Esprit, Coach, Tommy Hilfiger or Calvin Klein are some of the international brands that have had the Spanish giant behind, and that in the last decade have had in their capital some of the big ones like Juan Abelló, Artá Capital or L Capital.
Pepe Jeans is, without a doubt, the biggest success of venture capital in the Spanish fashion. If many of the other operations that took place in the sector weren’t successful, Pepe Jeans case points the opposite direction. And at least two of them happened in the last decade.
Along with changing its capital structure, the last ten years in the history of Pepe Jeans have gone by the group’s internationalization, in some occasions though its foreign markets and in others for the constant changes in its brand portfolio, with brands like Esprit, Coach or Calvin Klein. On the other hand, what hast change in the Spanish group is its management team, as discreet as many of the family run businesses, specially by the figure of Carlos Ortega.
Back in 2010, the company did its first relevant corporate operation in the last couple of years. In August, Artá Capital and L Capital, que venture capital of LVMH, acquired 27.9% of the company, for 85 million euros. After the operation, Torreal (investment of the businessman Juan Abelló) continued being the main shareholder of the group, with 31%; followed by its executive team, led by Carlos Ortega and Javier Raventós with 30%; Artá Capital with 16.4% and L Capital with 11.5%.
Back then, Pepe Jeans group owned Hackett and counted with a revenue of 347.3 million euros in the fiscal year ended March 2010. Besides that, the group was de distributor or Tommy Hilfiger in Spain and counted with the exclusiveness of Esprit in the country, though an agreement that ended in 2010, when the German group wanted to boost the business in the country.
After losing Esprit, another international agreement entered as replacement: in April that same year, Hackett created an alliance with the American Coach to open its first establishments in Spain, Portugal, United Kingdom and Ireland. The pact happened through two ventures that went fifty-fifty between Spain and United Kingdom.
Years of internationalization
After the entry of Artá Capital and L Capital, Pepe Jeans boosted its internationalization. One of the most relevant operations was the acquisition, at the end of 2010, of its business in India, with a market in which the group was a pioneer and that already counted with 150 establishments in 80 cities.
After the entry of Artá Capital and L Capital, Pepe Jeans boosted its internationalization
The Spanish company closed an agreement with Chetan Shah to take control over its distribution in the Indian market. Both companies created a jointed society of which the Spanish group controlled the majority.
At the same time, Pepe Jeans started its development in the Chinese market with the opening of its first two establishments, located in Shanghai. Pepe Jean allied with a local partner to open two shop-in-shop in the Chinese city.
India and China added to the markets where the brand was already present, countries like Spain, Portugal, United Kingdom, France, Germany and Italy. One year later, the group was getting ready for another big one: United States. The company took control of its American market, that since 2000 was in the hands of the New Yorker Jean Design, and took control of the brand al around the world.
In 2012, Tommy Hilfiger’s owner, the American giant PVH, reinforced its trust in Pepe Jeans and gave the group the management of its other branch, Arrow, in the Spanish market. By the fiscal year closed in March 2012, Pepe Jeans revenue arrived at 463 million euros, the majority from its own brand and 133 from its second brand Hackett. The ebitda of Pepe Jeans was then, 50 million euros.
In 2012, Tommy Hilfiger’s owner, the American giant PVH, reinforced its trust in Pepe Jeans
The growth of the group continued to happen in its internationalization: in 2012, the group joined Fashion & Lifestyle to grow in India with Hackett while it closed the last entry of the group in Hong Kong and reinforced positions in Middle East, where the group joined Azadea Group. In Europe, Italy was one of the group main expansion strategies, that in 2013 reached seven establishments in this market.
From breaking with Coach to adding Calvin Klein
Coach’s success in Europe made the alliance with Pepe Jeans to end few years after signing. In April 2014, the Spanish company sold Coach, 50% of the jointed society. In Coach’s last fiscal year, Pepe Jeans achieved a revenue of 480 million euros, 6.4% more and a net benefit of 30.3 million euros, with a rise of 61%.
