could be the deciding factor of brand success in China this year, and publicly owned brands may not have the luxury of enacting price increases willy-nilly. Going private can provide the necessary leeway to adjust pricing, manage wholesale channels more tightly, and implement global pricing strategies more effectively, without the immediate backlash from public market investors. The pressures and transparency requirements of public markets can exacerbate these challenges, making the private route more appealing for brands seeking to adapt and innovate in alignment with the changing dynamics of the mainland China market. The ability to make swift strategic shifts, invest in digital and omnichannel capabilities, and tailor product offerings to the nuanced tastes of Chinese shoppers can be enhanced in a private setting, where the imperative is long-term value creation rather than short-term earnings visibility. Key Takeaways Tod’s Group is transitioning to private ownership after 24 years on the Italian Stock Exchange, seeking strategic flexibility with the support of L Catterton and LVMH. The partnership ensures the Della Valle family retains a majority stake, complemented by meaningful investments from L Catterton and LVMH’s Delphine SAS, amidst Tod’s strong financial performance in 2023. Brands considering a similar shift should weigh the benefits of greater operational freedom against the challenges of leaving the public market, focusing on long-term brand equity and customer experience. Tod’s move could signal a broader industry trend where luxury brands opt for private ownership to better navigate volatile markets and implement strategic initiatives aimed at long-term growth, particularly in response to evolving challenges in markets like China.

Tod’s delisting reflects luxury’s appetite for private ownership

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Published February 25, 2024

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Tod’s delisting reflects luxury’s appetite for private ownership