Aritzia Inc. will be the third company to have a go at reviving the Fred Segal brand. The question is can it?
After mismanagement by companies that attempted to quickly balloon the iconic L.A. boutique retailer through category and store expansion, Aritzia is tasked with not only reversing the damage done by those activities but carve a new path in a retail landscape far different from the one in which Fred Segal was founded.
Thursday’s quarterly update for Aritzia’s business did little to offer specifics around the Vancouver-based company’s plan. In fact, it raised more questions about why Aritzia would even need Fred Segal to grow.
That was a question asked by one analyst, who sought to understand why the company acquired the business.
“We have seen this as an opportunity to capitalize on a brand name, the Fred Segal name, that we think will be brand propelling for us and will elevate brand awareness for us in a very important market on the West Coast,” CEO Jennifer Wong said in response.
Aritzia is already nabbing the numbers to scale its awareness without Fred Segal.
Net revenue in the fiscal fourth quarter ended March 1 was $1.2 billion, a jump of 33 percent from the comparable period a year ago. The U.S. accounted for nearly 64 percent of those sales, with $755.3 million in the quarter, which was an increase of 38 percent.
Meanwhile, the company’s adjusted net income grew 41 percent to $138.2 million.
“Everything is working well,” Wong said of what categories the business is excelling in. “Literally everything. It truly is broad based across all our categories, style, colors, you name it.”
Why Buy?
The tie between Fred Segal and Aritzia several years before this year’s acquisition announcement.
Lyndon Cormack and Jamie Cormack, founders of accessories company Herschel Supply Co., bought the Fred Segal Melrose compound for $43 million through CormackHill. The holding company is also comprised of Aritzia founder and former CEO Brian Hill. Now, the entity is leasing the real estate back to Aritzia to eventually revive the location.
How using the name of an existing business would further grow Aritzia remains to be seen, unless the plan is to co-brand the two at the former Melrose flagship. That is in fact what was attempted a decade ago when Aritzia had a pop-up shop at the Melrose at that location.
Fred Segal was always known as being a directional department store concept whose buyers were able to pluck local brands from obscurity and propel them to a shopper base that included tastemakers and celebrities. It led to success for many brands, including Juicy Couture and Kate Spade.
If Aritzia’s thought is to take its brand portfolio of some 14 lines and house them under one roof, it would seem to be a glorified version of what they already have in their regular line of stores — with the Fred Segal name attached as a point of differentiation.
Wong told analysts the idea is to “reimagine what Fred Segal means for a new generation.”
What that looks like is unclear.
Part of that would mean leaning on legacy, which they’re already doing to some extent online with vintage photos of the Fred Segal store. How to move beyond the past requires strong buyers and a local operational footprint.
Turning the Page
Currently on the Fred Segal website is a branded air freshener selling for $30.
If that’s any indication of the strategy, it looks a lot like something out of Global Icons’ playbook and, before them, Sandow Media and Evolution Media. Both companies attempted to grow brand awareness of Fred Segal through the launch of an apparel line and other category expansion, alongside increased door count.
Fred Segal carries plenty of baggage from those previous stewards of the business, with the lack of direction and a general sense of what’s truly involved in being a merchant.
With the media hysteria and congratulatory statements made to Aritzia management over the Fred Segal acquisition in the rearview mirror, it’s now time to get down to business.
“This is an iconic brand that redefined experiential retail and shaped L.A.’s stylistic and cultural identity for decades,” Wong pointed out. “We’re thrilled to embark on a new chapter for Fred Segal as we reimage the brand for a new generation.”
If anyone can pull off the re-tooling of the iconic brand, it’s another retailer — and a retailer whose business is doing well. It’s now time to see what Aritzia is able to pull off.
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