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Reformation Got Acquired, Plans for International Expansion

Investors are starting to see the value in sustainability and Instagram savvy.
Photo: Courtesy of Reformation

Photo: Courtesy of Reformation

Reformation, the Los Angeles-based, sustainably-minded and Instagram-savvy fashion brand beloved by millennial women who don't mind showing a little skin, announced on Wednesday that it had sold a majority stake to Permira Funds, a private equity firm known for investing in luxury labels like Valentino and Proenza Schouler.

It's big news for the retailer, which has grown rapidly since 2009, when it began as founder Yael Aflalo's side project, through which she sold limited-quantity wares made from fabric waste out of a small Lower East Side shop. It now has 14 locations in the U.S. and will open its first international location in Canada on Thursday, to be followed by a London location this fall. It's expanded its sizing and gone into categories like kids, shoes and swimwear. In 2017, it opened a massive, modern new factory in L.A. where most of its products are manufactured. It's raised $37 million in funding and, according to the New York Times, is profitable and projected to bring in over $150 million in sales this year. It's also made more floral dresses go viral on Instagram than we can count.

Permira purchased its majority stake in Reformation for an unknown amount; Aflalo will remain CEO and a "significant owner" in the company, while Hali Borenstein will remain president, according to a press release. The company will use its newfound resources to further its retail growth and to to make its e-commerce experience more seamless for international customers.

"When we met with the Permira team, it was clear that they shared our commitment to sustainability, and have a strong understanding of how to best navigate the complex and rapidly changing consumer market," Aflalo said in a statement.

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"Uniquely positioned at the intersection of fashion and sustainability, Reformation authentically speaks to today’s consumer," said Permira Principal David Brisske. "Yael has done an incredible job building a brand and a company with a clear mission, beautiful products and a loyal following. It's rare for a business to have both tremendous brand strength and first-rate omnichannel capabilities, as Reformation has."

It feels like authentically, sustainability and omnichannel are the key words here. That they're mentioned so prominently as reasons why Reformation made for an attractive investment is certainly a sign of the times. As the whole fashion landscape has changed, so has what signals a viable fashion business. Today, investors are pouring their money into online marketplaces, resale platforms, streetwear companies and disruptive direct-to-consumer businesses while many traditional fashion companies struggle. Those traditional fashion companies are exactly what Permira has been known to invest in — and ultimately divest from. Today, the only other fashion business in its portfolio is Dr. Martens.

While Reformation's grasp of the coveted millennial demographic, vertical integration and mostly direct-to-consumer business model all likely piqued Permira's (and probably others') interest, the acquisition also suggests that investors are starting to see the value in sustainability and Instagram savvy. Other recent sustainable success stories include Allbirds, which was valued at $1.4 billion after just two years, and Rothy's, another sustainable shoe brand, which raised $35 million from Goldman Sachs last December. And then there's the recent IPO of Revolve, whose success owes largely to its expertise in Instagram marketing.

Given that there are no shortages of Instagram brands or sustainable ones, Reformation's acquisition could have just paved the way for many similar success stories to come.

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