The strong internationalization process had already produced results, in the fiscal year ended March 2013, Spain represented only 25% of the total, compared to 36% a year earlier. The European Union, represented, on the other hand, 57%, and the rest of the world, 18%.
In 2014, Pepe Jeans closed other two key alliances to grow its business. On one side, in March that year, the group closed an agreement with the Italian Morellato to start working in a watches line for Pepe Jeans. On the other hand, it closed a deal with its historic business partner, PVH, to commercialize three lines of Calvin Klein in the Spanish and Portuguese market, as well as 19 establishments of the lingerie wear brand.
The strong internationalization process had already produced results in 2013
With all, the fiscal year ended March 2014 offered record figures for Pepe Jeans. The company reached a revenue of 516 million euros and a net result of 48 million euros, with an increase of 7% and 58%, respectively, compared to the year before. This set the perfect base to make a new investors change.
In mid-2014, the company hired Morgan Stanley to explore its sale options, in a process that attract many international funds like KKR, CVC, Pai and Permira. The operation finally happened with the Lebanese M1, that entered the capital of Pepe Jeans for 730 million euros, with a transaction hand in hand with L Capital Asia. The transfer of shares affected 58.9% of the capital, previously controlled by Torreal, Artá Capital and L Capital, while the executive team continued in the company’s capital.
Soon after the acquisition, in 2015 the group subscribed with fifteen banks a credit of 300 million euros. The operation had as a goal to finance the acquisition of the company and get resources for its performance. Pepe Jeans goals went by raising its sales 79% and double its ebitda up to 2019.
550 million euros was the highest revenue reached by Pepe Jeans, that counts with an important international presence in Europe, Asia and Latin America.
The Latin American and Asian markets where from then, the expansion strategy focus for the company, that continued earning positions in countries like Italy, Mexico and India, where at the end of 2015 executed a new corporate operation, paying 22 million euros for the 30% of the business that still didn’t control in the country.
The group continued its expansion in 2015 with a new Brand, Norton and closed that fiscal year with a revenue of 550 million euros. After the entry of M1, the group did a corporate reorganization, and PJL Investments, located in Netherlands, became a shareholder of 100% of Pepe Jeans Group SLU.
The group continued its expansion in 2015 with a new Brand, Norton
The entry of M1 in Pepe Jeans had another important consequence: in 2016, the Spanish group acquired the French chain Façonnable, already owned by M1, and months later, it moved to Spain the headquarters of the brand. In 2018, the company added a new brand to its portfolio, PVH trusted Pepe Jeans with the distribution of Izod in Europe.
In the fiscal year 2016, the group didn’t achieve the growth it expected. The revenue arrived at 542.8 million euros, 1.5% less than last year. Its net result, on the hand, improved 39%, up to 12.2 million euros compared to the 8.8 million a year before.
Evolution was not the best in 2017: the specialized in denim group closed its fiscal with a downfall of 2% in sales and 1% in ebitda, mainly because of the negative result of Façonnable.
In 2017, Pepe Jeans investors injected 2 million euros to boost the growth of the company in its online channel and in markets lime India, Indonesia and China. Plus, in 2017, Pepe Jeans also renegotiated some if the terms in the loan signed in 2015, “to adapt to the current conditions of the group”.
The bad performance in the last two fiscal years, led the company to a restructuration process. In May 2019, the company ordered McKinsey and detailed report to cut expenses and Rothschild to renegotiate its debt. The American bank will negotiate with Bbva, Santander, CaixaBank, Bankia and Barclays, the refinancing of a 250 million euros loan, that expires in June 2021.
One of the options for the company is to let go of one its crown jewels, India. The company is considering offers for its business in the county, where it has become the fist denim brand by sales volume.
Even though the company thought of opening the business to a minority investor, some groups have shown interest in acquiring a major share of the Spanish giant in the Indian market.
With offices in Barcelona, Madrid, Amsterdam, London and Bombai, Pepe Jeans is one of the biggest Spanish fashion retail groups of the decade, and one of the main denim groups in the world, with a strong position in markets such as Europe and India, a Spanish name by name but with international surnames.