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L Catterton’s Bet on Tod’s: A Strategic Move Towards ‘Quiet Luxury’

L Catterton’s Bet on Tod’s: A Strategic Move Towards ‘Quiet Luxury’

In a significant move, L Catterton, an investment firm backed by LVMH, has placed a €510 million ($545 million) stake in Italian shoemaker Tod’s. The firm is betting on the demand from wealthy Americans for ‘quiet luxury’, hoping to yield the double-digit return that private equity typically seeks.

Tod’s: A New Chapter Begins

L Catterton, created by U.S. fund Catterton and LVMH-owner Group Arnault, has secured sufficient shares to take Tod’s private. The deal, valuing the company at just over €1.4 billion ($1.5 billion), is set to formally conclude in the coming days.

Under the stewardship of private equity, Tod’s will invest in marketing to capitalize on its sober elegance cachet and grow U.S. sales. Tod’s branded shoes and handbags, including its $695 Gomino loafers with their characteristic rubber-pellet soles, have a healthy following among well-off consumers aged 40 and above.

The Luxury Ladder: Tod’s and Beyond

Further up the luxury ladder, Roger Viver, the Paris-based $950-a-pair buckled shoe brand it acquired in 2015, appeals to Asia’s bigger spenders. However, the group’s smaller brands, such as Fay and Hogan, need refreshing.

A failed attempt in 2022 to take Tod’s private aimed to manage the diverse brands separately, and possibly divest the least profitable ones. Tod’s has long refused to chase younger shoppers, a choice it appeared to partly remedy in 2021 when it named fashion influencer Chiara Ferragni to its board. After three years, her position was not renewed.

The Digital Sales Potential

The emphasis so far on older customers is one reason Tod’s has scope to increase digital sales. Tod’s also failed to exploit fully the success of its most celebrated products, such as the $3,000 Di Bag made famous by Britain’s late Princess Diana, to drive sales by expanding more into clothing.

To compete with the best in class, Tod’s must accelerate its rollout of new collections and invest heavily in its brand’s image. For now, Tod’s marketing and communications expenses total around 10% of sales, broadly in line with other Italian peers.

A New Creative Director and a Bigger Footprint

“A relaunch needs to focus on renewing and broadening the product range and strengthening the retail channel, both brick-and-mortar stores and e-commerce”, said Giuliano Noci, strategy and marketing professor at Milan’s Politecnico University.

L Catterton’s investment plans, which have a roughly five-year time horizon typical of private equity funds, will initially erode the operating profit margin, but the delisting means the transformation can take place away from the scrutiny of short-term stock market investors.

Looking Ahead: Tod’s Future in the US Luxury Market

In comments to Italian newspaper MF in February, Della Valle said growing its U.S. presence would be a core goal for Tod’s in the next two years, alongside developing its clothing business.

Any relaunch also requires a more ambitious retail strategy, a luxury industry executive said, with openings and a new store concept. At the end of last year, Tod’s had 19 directly-owned shops in the States, the same number as in France.

All this has to be done when luxury brands face a slowdown after a post-pandemic boom. Demand in China is a particular cause for concern as Tod’s is strongly focused on the Asian market.

With its consumer goods focus, Connecticut-based L Catterton is well placed to drive expansion in the United States. It aims to also grow another Italian brand, make-up maker KIKO, which it agreed to buy in April, adding to its $34 billion in assets under management.

Attempts to broaden the appeal of Tod’s are not new. A decade ago, Tod’s tried to expand into ready-to-wear and refresh its classic elegance image, but eventually retreated to focus on the leather products that have always been central to its identity.

In December, Tod’s appointed Matteo Tamburini as its creative director for both womenswear and menswear for its main brand, but its new collections have yet to arrive in the shops.

“We go back a long way with Tod’s: quality has always been paramount to them”, said Carla Cereda Biffi, head of buying for Milan’s Biffi Boutiques.

This new chapter in Tod’s history presents a unique opportunity for the brand to redefine its identity and expand its reach. With the backing of L Catterton, Tod’s is poised to make a significant impact in the U.S. market.


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