Following rumours earlier this week Next has confirmed it is purchasing FatFace with the consideration being settled partly in cash and partly by the issue of new Next shares and management equity rolling over into the new structure.
Upon completion of the deal, which is expected to take place within the next few weeks, Next will hold 97% of the equity and FatFace’s management will hold 3% of the business.
Next says the transaction will not materially impact its underlying profit before tax or EPS in the current year.
Next explains the announcement follows a period of strong trading for FatFace under the leadership of its CEO Will Crumbie, who will continue to lead the business.
It points out that in the 52 weeks to 27 May 2023, FatFace achieved total sales of £282m. Statutory profit before tax in the same period was £19.5m.
Digital channels account for two fifths (40%) of FatFace sales, with the remainder largely coming from their retail stores.
Next says it is anticipates that the company will continue to trade and develop its own retail store portfolio.
Earlier this week GlobalData apparel analyst Alice Price told Just Style FatFace's positive trading results "means it should generate immediate returns for Next without the need for significant additional resources".
She believes that adding FatFace to Next's portfolio could be key to unlocking its dream of strengthening its mid to upper-priced brand offering.
Price says: “Next recognises consumers are prioritising higher quality products to achieve better value for money during the cost-of-living crisis, so FatFace’s market positioning should help it achieve this goal.”
Meanwhile, for FatFace, this is a great opportunity to increase its customer base and bolster its growth potential.
The brand already has affiliations with Next Plc having launched on its Total Platform earlier this year where Next fulfils orders from its third-party brands’ own warehouses within two days.
“Next’s superior online proposition and global reach also allows FatFace to expand internationally, which has been a focus for the brand recently, with North America accounting for 7% of its sales and growing 20% in its FY2022/23,” Price notes.
