Photo: Canva
September 6, 2023
Are Ann Taylor, LOFT, and Talbots Better Together?
Sycamore Partners, the private equity firm, has formed KnitWell Group, a holding company combining three women’s apparel specialty chains with similar products and customer demographics: Ann Taylor, LOFT, and Talbots.
Sycamore took Talbots private in 2012 when it was struggling with a high debt load and had seen five straight years of declining sales amid competition from Ann Inc. — owner of Ann Taylor and LOFT — and Chico’s FAS. Talbots’ attempts to reach younger customers had also failed and alienated core shoppers: women over the age of 35.
In 2020, Sycamore acquired Ann Taylor, LOFT, Lane Bryant, and Lou & Grey out of Ascena’s bankruptcy proceedings. Ascena’s bankruptcy was blamed on the pandemic, but the retail conglomerate also faced challenges competing against “online retailers and inexpensive fast fashion brands” like Zara, H&M, and Amazon.
KnitWell will rank as one of the largest specialty apparel companies in the U.S. with combined annual sales of more than $3 billion. LOFT and Talbots each have about 500 stores, while Ann Taylor has about 200.
Lizanne Kindler, Talbots’ CEO, will lead KnitWell as executive chair and CEO. Kindler was Ann Taylor’s SVP of merchandising from 1992 until 2008 and has led Talbots since 2012 while overseeing Ann Taylor and LOFT since Sycamore’s acquisition. She will be joined “by a seasoned team of retail executives, and further supported by senior leaders at each of the brands — all of whom are dedicated to the unique needs of their customers.”
Kindler said, “We know that this new structure will support our efforts to unite brands and people by providing greater resources and capabilities, economies of scale, and enhanced value.”
Sycamore, which also owns large stakes in Belk, Hot Topic, and Staples, indicated other banners could be added to KnitWell.
Stefan Kaluzny, managing director of Sycamore, said, “Lizanne and the team have done an incredible job over the last decade reviving and growing these iconic American brands, first Talbots and most recently Ann Taylor and LOFT. The consistent and focused approach, which leverages the replicable playbook this team has developed, is laying the foundation of success not only for the brands currently part of the KnitWell portfolio, but also for potential future brands.”
Discussion Questions
DISCUSSION QUESTIONS: Do Ann Taylor, LOFT, and Talbots see much of a benefit as they reorganize under a single operating umbrella? What are the benefits and drawbacks of retail conglomerates to individual banners?
Poll
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Lucille DeHart
Principal, MKT Marketing Services/Columbus Consulting
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
Brandon Rael
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There is some sense in bringing the brands together under KnitWell, not least because there will be some efficiencies and savings the new group can find. However, success won’t materialize just because the entity is bigger and has economies of scale. Success comes from having clear brands that resonate with consumers. On that front, Sycamore Partners is making the right noises: it seems to recognize that each brand needs to be distinct and given operational freedom to make decisions that are right for customers. It remains to be seen how this all plays out, not least because some of the brands sit very squarely in the murky middle of the market and need to be better defined.
Operational efficiencies and streamlined systems and processes will certainly give a bump to these brands, but the real issue with them is that they never stayed relevant to the aging, nor emerging female consumers. The casualization of the workforce coupled with work from home did not help with the brands’ founding identities. Sharing a consumer base will only drive incremental growth if KnitWell is prepared to consolidate data and cross pollinate internally. The bigger challenge will be how they innovate the brands and maintain each brand’s DNA while creating synergy. This may be a case, however, of three aged retailers moving into the same retirement community.
My RetailWire comrades-in-words are saying it all. A ‘conglomerate’ of such similar businesses – all competing with one another on some level of merchandise and customer demographic does not sound so promising. If the economies of scale are the only reason to bring these three retailers together under one operating umbrella, the savings have to be significant and I don’t see it, not enough for all three to be profitable. But then, we mere mortals do not have access to the numbers. Sorry…
Don’t we love “iconic” American brands like Woolworth, Pan American, Oldsmobile, Howard Johnson, and soon to join the group, Sears?
