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Topshop Deal Should Worry Clothing Chains

By George Anderson

December 6, 2012

It's no longer a rumor. The private equity firm Leonard Green & Partners has invested $250 million for a 25 percent stake in Topshop and that appears to be just what the British fast-fashion chain needs to ramp up its expansion in America.

According to a piece on CNBC, Stacey Widlitz, president of SW Retail Advisors, says the deal should raise concern for fashion chains including Abercrombie & Fitch, Aeropostale, American Eagle, The Gap and Urban Outfitters.

Currently, Topshop has flagships in Chicago, Las Vegas and New York with another planned for Los Angeles in Spring 2013. It also operates store-within-the-store selling spaces in 14 Nordstrom locations across the U.S. It also has an online presence with its us.topshop.com and us.topman.com e-commerce sites.

Leonard Green & Partners is well known for taking stakes in retailers including BJ's Wholesale Club, David's Bridal, J. Crew, Jo-Ann Stores, Neiman Marcus, Petco, Rite Aid, The Container Store, The Sports Authority, Whole Foods and others.

Honor Westnedge, an analyst at Verdict Research, suggests that in light of Leonard Green's investment in Topshop, she doesn't expect the chain to have the same difficulties navigating the U.S. market as other imports. She told Bloomberg News, the private equity firm has "a lot of experience of the U.S., they know the customer, the areas they should have a presence."

Discussion Questions:

What do you expect from Topshop in the U.S. now that Leonard Green & Partners has taken a stake in the chain? What clothing chains do you think will be most directly affected by a bigger Topshop presence and how do you expect them to react?

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Instant Poll:

Which of the following apparel chains do you think is most at risk from Topshop expanding its presence in the U.S.?

Comments:

Topshop's US arrival should impact clothing chains, but the real victim could be Macy's, which asserts that its most valuable customer is a Millennial. Topshop's merchandise is more expensive than the likes of Forever 21 and H&M, which puts it on par with department stores' pricing. How will Macy's react?

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Cathy Hotka, Principal, Cathy Hotka & Associates

The initial Nordstrom link was interesting to me as it positions Top Shop above their brand position in the UK ... or at least above my perception of their brand position in the UK!

If they can leverage this "premium" halo with smart marketing as they expand, it could be a great help to margins and create a broader competitive impact.

I could certainly imagine some smaller or independent operators being impacted as well as the spectrum from department stores to the likes of Urban Outfitters, H&M and Forever 21.

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Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

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Topshop Deal Should Worry Clothing Chains

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