#1005 Thom Browne – lost a CEO, but won the war

I’ve only ever been to one Thom Browne show (New York Fashion Week, June 2009), but I can safely say that it was the most daring and daunting menswear collection I’ve ever seen. Daring due to the little grey suits paired with extreme drop crotch short pants; daunting for similar reasons (plus throw in a primary yellow vinyl trench and a fully embroidered scaly fish suit). Therein lies the secret to Browne’s success, and the recipe for his disaster. It’s almost too fashion forward – stuff you want to wear, but maybe in two seasons when you’ve seen other guys try it out first.

Take his little grey suits for example, the label’s trademark look. When they first walked down the runway, editors rejoiced, full grown men gulped. After years of wearing the same boxy suits with long pants, the thought of wearing a cropped jacket with schoolboy-short arms and ultra short cuffed pants must have seemed revolutionary. And at around USD$5,000 each, I mean revolutionary in that terrifying, ‘we’re about to try to overthrow the American government,’ kind of way.

So a situation arose where Thom Browne the company began suffering financially. Sales of the suits dropped in a nosediving economy, stores cancelled orders, debt rose, bankruptcy loomed. Enter interim CEO, Australian Josh Sparks (formerly of Sass and Bide). His was a tour of three duties – secure capital investment; lower price point and introduce more entry level elements; and find an ongoing equity partner who could enable a retail rollout in America, Asia and Europe.

“When I joined in April my first priority was to secure an immediate bridge loan. The economy was impacting how quickly Thom Browne was being paid by customers, the gross margin of the product had been too low for a number of seasons, and long term debt was coming due. We closed a multi million dollar facility with Cross Company four weeks after I joined. If we hadn’t closed it we had a back up plan to further cut costs [and] avoid bankruptcy, but it wouldn’t have been sustainable long term. The business required a total restructure, and without an immediate cash injection it would have been even more challenging.”

Cash injection secured, the second phase was to introduce the lower priced red/white/blue collection (unstructured suit separates and sportswear) – immediately enabling customers access to buy into the brand at an entry level position.

Sales rose 60%.

An ongoing equity partner was still needed to save the business and allow it to grow, and the Japanese Cross Company once again came to the plate, purchasing a 67% majority share in November. The only problem – business operations would now be moved to Tokyo, meaning that Josh Sparks would either have to leave the company or make the move too.

“Thom and I were both hopeful that our business relationship would be an enduring one,” says Sparks, “but the move to Japan wasn’t what I wanted to do.”

So despite losing a CEO, on the plus side of the deal, Thom Browne was able to retain full creative control of the company.

“That was the most important thing for me about finding a partner,” says Browne. “The creative side is the one thing that I’m really good at. Retaining 100% creative control over everything was vital for me.”

With a massive backer at the helm, the future looks bright for Thom Browne the designer and Thom Browne the company. There are stores to open and new markets to break.

“We’re opening our first Japanese flagship store within a year,” says Browne, “and then we’re focussed on opening up other areas in Asia, Europe and the United States. The US and Japan are very strong for me right now but Europe is still very small. There’s huge potential to grow there. I’ve always wanted to show the label in Paris [June 2010] and now we have the resources to do that.”

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Comments

  1. says

    hey isaac – great post. the business side of fashion is quite fascinating. must be so hard to predict market activity and to execute a business plan when the product can be HOT one season then not at all the following one. when so much relies on the creative ability of a couple of people that’s some serious pressure. more posts like this would be great! have a sweet Christmas with the family bud – say hi to your folks for me.

    rich.

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