Fashion’s new runway: Wall Street

The New York TimesOctober 4, 2013 

With his red-carpet gowns, lush cashmere sweaters and jet-set shoulder totes, Michael Kors has influenced fellow designers across the globe.

These days, though, Kors is inspiring the fashion world not only with his “affordable luxury” merchandise, but also with the extraordinary success of his initial public offering nearly two years ago.

On Wednesday, Marc Jacobs announced his departure from Louis Vuitton to focus on an IPO of his own brand. Last year, Diane Von Furstenberg set off speculation about a stock offering when she hired a top-level fashion executive in a push to expand her business. And while Tory Burch has denied any near-term interest in an IPO, there are persistent whispers of a Wall Street debut.

Call it the Michael Kors effect.

When a company receives such an exuberant reception from stock investors, bankers say, it naturally causes similarly positioned businesses to think: Why not me?

Shares of Michael Kors Holdings have more than tripled since their December 2011 offering, making the IPO one of the most successful in recent years, as the company continues to turn in exceptional financial results and torrid growth.

Now, it has a stock market value of $15.3 billion, recently surpassing the $15.2 billion market capitalization of Ralph Lauren, one of the most storied brands in the history of the apparel business that has been a public company since 1997. The blazing performance of Michael Kors stock has created extraordinary wealth for its namesake, a Fashion Institute of Technology dropout who rose to fame as a judge on the fashion television show “Project Runway.”

Kors, 54, has sold shares in his company totaling about $700 million and still holds stock valued at roughly $330 million.

Although they have not received nearly the attention of blockbuster technology offerings like Facebook’s debut last year and Twitter’s pending deal, fashion IPOs are in vogue on Wall Street.

Vince, a luxury apparel brand owned by Kellwood, filed last month to sell stock to the public and separate from its parent. In Europe, Prada, Salvatore Ferragamo and Bruno Cucinelli have listed shares in the last couple of years.

Traditionally, Wall Street favors the stocks of companies with diverse portfolios of brands and more reliable earnings, like VF Corp. and Jones Apparel Group, over ones with their fortunes tied to a single designer. An exception is Ralph Lauren, whose success has largely depended on the taste and image of the company’s founder.

But today, bankers and analysts say, investors are clamoring for “pure plays” instead of companies with multiple brands. For instance, Fifth & Pacific, formerly known as Liz Claiborne, has been trying to sell slower-growth lines like Lucky and Juicy Couture to concentrate on its hottest brand, Kate Spade.

“What investors crave is a high-growth story, and if it has ‘star power,' even better,” said John Berg, chief executive of the investment bank Financo.

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