Interview: What Missguided’s boss learnt from ‘self-inflicted’ mistakes

Scrolling through the 37-year-old Missguided founder and chief executive’s Instagram, you could be fooled into thinking you already know what type of person Nitin Passi is.

Pictures of him popping bottles of bubbly in exotic locations, driving fast cars and a supermodel fiancée on his arm all portray his brand – but sat in the Retail Week offices, jet-lagged from his recent trip to open a new LA office, he reveals a more humble side to himself. 

Champagne popping might not be warranted just yet, but Passi does have reason to celebrate Missguided’s latest set of results, following a torrid 2017-18 financial year.

The fast-fashion retailer returned to positive EBITDA of £3.5m during the 52 weeks to March 2019, compared with a £26m loss the previous year. The business also narrowed pre-tax losses to £4.7m during the period, in comparison with losses of £46.7m the previous year.

However, its sales took a hit after the boss trimmed its marketing spend to recuperate some money. Missguided posted a sales decline of 13.4% in the year, to £187m, down from £216m the previous year.

What went wrong?

Passi is brutally honest and makes no secret of the “shit year” the fashion retailer went through during 2017/18 – a far cry from the millionaire lifestyle he portrays on social media.

Missguided’s sales fell from 75% growth the previous financial year to just 5% in the year to March 2018 and EBITDA fell from plus £3.7m to -£25m during the same period.

Passi grew Missguided from his bedroom in 2009 to over £200m in eight years and says “poor control” at that rate of growth is what hurt the business so badly.

Cash control, stock control and people control were all attributing factors to the spiralling losses.

“As a fast-fashion business, we need to be turning our stock very quickly and showing our customers the newest on-trend fashion. But we were seeing stock that was six months old and we weren’t getting rid of it,” Passi explains.

“And at the same time, we moved to a new warehouse, got a new office, we integrated [new software] and brought in people that were spending money like crazy on marketing and it hurt us.

“We would have caught [the problems] in a week now, but I didn’t have the right people in the right roles.”

Following the difficult year, many of the Missguided top team exited in rapid succession. Chief financial officer Paul Masters left in 2017 after two years in the role. Prior to Missguided, Masters was interim chief executive at Bench and worked in a variety of positions over 10 years at sportswear brand Umbro.

Both chief customer officer Kenyatte Nelson and online chief executive Gareth Jones left the business after just eight months in their roles and chief technology officer John Allen also departed in 2018.

“If I had a strong chief financial officer we would never have got into those issues, so I suppose when we got into 2018/19 financial year it was all about cleaning up what hurt the business,” says Passi.

To help him with that Passi needed to replace the board he “didn’t trust” with a team more in line with his vision. 

Former Asda and Wiggle boss and current Pepco Group chief executive Andy Bond came in as chair in December 2018, and Passi says the retail veteran has helped him navigate the “crazy time” with a little help from some of Bond’s former colleagues. 

Passi brought former Pepkor owned GHM! chief executive Koray Gul as chief operating officer, former N Brown merchandise director Robin Gartshore as chief product officer, former Pepkor business development director Roy Ellis as chief financial officer and former Asda and Co-op digital marketing executive Nick Bamber in the newly created role of chief growth officer.

Bikini-gate and staying out of stores

Shiny new board and return to profits aside, there is still one hangover from Missguided’s annus horribilis that Passi is still dealing with – its bricks-and-mortar presence in the UK.

In 2017, the Missguided founder told Retail Week that, following a successful concession in Selfridges, he had his sights set on becoming a global brand, opening more concessions and a lot more stores – between 20 and 30.

“We have so much data about where our customer is, we can see our hotspots and are focusing on the top centres,” Passi said of his potential store opening spree. 

Unfortunately, that plan did not flourish as he’d hoped.

“The stores lost us money,” Passi explains. “But we didn’t have many stores. We got out of Westfield because after year one it was losing us money and I didn’t see any future in [bricks-and-mortar] retail, so I said let’s do a deal and get out of there.”

Passi was able to break his five-year contract at Westfield Stratford two years early and shut up shop in February 2019. Although Missguided negotiated an exit from its store in Bluewater, Kent, it continues to trade in the shopping centre on a short-term lease on “significantly improved terms”.

