The Wall Street Journal-20080125-Fashion Change- Hilfiger-s IPO Is Shelved- Pullback Reveals Anxiety In Luxury-Goods Sector Amid Market Volatility
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Fashion Change: Hilfiger's IPO Is Shelved; Pullback Reveals Anxiety In Luxury-Goods Sector Amid Market Volatility
Global market turmoil claimed its first fashion victim yesterday as Tommy Hilfiger Corp. shelved plans for an initial public offering of its shares on the Euronext Amsterdam exchange.
The company and its owner, private-equity firm Apax Partners, said the decision to shelve the IPO came even though "investor feedback has been positive."
"Considering recent volatile market conditions, management and shareholders decided to postpone an IPO process until such time that market conditions have stabilized," they said.
The pullback illustrates how the once-confident luxury-goods industry is getting skittish about whether it can attract investors at a time of roiling global markets and looming recession in the U.S. It remains to be seen how the turmoil could affect Prada SpA and Salvatore Ferragamo SpA -- two of the industry's best-known brands, which are planning listings on the Milan stock exchange this year. Prada shelved a previous plan for an IPO after the Sept. 11, 2001, attacks in the U.S.
"We are working with our advisers to determine the best timing. No decision has been made," said Prada spokesman Tomaso Galli. A spokesman for Salvatore Ferragamo couldn't be reached for comment.
The decision to put the Hilfiger IPO on hold also exposes the risks facing private-equity firms, which have paid lofty sums to acquire some of the biggest names in the fashion business. Hilfiger went private in a $1.6 billion buyout in 2006, making it the largest private-equity deal in the fashion industry at the time. That mark was surpassed last May when Permira bought a controlling stake in Valentino Fashion Group SpA that valued the company at 2.6 billion euros ($3.8 billion).
Those heavy price tags are weighing on the private-equity firms as they search for ways to square their bottom-line priorities with the creative talents and egos that drive the luxury sector.
In the past, the sector's galloping growth helped to increase confidence in private equity's plunge into fashion. With the industry's growth in question, however, the firms face tougher odds. "It's a very, very hard time to get some real pricing in the market," said Amedeo Carassai, a partner with Apax in Milan, adding that "historically [luxury] is perceived as one of the sectors that's been affected the most" by economic downturns.
Hilfiger, a quintessentially U.S. sportswear label known for its preppy aesthetic, is particularly vulnerable because of its exposure to the U.S. economy. Since the buyout, Apax has pushed Hilfiger to expand its clientele beyond the U.S., relocating its headquarters to Amsterdam and refashioning its designs according to European tastes.
A Euronext listing was expected to value the company at between 2 billion euros and 3 billion euros, and some of the funds raised would help fuel the brand's global expansion.
Luxury conglomerates such as LVMH Moet Hennessy Louis Vuitton SA and PPR SA's Gucci Group have been rolling out museum-like stores across emerging economies such as China in a bid to offset downturns in mature markets. That has put increasing pressure on smaller luxury companies such as Prada and Ferragamo to compete. Apax said a public listing for Hilfiger "has always been recognized as a logical step in the development of the company."
