Accuracy provided extensive commercial and financial due diligence which facilitated a change in strategy for a US-based high-end fashion brand.

Context

A US-based high-end fashion house encountered some difficulties in the European market as a result of some unfavourable market and business conditions, impacted by the 2008/09 financial crisis. A combination of low consumer confidence and a shift in local consumer preferences towards essential items only led to our client asking us to perform due diligence on the European business.

How we helped

Our work identified the fashion house’s strengths and weaknesses in Europe, discovered why the European operations were struggling and provided different scenarios on ways forward with the business.

Initially, we conducted a strategic and profitability review of the house’s three clothing brands. We then performed a store-by-store analysis to determine the outcome of selling lease rights or even the entire business to a third party. Finally, we reviewed the budget for the current year and prepared stand-alone profit and loss accounts for the house’s main brand.

Outcome

The team found various reasons for the poor performance of one of the brands: production was centralised in the USA; too many stores were located in rural areas; and the brand had an image problem where it was associated with an older clientele. However, the other brands were profitable because they were well-positioned and popular among high-wealth individuals.

Thanks to our input, the fashion house closed certain stores, converted others and set up operations in other European countries. Our added value was that beyond the initial due diligence, we were able to model various strategic options, giving our client the tools necessary to make an informed decision.