If Superdry is the “king” of young fashion brands, its edgier-sounding but weak High Street rival Republic was never going to enter the ranks of the retailing royalty.

If Superdry is the “king” of young fashion brands, its edgier-sounding but weak High Street rival Republic was never going to enter the ranks of the retailing royalty.

The first reactions to the sudden collapse of the Republic fashion chain have tended to be to blame “private equity ownership” or the weakness of the market, but it may be more instructive to simply compare and contrast Republic with its rival Superdry in terms of brand equity and management strength. If truth be told, Republic was just a pale imitation of Superdry, without its product quality or pricing power.

When the old Best Jeans business changed its name to Republic some ten years ago it chose an interesting, edgy name with anti-establishment overtones for its student customers, but it was never able to translate that into a cult brand with real substance behind it. The stores look modern and edgy but lack content, with an odd selection of brands and labels.

It is tempting to blame the demise of Republic on the iniquities of private equity ownership and TPG’s Cayman Islands tax vehicle may not bear close examination, but it doesn’t look as if the business was unduly loaded with debt and, to be fair, TPG did inject more equity when the business first began to run into problems. Three years ago TPG thought they were buying a highly profitable and dynamic young fashion brand with lots of expansion potential, but they simply bought the wrong brand at the wrong time for the wrong price.

The interesting aspect of the timing of the TPG acquisition of Republic for £300m in June 2010 was that it came a few months after the successful flotation of SuperGroup, when the City was excited about the up-and-coming new young fashion brands. With hindsight, Republic’s previous private equity owners Change Capital sold out to TPG at the top, with Republic’s operating profits reaching £30m and margins up at an unsustainable 17%, but it takes two to tango.

Of course, SuperGroup has its growing pains as public company and it has had to go through a painful process of moving from an entrepreneurial to a more professional management structure, but its founder Julian Dunkerton has stuck at it, whilst staying close to the key product and buying organisation of the business. Republic was never able to make the same transition, once its founders Tim Whitworth and Carl Brewins stepped aside.

The former TK Maxx boss Paul Sweetenham was brought in last year to move the business more upmarket, but the new fashion brands haven’t worked and the consumer has got confused about what Republic stands for. Republic is not alone in finding the market tough, because USC went through similar problems a couple of years ago, whilst JD’s young fashion business Bank is having the same trouble in terms of getting its brand selection right.

The collapse in like for like sales at Republic over the last two years was bound to destroy the profitability of the business and from then on things were on a slippery slope. Pricing power was lost, as the business had to discount heavily to clear stock and found it difficult to then get consumers pay full-price. It is noticeable that the administrators point to a renewed lurch down in sales at the end of January, presumably as Republic went off Sale and tried to move into selling full-price Spring ranges.

In contrast to Republic, Superdry is a brand that never discounts, outside its online business and Outlet stores, and it deserves more credit from the stockmarket for its disciplined pricing stance. Like Republic, Superdry has been encouraged by landlords to take on plenty of big new stores in recent years, but it has been more prudent about the sites it has moved into. It was interesting that when Westfield Stratford opened in September 2011, Republic took a much bigger prime store on the main mall, whereas Superdry opted for a cheaper location on a side mall.

It remains to be seen whether a rump of Republic stores will continue under a new owner, but the seeds of its decline were sown in the over-expansion of a weak concept. It would be wrong for SuperGroup to gloat, but CEO Julian Dunkerton can be excused a moment of quiet celebration that his business has stuck to the right retailing principles, whereas Republic didn’t.

 

About Nick Bubb

Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos “Retail Think-Tank”.