Francesca Grosso from Style Capital on the fund’s latest investment Soeur

After selling the majority of its stake in the Australian brand Zimmermann this summer, in a major coup, the Italian fund Style Capital, which started out in 2007 under the name DGPA, acquired 80% of the French ready-to-wear brand Sœur at the end of September. Back in Milan after taking part in the launch of a capsule with Forte-Forte and attending the Zimmermann show in Paris, in which Style Capital is still a minority shareholder, Francesca Grosso, director of the fund who joined founder Roberta Benaglia in 2008, explains to FashionNetwork.com the vision of this successful investor in the premium and luxury fashion sector.

FashionNetwork.com: As a minority shareholder, you still follow Zimmermann, but when you took over the brand, its valuation was around €300 million. And in just a few seasons, it has literally exploded, so much so that at the time of the deal with Advent International this summer, it was worth over a billion euros. How do you explain this performance?

Francesca Grosso: The company has grown very quickly, even during the coronavirus pandemic. Its wardrobe, with evening dresses, did particularly well after Covid. We were involved in expanding in Europe, particularly with openings in Italy and Spain, but the business was doing well throughout Europe. And now we’re developing other international markets in the Middle East and Asia. So there’s plenty of room for growth over the next three years. That’s why we’ve stayed involved, both in terms of shares and management. And we continue to support the founders.

FNW: Are you going to apply the same ‘magic formula’ with Sœur?

FG: Sœur is a brand that we’ve been following closely for over a year. This brand has its own positioning, with an approach slightly below the contemporary segment via a fairly low price positioning compared to the other brands in our portfolio. But it’s a company with an image that attracts contemporary customers. The brand has a good quality approach and a design vision.

That’s why we think it can be very successful, and not just in France, where it is performing above the sector average. What’s more, it has the advantage of already being very strong in e-commerce. The company is starting to grow outside France, in England and Spain. Its collections work well all over the world. And we’re getting enquiries from distributors in Asia and the Middle East. Customers are looking for good quality, but also a good price. I believe that today’s contemporary woman also wants pieces with a more intelligent price positioning. The management team is very strong and is performing well, not only in terms of direction, but also in terms of design and sales. We want to help them grow outside their home market. The business plan forecasts growth in Europe and the United States.

FNW: When you take over this type of brand, what is your priority? Do you always take the same approach, or does it depend on the company?

FG: It depends on the brand. For more upmarket brands, such as Golden Goose or Forte-Forte, we open one or two shops in each country, but only in the major cities. In Soeur’s case, retail will be focused on a few countries such as England, Spain and Italy, but we will be able to open several stores. There is potential for four or five shops in London. And then we want to push wholesale, because it’s still a modest part of sales. We want to help them grow outside the domestic market.

FNW: Do you intend to better balance the brand’s distribution channels between retail, wholesale and digital?

FG: Today we are working on all aspects, with this omnichannel approach. Fifteen years ago, when we bought Twinset, it was mainly a wholesale approach. We think it’s important to be involved in retail, wholesale and digital. And Sœur has already started to work on all three. We’re not going to change their approach because they’re already very strong in digital. In retail, they are also very strong, but we want to help them expand outside of France. In wholesale, it’s just the beginning and we have a large network that can help them.
 
FNW: It’s been ten years since you invested in Golden Gosse, at the time as DGPA, which was the former name of Style Capital. What has changed since your investment?

FG: What hasn’t changed at Golden Goose is the management team: they were at the head of the company when it had sales of €20 million. Now it’s a very big fashion company. For us, it’s a great success story, both in terms of performance and management. When we bought Golden Goose, the brand was only doing wholesale and we started to develop digital and retail. We also worked on the Asian markets, particularly South Korea. Then the founders asked us to develop the United States, which is one of the brand’s commercial pillars. For the next owner, the next step was to integrate production. When we took over, the brand had production in Venice, but it was difficult to keep up with the brand’s the growth while producing at the same high quality. So we looked for greater capacity and finally took over production. They have developed other countries, grown and integrated other parts of the business… but the spirit remains the same.

FNW: As an investor, it must be satisfying to see this growth after the sale?

