John Varvatos is a music man through and through. The defining theme of his upmarket menswear and apparel range purports to express what he calls a “Rock ‘n’ Roll sensibility”, and icons Alice Cooper, Jimmy Page and Iggy Pop have modelled his clothes. One of his New York retail stores is at 315 Bowery, the former home of legendary East Village music club CBGB, where the likes of the Ramones and Talking Heads once burnished their reputations. Nowadays punters are lured into the venue to browse Varvatos suits, boots and eyewear, pick up some vintage vinyl, or attend the occasional gig.
In February 2014, the Michigan-born designer launched his own record label, John Varvatos Records, in partnership with Universal Music Group. Part of the motivation behind the new venture was to find “the next Guns N’Roses”, as he told Rolling Stone magazine at the time. However, reinforcing the genre-specific undertones of the John Varvatos fashion brand was also part of the thinking. In September, the label announced its first signing – Atlanta-based Zac Brown Band, a three-time Grammy winning Americana outfit.
At the stylish and fully brand-compliant headquarters of John Varvatos Enterprises in New York’s Chelsea neighbourhood, the founder’s surprisingly tiny office is bursting with musical paraphernalia and personal gifts from his many acquaintances in the rock business. Perched on a black leather armchair, in between a collection of John Varvatos fragrance containers on the window sill to his left, and a turquoise electric guitar autographed by Slash to his right, he talks enthusiastically about how his business has evolved since its start in 2000, and what Lion Capital, his private equity backers since August 2012, are bringing to the table.
DON’T BLOW UP MY BRAND
Before Lion, the business was majority-owned by VF Corporation, Varvatos’ first backer and a $10 billion publicly traded apparel conglomerate with a collection of 30 other fashion brands including The North Face, Timberland, Wranglers and Lee. He says it was a good partnership and that the company is still using VF’s distribution capabilities. But with less than $75 million in sales, and “virtually zero stylistic synergies between ourselves and the other brands, we were feeling increasingly like a square peg in a round hole.” VF’s painstaking, listed-company style approach to decision-making didn’t suit him either. Growing the business at a faster pace would require a new partner.
He felt a likeminded strategic investor for VF’s stake would be difficult to find, and turned his attention instead to private equity. Several financial investors were keen on a deal, but Varvatos says what he learned was this: “I met a lot of brilliant young people in private equity, I must say – but they also seemed very mechanical and studied. They talked about blowing up the brand, about the quickest way of getting sales to $1 billion [in five years], and I couldn’t get comfortable, because of what getting to $1 billion in five years might do to the brand.”
Varvatos learned his trade working for Ralph Lauren from the mid-1980s. He says his former boss and mentor is one of very few designers who have managed to position themselves both in the luxury segment as well as the more mass-produced end of the market without confusing the aspirational appeal of their product. Varvatos felt that for his own brand to try and repeat Lauren’s trick would be fraught with risk, and he wasn’t sure his private equity suitors would agree with him on that.
But with Lion, he says, the conversation was different. “They talked with passion about growing the brand instead of exploiting it. Straight away we got into sourcing, distribution, the retailing strategy, instead of just talking about the margin. Obviously they aren’t retailers or operators, but they really seemed plugged into the industry.”