Rescue mission

is this the “last chance show”?

Fresh concerns have mounted over the future of Manchester-based Missguided after its founder, Nitin Passi, resigned as CEO on April 20 and consultancy Teneo was appointed to explore “strategic options for the womenswear retailer.

After guiding Missguided through its recent fundraising and strategic review, Passi will step down as CEO but remain on the board of the fast fashion retailer’s holding company, Project Marley Newco Limited, to represent 50’s stake. % from his family. In December, Missguided sold a 50% stake to London-based private equity firm Alteri Investors to get a cash injection, the backing needed to guide it through supply chain challenges across the world. industry and help it regain “sustainable profitability”.

The investment came after Missguided launched a review of its business structure at the end of 2021, to tackle cost inflation, supply chain disruption and weakening customer demand. It concluded that it needed to “align its costs to better match its current performance.”

In the year to March 31, 2021, Missguided, whose biggest markets in the UK and US, achieved sales of £287 million. However, it’s unclear if the business is currently profitable – it fell into the red in 2017/18 and started to slide back into the black in 2019.

Missguided reported making significant progress in resolving inventory issues, streamlining warehouse operations and reducing head office costs. In April, Missguided laid off 63 employees, following a 45-day consultation process. About 340 employees remain.

Missguided SS22

“Missguided has made substantial operational progress since receiving new investment at the end of 2021, putting us on a stronger footing in a very short time,” Chairman Ian Gray said in a statement. “[It] means that we are now able to accelerate plans to explore strategic options for the company.

The company is now looking, with the help of Teneo, for a partner who can provide the infrastructure Missguided needs to deliver the next step in its progress.

JD Sports have been tipped as a possible suitor, but their interest is “at a very early stage”, Drapers understands. The sportswear giant was last year among a small number of parties, including Asda, in talks with the retailer over an investment.

“It looks like the last-ditch sedan for the company,” an industry expert told Drapers. “‘Looking for strategic options’ is an understatement for trying to sell the business as a whole, or parts of it.”

He explained why Missguided struggled to stay afloat: “It had a roller coaster ride and, in my opinion, never laid the foundation for lasting success. Missguided gave the impression of being a company that was moving really fast, collection to collection, fashion to fashion, and didn’t really have the time to build the kind of solid platform needed to support a bigger business.You need to invest in the kind of systems that allow planning and forecasting in order to have inventory replenishment to feed an expanding sales base.”

He added: “Furthermore, during Covid, the apparel market contracted as people diverted their spending to domestic markets. With a smaller pie, weaker players lost out. Companies such that Boohoo continued to increase their market share and [Chinese etailer] Shein has established himself – the two will have captured Misguided business.

One retail veteran agreed: “Fast fashion is a low margin business, so the huge increase in container prices will hit these brands the hardest. Some, however, weather the storm in ways that Missguided does not. So that can’t be the biggest problem. [Chinese etailer] Shein came on the scene with really low prices and sells huge volumes, so her rise inevitably hit Missguided.

“We have also heard of warehouse issues and unless he has good IT, he may have a problem with stock and may not have an accurate view of stock levels.

“Cost control – or lack thereof – is probably at the heart of its problems. He made costly mistakes, like the huge store in Westfield London [which opened in 2016 and closed in 2019 as it was loss making. Its store at Bluewater shopping centre in Kent, which opened in 2017 has also closed].”

She added: “Alteri gets involved in struggling businesses and Missguided seems to be in trouble. It will want the business to be as lean as possible to cut costs and then offload it for far more than its equity stake costs. 50%.”

Second time

This is not the first time that Missguided, founded by Passi in 2009, has had to put in place a recovery plan. Once a darling of the fast fashion scene, with two sparkling retail outlets, Missguided’s fortunes changed rapidly in 2017/18.

For the 53 weeks to 1 April 2018, on sales of £216m, it had an operating loss before exceptional items of £37.7m, an EBITDA loss of £26.5m and a loss of £46.7m after tax. The retailer cited a “premature” investment in new management and a “far too big” retail store proposal for an “extremely difficult” year.

For most of 2018, the once bold retailer remained silent as it implemented reforms aimed at catapulting it back into the black. For the year to March 31, 2019 – Latest results published by Missguided – EBITDA returned to growth, at £3.5m. He also significantly reduced his after-tax loss to £4m.

In pursuit of this turnaround, Missguided reassessed its supplier relationships, reduced marketing, reshaped the board of directors and closed its stores.

However, a financial source close to Missguided said the plan never really worked out: “If it’s sold – for example, to JD Sports – it would give me a fresh start. [and backing] he desperately needs it.

“He started having difficulties around two or three years old – for example, when he tried to open stores in Bluewater – that was the first misstep, and I don’t think he ever recovered. on track from then on.. And the pandemic didn’t help.

He added: “I think it will be a long and difficult journey unless [it is] acquired by a major competitor, such as Boohoo Group, which could bring it in and use its synergies. CUT FOR MAG I didn’t see someone like Frasers Group being interested as they operate at different ends of the spectrum – Sports Direct and Flannels – and I don’t see Missguided being a good fit. SO FAR

Indeed, observers wondered if there really was room for Missguided in the market.

A retail veteran commented, “Big deal is who would want it? Shein seems to be only growing and what is Missguided’s unique selling point? Maybe loyalty, but with so many purchases from Shein, it doesn’t seem like loyalty really exists in the fast fashion world. I think only another retailer would buy it if they felt Missguided filled their entire current portfolio. »

A second financial expert said: “If you look at the market and take a step back, is there room for a Missguided? The barriers to entry are quite low and you compete with Boohoo Group, Asos, Shein and I Saw It First.

“Also, with the way the world is going, with the European Union’s strategy for sustainable and circular textiles, it doesn’t play to the strengths of fast fashion.” By 2030, through regulation, the EU hopes that textile products will be sustainable and recyclable, free of hazardous substances and produced with respect for people and the planet.

Either way, industry sources believe Passi made the right decision in stepping down as chief executive.

The financial source close to Missguided said: “There are pros and cons – clearly with him at the helm it hasn’t gone too well. He’s grown well – and quickly – but he has some problems and needs someone with expertise to turn a business around.

A fast fashion womenswear retailer said: “It’s time for a change for him and for the brand after so many ups and downs. nitin [Passi] is young and can channel his positive energy elsewhere and will only be good for him and his new business.

With so many competitors operating in the fast fashion space, there may be no room for Missguided. However, with Passi stepping down as CEO and a potential new executive and/or owner at the helm, this could be the fresh start he desperately needs.