Let’s buy Moncler for €20B

🧠 The Takeaways

Today, we’re acquiring Moncler to juice it up before LVMH comes in and eventually acquires it.

Focus more on Women since that’s where 69% of their customer base is.

Acquire Canada Goose to get a better foothold in the Americas.

Internationalize the playbook that’s crushing it in Asia to the rest of the world.

+ Why we need to turn July 4th into the new Christmas.

LBAB Community -  We need to make July 4th Christmas 2.0

US consumers spend $1T on Christmas. That‘s ~5% of the US GDP.  We all know it’s a big deal, but that’s a truly enormous amount of $ that flows through our system in a 2-month period.

It’s a high-stakes period that can lead to death or glory. The massive spike every year redefines most of our brands.

Really, when we break this down to its simplest consumer habit, we’ve decided that at this time of the year, sharing time and physical goods define our culture. 

All of the major eCommerce shopping Moments (Black Friday, Cyber Monday, Green Monday) were all created around that buying moment.

👆insight is totally replicable and, in a way, manufacturable.

Just like Black Friday was originally.

Then Cyber Monday as a Response to Black Friday.

We need to create a real second major buying season. 

Around July 4th. 

We need a second major moment throughout the year for risk, cashflow, and our sanity where there’s a massive amount of consumer $$ flowing through our ecosystem.

July 4th isn’t a random holiday I’m picking just because I’m American (other countries need adapt this to their major summer event). Instead:

It’s about the same distance to Back to School as BFCM is to Christmas.

It’s already a discount-heavy holiday.

It’s at the opposite end of the financial calendar as Nov/Dec.

We should all be aggressively running BFCM-style sales around July 4th to create the tidal wave of purchases around the holiday in a similar manner we see around Christmas. 

Products can be summer and American-themed with special discounts. It’s a natural event for anyone selling into Back to School trends, Summer travel, or if they’re down to stick an American flag design on their products.

80 years ago, Black Friday didn't exist. 

30 years ago, Cyber Monday didn't exist.

They became massive buying moments because so many retailers ran promos on those days that they shifted consumers spending behavior.

It’s time for another major consumer spending holiday but this one in the summer. There’s a reason Amazon Prime day is always in the middle of July. We need to create one that generates a huge spike in sales, so brands have better cash flow throughout the year.

Amazon isn’t the only innovator in this space.

Chubbies was early on this trend with July-ber Monday. But this will only work if everyone piles on. There needs to be a density of brands all running deals, so consumers see it as a major buying moment that they have to be a part of.

It won’t have the same horsepower as Christmas just because people won’t be giving as many gifts, but it can be an area where it’s the 3rd best month of a brand’s year. 

And whether you want to or not, in a couple of years you’ll be running a Prime day promo anyway. 

Let’s at least theme it around a better holiday.

Let’s Examine This Biz

Moncler is going to be acquired by LVMH. 

Trading at $61.10/share with a €15.1B market cap, Moncler is +65% L5.

The luxury outerwear portco (owner’s of Moncler + Stone Island) based out of Italy make Jackets, sweaters and everything else millionaires wear to the Ski lodge. They were founded in the 1950’s as one of the first down jacket makers. Now they’re in the leagues of Coach and Prada.

LVMH has already invested a 1% stake into Moncler. Let’s take that signal and make Moncler irresistible for its inevitable luxury corporate daddies.

A common practice when a scaled brand or portfolio of brands knows they’re going to exit is to acquire or “roll up” other brands to increase the equity value of their holdings.

The underlying principle is simple. The more dollars we have on our P&L, the more money we’ll get at exit. 

This can either manifest through a higher multiple (brands become more valuable at Revenue/Earnings bands) or just more scale. 

If I’m going to get a 5x multiple of earnings at exit, I’d rather have $100m in earnings than $50m. Assuming I get the same multiple that’s the difference between a $500m vs. a $250m purchase price.

Today, Moncler’s biz is worth €15B (25x their earnings), or a 5x multiple on their Rev. If we can add €3B to their Rev, it would be worth €30B.

If we can acquire €3B in Rev for less than €10B and exit at 5x Rev, we’ll make enough money to buy anything we want from Moncler’s stores. or any LVMH store for that matter.

Financial Summary

TLDR Analysis: This is what you want to see 

Rev growing faster than COGS. 👍

Overhead growing slightly faster than Rev. But not too much. 😐

FCF doubled YoY. This biz is printing cash. 😍

These are the types of consistent numbers Investors/Acquirers like LVMH want to see. Consistent performance at a massive scale with all the numbers heading in the right direction.

Nothing here stands out as to why this biz is trading at 25x Earnings, but that multiple also doesn’t seem very far off from the rest of the market.

Moncler has been chugging away for 60+ years. Now, it’s having its moment in the sun.

Let’s Scale This Biz!

Here are the 3 moves I’d make to roll up Moncler for a $30B exit to LVMH.

1) Focus more on women.

This is a super weird one. For 2 brands (Moncler + Stone Island) with a 69% female customer base, they focus on male products a lot.

Like, so much it doesn’t make sense, and I needed to look at my wife’s phone to make sure I wasn’t just getting a personalized site experience.

I’m not saying they need to go full on CRO nerd, but they should be prioritizing their largest customer more frequently in their experiences. The brand overall reeks Dude.

The first products that show up (+ the major focus of the whole shopping experience) should be for women. I’m all for bundling up, and think the play of buy for me + my significant other is brilliant, but a welcoming experience needs to revolve around women’s products/designs first.

