Missguided: What went wrong for the fast fashion giant?

Administrators were last night called in for Missguided after the fast fashion retailer failed to finalise a rescue deal.

This has put the workforce of over 300 jobs at risk and leaving hundreds of orders unfulfilled.

Teneo Financial Advisory will handle the process after suppliers, who claim to have not been paid in months by the retailer, issued it with a winding up petition in early May. Some are owed up to £2 million.

Over 80 employees are rumoured to have been let go immediately, with more expected.

“Missguided is a high profile key player in the fast fashion industry and at a time when a perfect storm has been brewing for the sector, this announcement is sure to make other retailers in the sector nervous,” said Begbies Traynor partner Julie Palmer.

How has Missguided slipped down the pecking order while its rivals have thrived?

A brief history of Missguided

Nitin Passi set up the fashion retailer in Manchester in 2009 and remains the owner of the company.

Since its launch, it has experience rapid growth in the UK as fast fashion experienced its moment as the favoured medium for younger consumers.

Missguided also launched in the US, Australia, France and Germany as it hoped to achieve a stature similar to that of its rivals Boohoo and PrettyLittleThing.

The retailer launched a range of wedding dresses in 2016 and the following year started its menswear label, Mennace.

Over the course of 11 years since the company’s launch, notable partnerships with brands and celebrities including Playboy, Nicole Scherzinger and Sofia Richie helped to scale the brand’s image amongst its rivals in a hotly contested fast fashion market, which also welcomed in Chinese ecommerce behemoth Shein.

Physical stores were opened in Westfield Stratford City, London and Bluewater shopping centre, however the Westfield store was closed less than three years later despite the retailer claiming it was a success.

Figures demonstrated however that the two stores generated insufficient revenue to cover operating costs.

In December last year, Alteri Investors acquired a 50% stake in the business, giving the retailer liquidity amid the supply chain disruption that was wreaking havoc across the industry.

Fast forward to the end of May and Missguided was being served with a winding up petition by JSK Fashions after suppliers accused the brand of not paying them what they were owed. Police were eventually called to Missguided’s head office in Manchester.

The company was saved from collapsing last year, and has since been searching for ways to save its business over the past few weeks. Boohoo and Shein were expected to table bids for the sinking brand.

How did Missguided fare during the pandemic?

Missguided returned to pre-tax profitability following a dire year of trading in 2019, despite seeing sales decline in, just before the pandemic hit.

For the year to March 31 2019 the online fashion brand reported an EBITDA of £3.5 million, a triumphant return to the black after posting a £26.3 million loss a year earlier.

After tax Missguided still posted a loss of £4.7 million, thought this was again a significant improvement on the £46.7 million loss reported a year earlier.

Missguided saw positive numbers during the pandemic as work from home culture boomed and bricks-and-mortar retailers closed their doors.

It saw a whopping 700% rise in the sale of joggers and leggings in 2020 as consumers were forced to stay at home.

Loungewear sales for the brand in general boomed compared to its sales data from the previous five years.

According to the brand, sales began to spike in loungewear in June and July, following a peak in active jogger sales in May as people turned to exercise to keep them occupied during lockdown.

What happened post-pandemic?

The rise of new, cheaper, fast fashion retailers hampered Missguided, mainly Chinese firm Shein, which took the sector by storm.

Shein overtook Amazon last year to become the most downloaded shopping app in the US as it continues its blistering rise to prominence.

The Chinese ecommerce fast-fashion app was dubbed the “TikTok of ecommerce”, and is reportedly the fastest growing ecommerce company in the world, expanding over 100% every year for the last nine years.

Unlike Missguided, Shein controls its entire production chain from design to manufacturing.

This allows it to pump out hundreds of new products tailored to specific user tastes in different markets across the globe for prices almost always undercutting its fast fashion rivals.

Unfortunately for Missguided, outsourcing its production chain has ultimately cost the brand.

Rival brand boohoo also took the decision to switch to in-house production in February 2021, telling its Leicester-based suppliers, which account are understood to produce around 40% of its garments, to cut ties with sub-contractors and third-party producers.

Suppliers without the “expertise or knowledge” to run a factory, must buy a Cut, Make and Trim (CMT) manufacturing unit, boohoo said at the time.

It added that while suppliers could reach out to discuss the new measures, this was a “mandatory requirement and not open to negotiation”.

What’s pushed Missguided towards administration?

While a myriad of factors have been discussed as to reasons why Missguided has sunk to the bottom of the pile, however GlobalData analyst Darcey Jupp believes that it comes down to the strength of the resolve of its rivals.

Jupp told Charged: “It is clear from the continued growth of its rivals that its failure is down to its own lack of competitiveness rather than sudden fall in demand for fast fashion.

“The true reason for its demise was its lack of competitiveness with the likes of Shein and boohoo. While many UK pureplays have struggled to continue their pandemic momentum in 2021 as in person shopping returned, Missguided has slipped further than most, with its lack of high-profile celebrity collaborations and uncompetitive pricing contributing to the brand losing the lucrative attention of young shoppers in the UK fast fashion market.

Jupp said she believed that the company’s failed venture into physical retail was a huge factor in the brand’s collapse.

“Missguided’s failed venture into physical retail would have certainly put another nail in the coffin, as the brand opened expensive and uninspiring stores that were unable to maintain footfall, leading to their subsequent closures.

“While its launch of concessions in some ASDA stores had the potential to be successful, this was evidently not enough to rescue the struggling brand.”

Palmer pointed out that the failed restructuring was also a contributing factor in the downfall of Missguided.

“Whilst the company attempted to restructure earlier this year, things clearly have not gone to plan. A number of factors, including supply chain issues and enforced Covid lockdowns in the Far East have led to a downturn in trade,” she said.

Who’s in the running to rescue Missguided?

Both Shein and Boohoo were rumoured to be interested in taking control of Missguided, however no bids have come to fruition as of yet. Sports retailer JD Sports was also reportedly interested in putting a deal on the table.

“At present, the boohoo group appears to be the frontrunner to rescue Missguided, and this acquisition certainly has the potential to revive the brand,” Jupp said.

“The boohoo group has a reputation of rescuing struggling apparel players, and its similar proposition means it is best-placed to take on the Missguided brand than the other interested players, including JD Sports and ASOS.”

Palmer believes that these are worrying times for the retail sector and that whichever brand acquires Missguided will achieve a significant increase in its market share.

“Missguided is a high profile key player in the fast fashion industry and at a time when a perfect storm has been brewing for the sector, this announcement is sure to make other retailers in the sector nervous,” she added.

“Now more than ever, businesses in the sector should remember that cash is king to ensure their survival. Maintaining a tight control over cashflow and a regular dialogue with creditors is hugely important – in Missguided’s case, it seems as if there was a breakdown in communication with key suppliers.

“When implementing a restructuring strategy, it is also important to remember that securing early professional advice is key to a successful outcome.”

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