Private equity firm Sycamore Partners has formed a holding company called the Knitwell Group comprised of its Ann Taylor, Loft and Talbots women’s specialty businesses.
Together, the three brands generate more than $3 billion in annual sales and have a workforce of about 30,000.
Lizanne Kindler, chief executive officer of Talbots, shifts into the role of leading the Knitwell Group as executive chair and CEO. An office of the executive chair was formed that includes iKindler and other top executives, which will be supported by senior leaders at each of the brands, the New York-based Sycamore indicated in its announcement Wednesday.
The creation of the holding company raises several possibilities for cost savings and sharing talent as well as best practices in product development and other areas more than might have been done in the past. The holding company can get its subsidiaries to sell products to one another at below-market prices.
There’s also speculation that by bringing the retail businesses together, it’s a prelude to a potential sale of the group to another private equity firm, retail company or through an IPO.
“The Ann Taylor and Talbot brands have tremendous customer overlap. This combination is long overdue as a meaningful opportunity to streamline overhead and generate cost savings,” said William S. Susman, managing director of Threadstone Capital. “Eventually, you are creating a large-scale entity with higher profitability that could be attractive in the public markets.”
“The first thought that comes to my mind is that they are trying to sell these companies by packaging them into a salable group,” commented veteran retail analyst, consultant and blogger Walter Loeb. “The products that these three companies sell are comparable.”
“Knitwell is a collection of powerful brands that, in aggregate, have been providing customers with the fashions they want for nearly 300 years,” Kindler said in a statement. “Brands are propelled by a deep and meaningful connection with the customers they serve, and that is where we start and end each day. With that as our North Star, we know that this new structure will support our efforts to unite brands and people by providing greater resources and capabilities, economies of scale and enhanced value.”
Stefan Kaluzny, managing director of Sycamore Partners, said in a statement, “Lizanne and the team have done an incredible job over the last decade reviving and growing these iconic American brands, first Talbots and, most recently, Ann Taylor and Loft. The consistent and focused approach, which leverages the replicable playbook this team has developed, is laying the foundation of success not only for the brands currently part of the Knitwell portfolio, but also for potential future brands. We look forward to our continued partnership with Lizanne and the entire team.”
The new company will also continue to provide oversight and shared services to Lane Bryant, which sells plus-size women’s apparel brand and is less comparable to the other three brands.
Another financial source, who requested not to be named, said, “If you go way back in time, when Ann Taylor and Talbots were publicly traded companies and competed against each other, when one comped up three points, the other would be down three points. It was like Coke and Pepsi, two competing brands.” For many years, Ann Taylor and Loft, founded as a lower-priced, casual version of Ann Taylor, would also not perform equally; when one showed gains, the other showed declines.
“Fundamentally, they do have comparable merchandising, and only slightly different demographics, but there could be an opportunity to take out a ton of back office expenses and up the value of a combination. This feels long overdue.”
In 2020, the Ascena Retail Group went bankrupt and later agreed to sell Ann Taylor, Loft, Lane Bryant and Lou & Grey to Sycamore Partners, which previously had acquired Talbots. Sycamore also owns or has large stakes in Staples, Torrid and Hot Topic, among other retail and consumer brands.
Talbots, Ann Taylor and Loft still attract customers and have had loyal followings. But they’ve lost a good deal of their luster over the last millennium, and have lost business to overseas retailers expanding into the U.S. such as Zara, H&M, Aritzia and Uniqlo, as well as off-pricers such as T.J. Maxx, and Amazon.