Leading fashion retailer Next has surprised the industry by acquiring a 25% stake in respected mid-sized fashion brand Reiss. However, what makes this move even more significant is that Next has the option to take a majority stake in Reiss, effectively gaining control of the company. The deal involves Next purchasing shares from existing shareholders in Reiss Limited’s holding company. Once regulatory clearance is obtained, Next will invest £33 million in equity and £10 million in debt using its own cash resources. By exercising the option before July 2022, Next could potentially increase its stake to 51%.

Reiss, which was originally founded in 1971 as a menswear brand by David Reiss, is currently celebrating its 50th anniversary. Over the years, the brand has expanded to include womenswear and accessories. In 2016, US private equity firm Warburg Pincus acquired a majority stake in Reiss, with the Reiss family retaining a minority stake. Despite Next’s acquisition, Reiss CEO Christos Angelides, who has held the position since 2017, will continue in his role. Before joining Reiss, Angelides had worked for Next for 28 years and served on its board as a group product director for 14 years. This decision reflects Reiss’s commitment to preserving its management autonomy and creative independence. The brand will maintain its independent board and remain headquartered in London.

Although Next’s acquisition will bring about some changes, Reiss’s websites and online operations, both in the UK and internationally, will now be operated by Next’s Total Platform. Furthermore, Total Platform will provide warehousing and distribution services for Reiss’s retail, franchise, wholesale, and concession businesses. Reiss is expected to transition onto the platform within a year. Next intends for its infrastructure to serve as a launch pad for Reiss’s growth plans, both domestically and globally.

While Reiss has not yet released its financial results for the year ending in February, it is expected to have been impacted by the pandemic, along with many other fashion retailers. However, in the year leading up to February 2020, Reiss reported a 22% increase in sales, reaching a turnover of £227.4 million. Additionally, EBITDA experienced significant growth, rising by 51.6% to £29.3 million. The brand currently operates in 14 countries, with 79 stores, 104 concessions, and several wholesale and franchise partnerships.

Next’s acquisition of Reiss, despite being a higher-priced brand, is motivated by several factors. Reiss is highly regarded in the UK fashion sector and has a strong international presence, much like Next. It is well-known for its efficient management and promising future prospects. Next has been actively acquiring businesses recently and is currently in an acquisition-hungry phase, following its recent acquisition of Victoria’s Secret UK operations. Next CEO Simon Wolfson expressed excitement about the partnership with Reiss, believing that combining Reiss’s product, marketing, and brand building skills with Next’s Total Platform infrastructure will yield significant benefits. Angelides, CEO of Reiss, shares this sentiment, viewing the partnership as transformational and expecting Next’s infrastructure to enhance operational efficiency and customer service across all of Reiss’s channels.

In summary, the partnership between Next and Reiss presents a valuable opportunity for both companies. Reiss can utilize Next’s infrastructure to further its growth plans and expand its global presence as a modern fashion house. Simultaneously, Next can leverage Reiss’s exceptional brand and management team to solidify its position in the fashion retail market.

Business of Fashion: Next Takes 25% Stake in Reiss
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