With Chico’s Acquisition, Private Equity Sycamore Partners Builds A $6 Billion Fashion Powerhouse

In a deal valued at $1 billion priced at $7.60 per share, private equity firm Sycamore Partners just acquired specialty fashion retailer Chico’s FAS, including the flagship Chico’s brand along with White House Black Market and Soma intimates.

The Chico’s brands will be merged under Sycamore’s recently formed Knitwell Group that includes the Ann Taylor and Loft specialty fashion chains acquired in 2020 from Ascena and Talbots, which was acquired in 2012. Knitwell also provides support and shared services to Lane Bryant, specializing in plus-sized fashion. Sycamore also owns Belk, The Limited and Torrid. A request for comment from Sycamore went unanswered.

Lizanne Kindler, executive chair and CEO of Knitwell, said in a statement, “Knitwell is a best-in-class operating enterprise in the world of vertical specialty retail, comprising some of America’s most iconic brands, committed to instilling confidence in the women they serve.”

With the addition of Chico’s FAS, that generated $2.1 billion in its most recent fiscal year 2022, Knitwell boasts its portfolio of brands represents some $6 billion in annual sales, putting it in the league of the nation’s largest specialty fashion brands, such as $6.7 billion Tapestry in its most recent year, Ralph Lauren $6.4 billion, Levi Strauss $6.1 billion and Capri Holdings $5.6 billion.

“There is so much opportunity that comes with being part of this larger family of brands in terms of sharing best practices, innovation, and an incredible runway for growth and development, as well as efficiencies and leverage that come from size and scale with the best retail apparel brands in the country,” Kindler added.

Doubling Knitwell’s Bandwidth

Deal Done, Chico’s FAS CEO Molly Langenstein is making a hasty retreat, according to a letter to employees obtained by The News-Press/Naples Daily News, although no official announcement has been made. According to the company’s proxy statement, Langenstein will receive a Golden Parachute Compensation of $26.2 million. It is assumed that Kindler will take charge; however, she also acts as CEO for Talbots, so her plate is full.

The Chico’s acquisition more than doubles Knitwell’s bandwidth. It brings 14,000 associates and 1,258 locations in the U.S. and another 60 in international franchise operations.

Domestically, Chico’s has 484 full-priced boutiques and 120 outlets and contributes about 50% of revenues. White House Black Markets brings in 30% of revenues and operates 322 stores and 53 outlets, while  Soma accounts for 20% of revenues with 259 stores and 20 outlets.

By comparison, Talbots includes some 500 locations, Loft has some 375 and Ann Taylor about 115 stores. The three brands employ more than 30,000 associates.

Langenstein joined Chico’s in 2019 as president after serving 11 years with Macy’s and was promoted to CEO after less than a year. She is widely credited with stablizing Chico’s declining fortunes, building the brand to its current level after its heyday in 2015 when revenues peaked at $2.7 billion. In 2021, revenues reached $1.8 billion and Langenstein and team boosted revenues by 18% to reach $2.1 billion in 2022.

“We achieved strong results across all key financial metrics in fiscal 2022,” Langenstein said in a statement at the time. “We delivered strong store and digital sales growth, substantial gross margin expansion and solid expense leverage for the year, which produced outstanding operating income, cash flow and EPS. These results demonstrate the power of our three brands,” to which I would add, Langenstein’s leadership.

Under New Leadership

With Langenstein out of the picture, all rests on Knitwell’s Kindler and her team to keep Chico’s momentum in high gear. Being the leader of a private company, she is largely an unknown quantity in the wider business community.

A Danish native, she graduated in 1992 from Copenhagen Business School with a bachelor’s degree in economics. She went to work immediately after with Ann Taylor in merchandising, staying 15 years before moving to Talbots in 2008, also in merchandising, then hopping to Kohl’s in early 2011 for less than two years.

Sycamore Partners called her back to Talbots with its acquisition in 2012. According to a presentation she made to Syracuse University’s Whitman School of Management in 2020, it took some coaxing to get her to leave Kohl’s, where she was responsible for the company’s private brands and somewhere in the neighborhood of $9 billion in volume.

Kindler’s first round with Talbots was a personal disappointment. “The financials of the company were fine, but it was positioned as a turnaround because the business had gotten stale and dusty,” she said.

She went promptly to work to brighten the brand on the merchandise front, but ultimately was disappointed with the company’s  leadership. “It felt like I had to fight for what I believed in and I didn’t really have the support.”

By the time she was approached by Sycamore Partners to return to Talbots, it was in need of a real turnaround, not just sprucing up the merchandise.  “The company was bleeding money. It was really in distress and the team was demoralized,” she said, but that was the challenge she’d been waiting for.

“I walked in the door, rolled up my sleeves and just got to it. Since then, we closed our largest revenue and profit year in 2019,” she boasted.

She credits her career success on three qualities:

  • Focus – “I focus wholeheartedly on the situation. I’m not distracted. I get a lot done in a short amount of time because I’m intensely focused and not distracted.”
  • Listening – “I love asking questions because I don’t think I always have the answer. I need to know what people around me are thinking so I can make the best decisions.”
  • Being Decisive – “I’m a big decision maker. I’m not afraid of making decisions because I know that in business I can make a change if something doesn’t work out.”

Kindler is going to be putting all three qualities to the test now that her span of control has virtually doubled with the acquisition of Chico’s FAS. But unlike when she took over Talbots, Chico’s is doing quite nicely. Perhaps her biggest challenge will be not to screw it up.