Deal in focus: Kurt Geiger steps back into PE ownership

Alice Murray
24 April 2014

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In mid-April, US-based buyout house Sycamore Partners brought designer shoe brand Kurt Geiger back to private equity ownership, just three years after it was sold by Graphite Capital to The Jones Group. Alice Murray reports

Kurt Geiger is now back in a private equity portfolio for the third time – the numerous ownership changes endured by the business highlight a growing acceptance of secondary and tertiary buyouts, as well as deep changes in the once explosive luxury consumer market.

Sycamore purchased The Jones Group for $2.2bn in early April this year. Following the deal, the struggling retail behemoth – owner of major brand names including Anne Klein, Nine West, and Robert Rodriguez – and its new private equity owners clearly acted fast in putting together a restructuring plan. Part of the group's restructure was to separate Kurt Geiger, turning it into a stand-alone retailer backed by Sycamore.

On its return to independence, Kurt Geiger counts more than 180 multi-branded shoe concessions in UK and international department stores, including Harrods, Selfridges, House of Fraser, John Lewis, Debenhams, David Jones and Myer. As well as its name brand, Kurt Geiger also sells its Carvela, KG and Miss KG brands in more than 70 locations globally.

Kurt Geiger CEO Neil Clifford, who has been with the company since 1995 and led both previous private equity buyouts, finds himself once again at the helm of continued overseas expansion plans for the shoe retailer. According to Clifford, there is still plenty of room for Kurt Geiger to grow in the UK and internationally, as global demand for British design continues to intensify.

Affluent adjustments
The sale of Kurt Geiger to the Jones Group back in 2011, which coincided with Towerbrook Capital Partners' sale of iconic shoe brand Jimmy Choo to Labelux for an impressive £500m, was set against a backdrop of increased consumer polarisation. The financial downturn of 2009 saw the creation of the "Primark to Prada" market, whereby shoppers were increasingly turning to either value retailers or high-end luxury brands.

But a recent report by Bain & Co highlights the increasing divergence within the luxury consumer market itself. While the number of luxury consumers globally is still growing at an impressive rate, having more than tripled over the last 20 years to 330 million by the end of 2013, this group is moving away from a traditionally homogenous one to an increasingly heterogeneous league of shoppers. According to Bain there are now seven distinct groups of luxury consumers, ranging from the "omnivore", a new entrant to the market who is young and experimental; to the "hedonist", who seeks out flashy logos; and the "opinionated", often highly educated with a preference for leather and brands.

According to Tom Leman, partner and head of retail and lifestyle brands at Pinsent Masons, this latest deal also reflects another growing trend in the retail market. "The deal isn't surprising as lifestyle brands are set to grow faster than luxury brands, with consumer spend increasingly moving towards the former at the expense of the latter. While these sorts of brands have been well-exploited in the UK, there is plenty of growth for this retail strategy globally, particularly in Asia-Pacific."

Against this new backdrop, the shoe-maker's new private equity owners will likely set about boosting Kurt Geiger's presence in global markets where lifestyle brands are increasingly capturing consumer spend.

Kurt Geiger and private equity: A history
Kurt Geiger made its first steps into the world of private equity back in July 2005 when it was purchased by Equistone Partners Europe (known then as Barclays Private Equity) from previous parent Harrods Holding. The company was bought for £46m.

In February 2008 the shoe retailer changed hands again, this time being acquired by Graphite Capital for £95m.

Under Graphite's stewardship, Kurt Geiger increased turnover by 70%, with revenues reaching £205m in the year ending April 2011. The company opened a further 24 standalone UK stores and strengthened its relationships with department stores where it had concessions. Furthermore, the company opened up stores in Dubai, Kuwait, Bahrain and Qatar, as well as signing agreements with franchise partners in Russia and Turkey.

Graphite sold Kurt Geiger to the Jones Group for £215m in June 2011, in a deal that awarded the company's management with a £20m windfall, and Graphite with a profit of around £120m.