CNBC’s Margaret Brennan made a few interesting observations about luxury this week, triggered by the proposed purchase of Valentino by private equity firm Permira Advisors. This buyout is an example of a private equity firm paying a great deal (€2.6 billion) for a brand itself—past private equity purchases in the luxury / fashion retail space (such as Texas Pacific’s purchase of Neiman Marcus) had a great deal to do with the value of the retailer’s real estate.
Valentino is interesting because as Brennan notes, unlike other luxury brands it hasn’t made a masstige push and licensed out its name into high margin accessories. In Brennan’s opinion licensing brands “commoditizes them in a way that undermines the value of the name.”
This topic is no stranger to Janus Thinking. I’m of the opinion that when pursuing the masstige option, it’s a matter of keeping enough exclusives at the high end to keep buyers feeling special, and educating them that the difference at the high end is worth the price premium (without alienating the buyers of the less expensive goods who are really helping the bottom line). It will be interesting to see, if the purchase goes through, whether Permira will force Valentino to license its name.