“We had some intentions of opening stores in the UK which we quickly stopped,” Passi says. “I would never go into stores in the UK as the climate stands now.”

Alongside its financial woes, Missguided had to face up to some ethical ones this year.

The infamous £1 bikini that has faced backlash from environmental activists was featured on an advert later banned for being “overly sexualised and objectifying women” by the Advertising Standards Agency (ASA).

Despite the backlash, Passi stands his ground on the decisions the brand made on both.

“Every woman as an individual has their own view on empowerment but our job as a brand is to empower our customers to look and feel confident and we do it across a lot of our messaging,” he says.

“Of course, we want to make them fun and glossy and sexy, so if the ASA wants to take it down after we’ve run it then so be it. I don’t agree with them but it’s not my choice.

“We will not tone down who we are as a brand that’s for sure.”

Although the £1 bikini may have looked bad from a sustainability point of view, Passi says the marketing tool was “hugely successful” in doing what Missguided wanted it to do.

“We went and made [the bikinis] in a factory that is certified, we absorbed the cost of it and we did it as a customer recruitment tool,” Passi explains.

“It’s no different than spending a million quid on TV [advertising]. And yes, while for our customers and for us as a business it’s very important to be aware of our carbon footprint and the working practices of the people in our factories, our customer loves a discount.

“She comes to us because she loves affordable fashion. We weren’t offering a zillion bikinis; we were offering a timed amount at one hour each time to drive that limitation in a crowded love island market. It was a marketing stunt.”

Missguided, along with many of its rivals, have come under fire for the impact the businesses have on the environment, which Passi “isn’t afraid to say” wasn’t a focus for Missguided the first “six or seven years” of its growth.

“We focused on growing the business but as it’s become more established and well known we’ve started to address [sustainability].”

The fast-fashion retailer now has a team dedicated to its ethical practices and is actively making changes to be more in line with expected standards.

Missguided has cut its UK suppliers from 40 to five after finding it “couldn’t control what was happening in them” from an ethical standpoint. The decision to consolidate its suppliers was part of a submission made to the Commons Environmental Audit Committee, led by MP Mary Creagh, which called for a change in the law to incentivise fashion retailers to operate sustainably and punish those that do not.

Its packaging, labels, garment and delivery bags are on the way to becoming 100% recyclable and it is working with fabric suppliers to use more end of roll fabrics to save on wastage.

“It’s an ongoing thing for us as a business,” Passi says.“It’s not something we want to shout about to our customers because, at the end of the day, we’re trying to do our bit and do more.

“But it’s not the USP of our business. It’s something we will be better at and will constantly improve on, but I think it’s important for us we don’t try and make money out of doing it,” he says.

Growing up and going global

Although Passi has turned his back on bricks-and-mortar expansion in the UK, he does see opportunities in physical retail further afield.

“I went into retail with franchising in mind. I looked at Zara and H&M and how they expanded their global footprint and a lot of it was with that model,” he says.

Last year, Missguided signed a deal with international franchise group Azadea to open 30 stores in the Middle East over five years.

Following store openings in Dubai and Abu Dhabi and one in Kuwait imminently, Missguided is set to have 10 franchise stores by the end of 2020 – including one in Vietnam and a flagship in Tel Aviv, Israel, opening in February next year.

“Our franchise strategy is to open stores with key partners in territories we would not go after ourselves, and that’s how as a brand we will attack bricks and mortar,” Passi says.

The retailer’s wholesale business is also continuously growing and accounts for £40m of the retailer’s revenue today – Asos and Zalando are its biggest customers.

Its online business still accounts for 80% of turnover and Passi has been investing time and money to set themselves apart from the likes of Boohoo and PrettyLittleThing.

“Three years ago, we were very much unicorns, rainbows, LOLs, talk to you later – all that sort of slang, which we sold to a 16-29-year-old target demographic,” he says.

“I thought we were alienating the older end of the demographic and too many people were ripping us off. So, we’ve really slickened up who we are as a brand to attract more of that target audience.

“We’re a bit bolder, a bit slicker and a bit more fashion-forward, and we’ve invested a lot more in quality and how we communicate ourselves as a brand,” Passi says.

Following a year of misguided decisions, Passi and his strengthened top team are back in business and aiming for profitable growth in 2020.