Although Next boss Lord Wolfson recently said he was determined not to see the fashion giant become a conglomerate-style “corporate blob”, it has snapped up another retailer.
Days after speculation of a bid emerged, Next completed the acquisition of fashion brand Fat Face last week.
The move was something of a shock, given the acquisition didn’t necessarily match Next’s usual acquisitions. Unlike previous bids for the likes of Gap, Made.com and Joules, Fat Face wasn’t in any form of distress.
If anything, it was trading well. In an exposed mid-market fashion category riddled with brands struggling to compete for dwindling customer demand and discretionary spend, Fat Face has been outperforming, with sales up 15% to £282m in the year to May 27, 2023. The retailer also posted a 3% increase in EBITDA for the period.
Next is purchasing a brand in rude financial health and one that will immediately generate returns without the expense of large-scale investment.
It’s also a brand that Next is well acquainted with. Fat Face has been sold on its branded online platform Label since 2016 and it’s expected that its online operations will be migrated across to Total Platform within the year.
Analysts have welcomed the acquisition, saying that Fat Face’s slightly more upmarket brand positioning will help Next achieve its goal of diversifying its branded offer.
“Next recognises that consumers are prioritising higher-quality products to achieve better value for money during the cost-of-living crisis,” says GlobalData apparel analyst Alice Price. “Fat Face’s market positioning should help it achieve this goal.”
Fat Face also stands to gain from the tie-up, says Price. The fact that Next fulfils orders using its third-party brands’ existing infrastructure within two days will help it grow its customer base.
Also, having access to Next’s Total Platform will help the retailer achieve its international expansion goals.
Fat Face launched in Canada in the summer and has a burgeoning business in the US. North America now accounts for 7% of the brand’s total sales and grew 20% in the 2022/23 financial year.
Along with strong trading, the retailer is also built on a solid management foundation. Chief executive Will Crumbie has been with Fat Face since 2014 and at the helm of the business since 2021.
Both Crumbie and the board will be retained under the new ownership model.
Crumbie tells Retail Week that while the economic situation facing consumers “isn’t easy at the moment”, Fat Face “always comes back to the core principles of wanting to put newness and something interesting in front of the consumer.”
“That newness and innovation are really helping us mitigate some of those negative pressures that are there in the market at the moment,” he says.
One area where Fat Face has invested heavily in recent years that hasn’t yet been addressed as part of the deal is the future of its own third-party partnerships.
Most recently, Fat Face reached an agreement with N Brown to launch digitally across its Jacamo and JD Williams brands. It has also teamed up with the likes of Marks & Spencer and, pre-acquisition, with Next on its line of kidswear and in 2019 on a concession partnership with supermarket giant Sainsbury’s.
Crumbie believes the acquisition represents an “important next step” in Fat Face’s journey.
He says: “We have great momentum. This is about helping us reach more customers – whether that be in the UK or internationally – and becoming a part of the Next family, with the backing of their Total Platform infrastructure, will help us achieve this.”
Even as Wolfson and Next have added another brand to the stable, the Fat Face acquisition isn’t in danger of turning the group into a “corporate blob”. Bringing so many strengths to the tie-up, Fat Face could go on to be one of Wolfson’s shrewdest acquisitions yet.
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