Not surprisingly, “Talbots’ attempts to reach younger customers had also failed and alienated core shoppers: women over the age of 35.” Ladies, aren’t these three icons your mother’s retailers?
The real value of this re-organization will be the ability for Sycamore to allocate finite resources to the best alternatives. Sycamore knows the private equity playbook, and their objective isn’t for their properties to be a rousing success.
I am not sure about how the three different brands make for one storyline, however in a move like this one you will always (assuming proper integration) save on back office costs. Get that right, and you have three brands operating with greater margin opportunity.
Sounds good to me.
I think it’s a decent idea. The brand ethos’s are similar and none seems to have the mass to succeed on their own. But if it becomes a dysfunctional conglomerate, nothing will be gained.
“A decent idea”. A perfect description.
The recent retail mashups, collaborations, mergers, and acquisitions have been quite interesting. On the surface, the operational efficiencies, synergies, shared services model, and economies of scale that a single operating model under a retail conglomerate offers could be successful. With Sycamore Partners establishing the KnitWell Group, Ann Taylor, Loft, and Talbots have a fighting chance to turn their businesses around in such a dynamic and competitive middle-of-retail segment.
The KnitWell group will seek these efficiencies, cost savings, and synergies while being committed to developing a common companywide business process and technological solution capabilities while maintaining each brand’s individual identity and authenticity. Ann Taylor, Loft, and Talbots have an identity crisis and must reignite their brand purpose and missions. They must develop strategies to resonate with the proper merchandising, assortment, pricing, promotional, digital and social commerce strategies to retain their most valuable customers while aggressively going after the next generation of consumers.
I’ve always been a bit of a skeptic when very large companies combine to create even larger companies claiming savings due to economies of scale. Does a $20bn grocer really operate that much more effectively than 2 $10bn ones? If the combined company provides superb centralized logistics services (all the way to the customer door) that would prove a customer and financial benefit that perhaps each company on it’s own could not replicate. As to savings in expenses, bigger buying power – I don’t really buy it.
Peter, you have every right to be skeptical. While these combinations work well on an Excel spreadsheet, they rarely work in reality.
I suspect the end game for Sycamore is to strip costs and generate an appealing bottom line, then take them public and make boodles of ROI.
This is potentially a great idea…if…they use the transparency across the brands to create and manage differentiation. The word ‘similar’ makes me nervous. General Motors had similar brands that all died for lack of differentiation. The surviving brands spoke clearly to different market segments. This isn’t going to be easy. Lots of discipline required.
It is a good idea to combine? Maybe. Talbot’s alienated its core customers by trying to attract younger customers. Ann Taylor did the same and look how that turned out. Now its apparel is basic and boring with styles repeated from season to season in different fabrications. I hope they leave Loft alone, although lately I have noticed its garments trending younger, but shoppers on the sales floor are not. Did we not learn anything from St. John Knits “we need to attract younger customers” debacle that almost killed the company?
It’s a sad fact that people age out of their favorite stores. It shouldn’t be the other way around. Stay in your lane, offer fresh designs, and provide your core customers with what they want. Easy, right?
I’m with you, Georganne
Talbots and Ann strayed from their core customer, resulting in lost marketshare and loyalty. I have not seen compelling merchandise that appeals to shoppers looking for new, more relaxed post-pandemic style.
Unless each brand has specific target audience(s) and compelling merchandise, back office efficiencies will not revive these brands for the long-term.
While you can certainly expect to realize cost savings across these brands from the merged entity, cost-savings alone won’t spell success. These specialty apparel brands are very much in the “middle of the road” in apparel, so we will need to see what the new corporate structure brings to product design and merchandising to attract new customers. The potential is definitely there, now we need to watch the execution!
Much like Anna Karenina, all merger promises are the same – bigger, better, cheaper – but the realities are unhappy in their own ways (That’s a paraphrase, of course, but then Tolstoy wasn’t much of a Retail Analyst) The (perceived) benefits are all variations on the economies of scale in operations and greater clout in buying, but the downsides are usually more intangible: less creativity and culture clashes in attempting to get square pegs into round holes. I’m not intimate with the structures of any of these companies, so I won’t attempt to handicap this, I’ll just wish them well.