So Thursday’s announcement that the two retail businesses are merging into a single $600 million entity came as something of a surprise. What changed?
Eric Morris, CEO of the newly created retail giant known as Brand Collective, said it was the realisation that bigger is better.
“When the business was originally purchased, the logic was, ‘Let’s get in there and understand the business without any ideas of bringing it all together.’ Larry and his team did that and made the decision that by bringing the two together, we’d be a lot more powerful as a total organisation,” Morris told Inside Retail.
“They haven’t done it – and this is a really important point – purely from a synergistic perspective. That’s not what we’re trying to do here. We’re trying to do it from an operational efficiency and growth perspective.”
The newly merged Brand Collective is now home to 26 fashion and footwear brands and 15 character licences sold in over 300 retail locations, making it the third-largest fashion retailer in Australia.
Morris believes the size of the portfolio and the calibre of globally recognised brands it contains – such as Clarks, Hush Puppies, Superdry, Replay, Review, Everlast and Lonsdale – will make it easier for the company to attract new business as well as top retail talent.
“Putting them together is actually really powerful from a people perspective [in terms of] career opportunities within the organisation and from a new business perspective,” he said.
“I realised that with the Replay business. The moment we brought it into the portfolio, there was attraction from other people who also wanted to join. That’s what happens. People are attracted to things like size.”
However, size alone may no longer be enough to compete in today’s values-led retail environment, retail strategist Rosanna Iacono said.
“Talent is looking for employers who match their values and fulfil their professional growth ambitions. The same can be said of brands looking for investors,” Iacono, an adviser and partner at The Growth Activists, told Inside Retail.
“M&As are increasingly values-led, especially for young entrepreneurs looking for bigger partners, and who have heard the horror stories of post-merger integrations gone wrong,” she explained.
For his part, Morris doesn’t appear concerned about Brand Collective’s acquisition pipeline. He noted that another brand would be joining the portfolio this week.
Synergy – but mostly growth
While the primary reason for the merger with PAS Group may have been growth, Morris still expects Brand Collective to benefit from certain synergies.
“We have a really strong digital team across the PAS business, and we’ll be utilising best practice across the brands collectively. In effect, Anna Samkova, who runs our digital business, will head up digital across the total group,” he said.
Similarly, Lisa Shalem, previously general manager of Brand Collective’s booming kids’ shoe business Shoes & Sox, will now be executive general manager of the footwear division, with the general managers of each footwear brand reporting to her.
Morris sees this structure as the key to ensuring that individual brands don’t get lost in the shuffle as Brand Collective’s portfolio continues to expand. It’s a potential pitfall that Iacono believes the business will need to keep in mind.
“Now there is an even bigger portfolio of brands to manage, and the imperative to ensure that each is performing strongly,” she said. “The post-pandemic market has shifted seismically, and the demands of consumers from the brands they buy from, particularly from a brand-engagement and sustainability standpoint, are only getting higher. Brands need to be pedalling hard on these fronts to remain relevant.”
Time will tell whether Brand Collective can keep up with these new consumer demands, but Morris believes it’s in a good position to do so, thanks to LK Group’s ongoing investment.
“Through the most difficult trading time through the pandemic, when a lot of organisations were cutting back, we looked at what we could do to ensure we were in a good position to continue growing as we came out,” he said.
That included improving digital systems and processes and bricks-and-mortar stores, along with marketing activities, such as brand collaborations and charity partnerships.
Longer term, Brand Collective isn’t writing off a public listing, but for now, the focus is on growth, Morris said.
“That provides options down the track.”