Missguided veered badly off course. Could this become a trend? | retail industry

The collapse of fast fashion retailer Missguided has been a fire for suppliers, buyers and investors. As trustees pore over the books this week and creditors clamor for their money, the question being asked is: Was his demise a warning bell for the online rag trade, or just an isolated case of a company doing honor to his name?

Missguided’s creations once proudly paraded around the pool at Love Island and were promoted by a stream of influencers in marketing alliances. The Manchester-based firm, or at least his brand, is now set to become part of Sports Direct founder Mike Ashley’s empire after his firm shelled out £20m for intellectual property rights.

Michael Murray, who has just taken the wheel as the new boss of Ashley’s Frasers Group, has the job on his hands to revive Missguided, his first acquisition since taking the hot seat.

It can cut costs by connecting Missguided to the Frasers warehouse system and potentially its House of Fraser department store, but it has taken a risk in a fashion market that is clearly changing.

Online fast fashion players enjoyed a boom during the pandemic, as high street competition was nearly wiped out for months. Additionally, the cost of handling returned items was kept low, as shoppers were more likely to keep what they bought, given the trend for less “tight” looks.

Now, party dresses and workwear are back on the agenda, shoppers are returning more items, and costs for fabrics, delivery, warehouse labor, and energy have risen.

Fast fashion shoppers are also facing a huge drop in their purchasing power as bills mount. Discretionary income for those under 30 fell 26% in April compared to a year earlier, according to Asda’s latest income tracker, compared with a drop of around 11% for those aged 30-64.

For now, many households are still protected by savings made during the lockdown, when holidays abroad, nights out and trips to work were out of the question. But veteran retail bosses at Marks & Spencer and Asda expect things to get a lot tougher this fall as energy bills get higher.

Concerns about sustainability and cash are fueling a surge in the trade in second-hand fashion through sites like Depop and Vinted.

Missguided isn’t the only online fashion provider to suffer in this suddenly much tougher market. Boohoo recently revealed that profit fell 94% in the year to the end of February amid weakening demand and rising cost of delivery and handling of returned items.

Meanwhile, Asos posted a £15.8m pre-tax loss in the six months to the end of February, compared with a £106m profit a year earlier, as it said the disruption to the supply chain had curbed stocks of some of its best-selling products.

These British players face increasing competition from high street groups such as Next, M&S, Zara and H&M, who are now doing an increasingly good job online, as well as cheap and fast Chinese rival growth, Shein.

Meanwhile, concerns about sustainability and cash are fueling a surge in second-hand fashion trading through websites like Depop and Vinted, which are grabbing another slice of the established market.

Darcey Jupp, an apparel analyst at market research firm GlobalData, said: “The real reason for [Missguided’s] demise was his lack of competitiveness with the likes of Shein and Boohoo. While many pure UK games have struggled to continue their pandemic momentum in 2021 as in-person shopping returns, Missguided has slipped further than most, with a lack of high-profile celebrity collaborations and low prices. that contribute to the brand losing the lucrative attention of young buyers. in the UK fast fashion market.

There are clearly question marks over Missguided’s management. As recently as December, its founder, Nitin Passi, promised that there was no reason why it could be determined that the company could not pay its debts for a whole year, as it secured a new investment from the Alteri private equity group, which is backed by the wealthy Apollo Global Management.

Alteri acquired a majority stake in Missguided after shareholders invested £19m in the business in the year to March 2020, bringing the total invested to £60m over its short existence.

Sales rose 8% to £202m in the year to March 29, 2020, according to accounts filed with Companies House, but there were already signs of trouble: pre-tax losses widened to £8.3m from £4.7m the previous year as costs, particularly in distribution and marketing, skyrocketed.

When the market got tougher, Missguided didn’t have the resources to survive. It is unlikely that you are alone.

Source: www.theguardian.com