Mary Katrantzou Bites the Dust
In November 2020, Mary Katrantzou was yet another luxury fashion brand to enter into a CVA (Company Voluntary Arrangement). It seems like there will be many more that will follow suit in 2021. Even small brands owned by a luxury conglomerate have no guarantee of survival. This year LVMH parted ways with British shoe brand Nicholas Kirkwood and in 2019 Kering sold back its 51% stake in Christopher Kane to the designer. JW Anderson, of which LVHM has a minority share, had an operating loss of £5.7 million for its filed accounts as of 31 December 2019. The brand’s revenue also fell by 17% compared to 2018. Nevertheless, the French fashion conglomerate continues to lend its support to JW Anderson.
An Early Success Story
Mary Katrantzou founded her namesake brand in 2008. In the first 5 years after its launch, the label was a great success, largely due to Katrantzou’s unique and colourful prints. In 2013, the brand achieved a turnover of almost £11 million with a healthy pre-tax profit of £2.9 million.
Sensible and Sparing
The Mary Katrantzou brand seemed prudently managed and, unlike many other fledgling luxury brands, did not open an expensive flagship store. For small brands, flagships can be a massive drain on resources and are often loss-making. Also, the designer only drew a more-than-modest annual salary of £12,000. You can compare this to Jonathan Anderson would was earning in excess of £1 million for his part-time role at his own brand plus possibly an even bigger pay packet for being the Creative Director of Loewe.
Recruitment and Redundancies
In 2013, Mary Katrantzou had an average of 25 employees. But as turnover was expected to increase, the brand went on a recruitment spree, and by 2015 the staff complement had doubled to 50. Sales did not meet expectations, and as revenue declined, redundancies were made. By 2018, Mary Katrantzou only employed 21 individuals and the estimated turnover for that year was £5 million.
Loans and Raising Capital
In 2017, Mary Katrantzou raised £550,000 from 3 investors by selling 4% of its shares. This valued the brand at £14.5 million. Mary Katrantzou is the main shareholder of her brand, holding 96% of the shares. In 2018, she made a loan to her brand of nearly £1 million, simply to keep it afloat. Katrantzou had the means to do this as she was born into a wealthy family.
Losses for 4 Years Running
Mary Katrantzou suffered losses in 2015, and in the 3 years that followed. By 2018, the brand’s accumulative losses totalled close to £5 million. Accounts for the financial year ending 31 December 2019 have not yet been filed but further losses are predicted.
First at the Temple of Poseidon
In October 2019, the Mary Katrantzou brand showcased its Spring-Summer 2020 collection at the sought-after Temple of Poseidon, close to Athens in Greece. The label was the first ever to stage a catwalk show at the venue. Katrantzou had achieved what many other luxury fashion brands dreamt of doing. Nevertheless, besides receiving significant PR, the financial outlay to put on the show was enormous.
In One Day and Out the Next
What went wrong with Mary Katrantzou’s brand? It got off to a good start, was profitable, and appeared to be well-managed. Unfortunately, fashion is a fickle friend and what the consumer likes today may not be popular tomorrow. Put simply, this translates into a falling demand for any product line.
Why the CVA?
Good question. With the onslaught of the coronavirus this year, Mary Katrantzou realised that her brand would become increasingly susceptible to lower revenues and more losses. The CVA was a sensible and strategic move for the brand.
