Le Tote just picked up Lord & Taylor during a $75m shopping spree, and the fashion world is shook.
Umm, I don’t speak fashion
Le Tote is a fashion rental subscription service… basically, people pay to borrow clothes. Launched in 2012, the startup was recently valued at $180m.
L&T, on the other hand, is an iconic department store. Founded in 1826 and owned by Hudson’s Bay Company, it’s known for high-end fashion and — fun fact — introduced the personal shopper concept. Last year, L&T saw sales of $1.1B.
So… shouldn’t L&T have purchased Le Tote?
Hudson’s Bay Company has been losing money since 2016 and announced earlier this year it was mulling culling L&T.
Enter Le Tote … and an interesting deal. In exchange for L&T, Hudson’s Bay will get a bit of cash plus an equity position in Le Tote Inc. Hudson’s Bay also agreed to pay about $58m in annual rent on the Lord & Taylor stores that are leased for at least the next three years.
Le Tote plans to keep the stores open and staff employed. Meanwhile, it will have to raise additional capital to complete the transaction.
Fashion is weird
Established names like L&T struggle to attract capital because traditional retail has an uncertain future.
But new concepts — like clothing rental services — generate buzz, and that’s attractive to investors. The clothing rental market is estimated at $1B and is predicted to hit $2.5B by 2023.
And Le Tote and L&T might not be a clashing combo. Consider this: An expensive designer dress that doesn’t sell quickly in a store gets marked down — that’s lost margins. But sending that dress into the rental cycle allows more shoppers to wear it … and pay the full price of the dress.