Some basic customer demo stats:

69% of customers are women

67% of customers are in EMEA

64% of customers are < 40 yrs old

It’s one of those small steps that greatly improves performance by removing basic friction. If the core customer doesn’t need to scroll/click to see what they’re interested in, the right people will see the right products (= more sales).

It’s interesting to see a brand so obviously DOMINATED by female customers not featuring women throughout the shopping experience. And Moncler aren’t eCom newbies. They were actually early adopters of Luxury eCom. Their site’s been live since 2008.

It sounds like a such a small lift it doesn’t matter, but it’s a small hinge that swings a big door. Stanley made this exact same shift and it lead to them selling $700m+ worth of drinkware in a year.

Takeaway: Always build your Shopping CX around the largest customer base.

2) Acquire Canada Goose & Move into the US.

Moncler is predominantly a young European Women’s Outerwear brand. 

The glaringly obvious opportunity for Moncler… Get to the States! 

Only 7% of their customers are in the Americas. But I know a brand that is based in the Americas trying to become the new cool kids in outerwear.

Canada Goose is worth €1B (6% of Moncler’s cap).

This is triple threat acquisition:

Gives Moncler a foothold in the Americas for their 3 Outerwear brands (Moncler, Stone Island, + Canada Goose).

Push Canada Goose in Europe as the cool brand in America*.

Add €886m in Sales to their €2.9B Rev.

*I know Canada Goose is Canadian, but c’mon. We all know LVMH would position it as the cool American brand.

Why is that important? 2 reasons:

A) It better diversifies their Rev streams.

Currently, the Moncler brand represents 86% of the overall biz’s Rev. Stone Island only represents 14%. They have diversification, but it’s not valuable. At $411m, Stone Island’s Rev isn’t a rounding error to Moncler, but it also isn’t a priority.

If you add Canada Goose’s €886m to the portfolio, that would represent 22% of all 3 brands. Now, we have real diversity, with Moncler only representing 66% of the total group' Rev.

Plus, LVMH would be buying a true portfolio of brands to meaningfully extend their reach into Outerwear in 1 shot. Vs. Moncler being the foundation of their expansion into luxury outerwear and Stone Island truly being a rounding error for them.

B) It provides them with more scale. 

Moncler currently trades at 5x their Rev. Canada Goose Trades at 1x. If the market has the same reaction to the acquisition that I do, Moncler can add €4.4B to their market cap for €1B.

They could execute the deal in all stock since Moncler’s is literally more valuable than Canada Goose, but this is a golden opportunity to acquire the brand through mostly debt. Pay down the debt on the deal over time while the stock price skyrockets. The arbitrage will more than pay for itself at acquisition.

The icing on the cake: bringing Canada Goose into the portfolio extends the product catalog while taking a potential competitor off the board.

Takeaway: Moncler should buy Canada Goose.

3) Internationalize Moncler’s Winning strategy in Asia

2 facts are uniquely interesting to Moncler:

78% of Rev comes from DTC. (73% from the Moncler brand)*

53% of Rev comes from Asia. (50% from the Moncler brand)

*Real DTC means from both eCom + owned Retail locations.

They have really figured out how to sell directly in Asia. How? 

Through my favorite strategy: Collabs!

They have mastered collabs with local Brands/Influencers around major events and tackled an innovative sales strategy in the whole region. Most importantly using those collabs as a brand play to create specific products in those regions. The numbers speak for how well it’s been working.

What’s the next major market after Asia to sell to consumers who need to spend their hard earned money on status? The US.

Moncler needs to run the American version of the same playbook. It writes itself, to be honest.

Celebrities modeling around iconic collabs with American designers/brands.

The hottest drops that become must-haves at après-ski.

Big events/promotions (not discounts) around major cold winter events. (BFCM/Christmas/New Year’s).

The Asian market is much bigger than the US market, but at a measly 14% of total sales and (the only region that didn’t grow for the biz last year) the US is a massive opportunity for Moncler.

There are plenty of <40 High Household income (HHI) Women who will want in on the cool luxury outerwear brand from Europe that’s making noise in Asia.

Takeaway:  Adapt what wins in big markets into other big markets. Then localize.

Final Thought

There are 10 massive brands in the Outerwear space, but no one really owns the Women’s Luxury Boot market. 

The most famous female boots are all extensions of other famous Luxury brands, like Jimmy Choo or Stuart Weitzman.

The largest independent Luxury boot biz I could find was for Equestrian or Cowboy.

There seems to be a real market opportunity to establish and own the luxury boot market. If you just map out the core buying behavior of luxury outerwear…

Customers (especially female) buy multiple products.

They cycle through them for different options.

Change/upgrade them with trends

It seems to be an incredible biz to get into. Yes, you’d need to run it for 30-50 years for it to be considered luxury. But Footwear brands are one of the hardest bizs to launch, and the ones with decent scale become massive.

They would be:

High Price point & margin

Massive, easily identifiable market/customer base

Big opportunity for a large catalog.

Plus once you nail boots, it’s easy to move into other categories (other footwear, apparel, even outerwear).

A real, viable Luxury Footwear brand meant for the outdoors was the real missing piece to a larger acquisition strategy I wanted to build here. Moncler has 1 style of Boot they currently offer, but all their “look” photos all have boots in them that Moncler doesn’t sell.

Knowing how successful most footwear brands are in the public markets, this seems like a slam dunk opportunity. And once the brand gets to scale, I know a buyer who would scoop them up.