FG: When we buy or invest in a company, we always plan for it to grow after we leave. I think it will be the same with Zimmermann. The brand has growth potential in many markets. Over the next few years, it will reach new levels.
 
FNW: Style Capital was very Italian in its early investments. With Zimmermann, Re/Done and Sœur, they seem to be increasingly international. How do you choose your investments?

FG: When we started out with Style Capital, we decided to focus on the fashion industry. But we were targeting Italian companies to develop them internationally, using our experience. Then we invested in Re/done. And that raised questions: the company is in Los Angeles, how do you work with an American brand? How do you monitor the business remotely, given the time difference? But, particularly during Covid, when we were doing everything via video conferences, we realised that we could work effectively with other countries and therefore take an interest in foreign companies.

And for an American player, we saw that our expertise was very important. Seen from the other side of the Atlantic, Europe appears to be a market of the same size as the United States. But in reality, each country has its own specific characteristics. We realised that an international company could benefit from our understanding of the consumer habits of each European country. That’s when we invested in Zimmermann. At the time, the family couldn’t come to Europe, but they were in the process of growing and wanted to open boutiques and develop the European and American markets. They chose us because we could support them during Covid. This confirmed our ability to develop international brands. The other point is that there are a lot of very good design brands to be developed that are not based in Italy, even though Italy is still very strong in terms of production.
 
FNW: You have taken majority stakes in your latest investments. Is this your new strategy or does it depend on the projects?

FG: No, it depends on the project. Our approach has never been to focus on the stake we take in a company, but on its needs. It depends on what the founders have in mind. We are flexible when it comes to formats. We do both capital increases and soft LBOs. What we don’t do is company turnarounds.
 
FNW: You were talking about the relationship with the founders. Do you always invest in companies where the founders are still involved?

FG: What’s important for us is the design team. We invest in companies where this team is very strong. This is essential, because changing a designer is very complex. For us, this element has to be very solid, just like the quality of the products, and then we can work on all the other issues. You can always study the P&L (profit and loss), but for us, certain companies have enormous potential for growth in terms of creativity. It’s not necessarily directly linked to the figures, but to the product and the moment. For example, timeless brands like Max Mara and Totem are performing well at the moment. For us, Sœur is in tune with fashion trends. In the past, sportswear was very strong. Our investments also depend on what we anticipate for the next three years in terms of creativity.

FNW: What is Style Capital’s strategy for the next few years? How are your funds organised?

FG: Three years ago, we were just four people. At the moment, we’re getting more structured. We now have eight people and two industry experts to support us with our design development strategy. As far as funding is concerned, we have completed the financing of our second fund with capital of 280 million euros. But with our previous fund, we have the capacity to raise funds with other sponsors. This was the case with our investment in the Italian luxury multi-brand Luisa Via Roma, where we invested directly but also co-invested with other limited partners. With Style Capital II, we are in the process of finalising our investments in the fashion brands Zimmermann and Sœur and in the work footwear company U-Power. We have no other deals in the pipeline for the next six months. But we’re keeping an eye on the market for opportunities.
 
FNW: What are your remaining investment capacities with Style Capital II?

FG: I can’t give you a precise figure. But I can tell you that our average investment is €50 million per project, and this can be higher if we set up co-investments. 

FNW: What are the plans for the other MSGM brands, Luisa Via Roma, Forte-Forte and Re/Done?

FG: We are not currently in the process of exiting.

FNW: What is your perception of the sale and acquisition market, which has become tense in recent months? What has changed from your point of view?

FG: In my opinion, there is less competition. A few years ago, generalist funds were looking closely at the potential of assets in the fashion industry. These investments can yield very good returns. For example, in Twinset, when we exited, we made x9 on the capital invested. But you need to know the sector very well, otherwise you risk not getting very good returns.

I think that some generalist funds have been faced with a lack of expertise, and are currently looking at other sectors. So at the moment, there are fewer people working on the issues. For us, that’s a good thing, because valuations have come down significantly, whereas they had soared beyond our means. The key point at the moment is that banks are not backing certain fashion and retail projects. Financing is holding up a lot of big projects. But over the last six months, the situation has improved.