The coming year is also likely to be challenging in fashion retail. Year-on-year, womenswear retailers grew just 3.8% through November, essentially keeping pace with inflation, which ended the year at 3.9% for womenswear.
“This year, like other consumer staples categories, apparel companies will face challenges stemming from a mild recession in the US and weaker economic prospects in many parts of the world,” reported S&P Global in an outlook for a variety of consumer staples categories.
“Apparel companies will likely resort to promotional pricing to increase sales and eliminate excess inventory.” The inevitable consequence is pressure on profits.
There is one bright spot for fashion retailers, however: clothing people for the things they desperately want to do after being held hostage at home due to the pandemic.
“As consumers emerged from the pandemic, they eagerly traded in their sweatpants for smarter attire. We’ve seen apparel manufacturers and casualwear retailers benefit from pent-up consumer demand for in-person activities, including special events and travel,” said Sarah Wyeth, head of consumer and retail at S&P Global Ratings.
While other fashion brands may experience a short-lived boom in special occasion wear this year, Windsor has perfected the special occasion business model. It has made it an evergreen market opportunity, unlike other retailers who only offer a limited selection of evening dresses or focus primarily on a special occasion such as a wedding. B. David’s Bridal.
Windsor dresses women for all the special occasions in their lives, from their teens for prom, homecoming and graduation to their twenties and thirties for dates, club functions and other special occasions. Then the technique is refined to bring her back with her teenage daughter as she begins her life journey.
The business model is a virtuous circle that has enabled Windsor to grow from about $50 million in 2010 to over $500 million in 2022. Barring a 2020 pandemic-driven slump, it has been growing year over year, posting a CAGR of 21%. in sales and 41% in EBITDA since 2010.
With 320 stores located primarily in malls, although it opened its first Manhattan street store in 2022, it has about the same number of stores as David’s Bridal.
But Windsor has potentially greater odds as they have a recurring calendar of special events throughout the year.
“Customer acquisition starts when you come home in 9th or 10th grade,” CFO Paul Hoffman told me. “Then she cycles through prom and graduation.”
Adding to what the company calls these school milestones, or “rites of passage,” are recurring annual holidays like Valentine’s Day, Halloween, the December holidays, and New Year’s Eve. Also, the company hosts special events every day throughout the year, such as birthdays, dates, and dinners with friends.
And while Windsor doesn’t specialize in wedding dresses like David’s, it does do big business in weddings for the bridal party and guests, including all wedding-related parties.
“These three ‘buckets’ of opportunity create a unique retail environment where we actually have four quarters of equal sales and profitability,” added President Andy Solomon. “We are not dependent on the fourth quarter and that presents a unique opportunity throughout the year.”
And Hoffman notes that the cost of acquiring clients is low (about $2.47 per new client) because her desire to find the perfect dress is strong. “These big occasions in a woman’s life are extremely intense, so we don’t have to go out and spend a lot of money to attract these clients,” he adds.
The intensity of their desire allows the company to charge full retail price, with more than 90% of sales being made at full price. And those retail prices are very affordable compared to the competition, with prices ranging from $60 to $80 on average and up to around $200.
Windsor’s Secret Sauce
Windsor’s core clients are GenZ and Millennial women; 35% of customers are between the ages of 16 and 34, but then the cycle repeats itself when mothers shop with their daughters.
Consumers aged 45-54 make up 26% of the customer base, and 12% are 55-64 years old. And women aged 35 to 44, who make up 20% of the customer base, may be dressing themselves and their daughters.
Being a fashion brand that can span generations is the secret ingredient Windsor has mastered. “Some fashion brands are really successful with young people, but then they’re stuck on how to grow into the next customer group. That’s what we found out,” Solomon said.
It also takes into account the often spontaneous nature of their last-minute purchase. While online accounts for about 20% of sales, the company understands that its core customers want to see, feel and try on their special occasion outfits.
“Our busiest week of the past year was the week between Christmas and New Year, particularly the two days before New Year. Obviously these are not ecommerce days. She needs an outfit at the last minute. Our stores are a haven when she’s under pressure to find the perfect dress for her special occasion,” adds Solomon.
Overall, the company envisions an addressable occasionwear market of approximately $80 billion, including $24 billion in vacation wear, $15 billion in nights out, $14 billion in vacations, $17 billion in weddings and parties Guests, $8 billion for school milestones and $3 billion in celebrations.
It owns less than 1% of TAM, but intends to expand its market penetration by increasing its store footprint – with 320 stores in 45 states, including five stores in Puerto Rico, it covers most of the country’s major population centers. It is also looking to expand internationally, focusing first on our neighbors Canada in the near future and Mexico in the future.
The company has a rich history that began in 1937 when brothers Albert and Maurice Zekaria opened a lingerie and hosiery store in Los Angeles and in 1957 switched to special occasion pieces.
In 1997, Maurice’s son Leon took over the company and has been the company’s CEO for 35 years. The company’s first store outside of California opened in 2001 and by 2016 had reached 142 stores in 27 states.
In 2017, Sun Capital made an investment that allowed the company to improve its e-commerce capabilities and further expand its store presence as it bolstered the company’s leadership talent. The Windsor team sees a feasible path to doubling the business from over $500 million today to $1 billion in the foreseeable future.
“We’ve sort of flown under the radar, but we’re a highly profitable company that’s growing rapidly with a unique business model and discipline in all areas of our business,” concluded Solomon.