The coming year looks to be another challenging one in fashion retail. Year-over-year, women’s specialty fashion retailers grew only 3.8% through November, basically keeping pace with inflation which was running 3.9% at year-end in women’s fashion.
“This year will bear challenges for apparel companies, like other discretionary product categories, arising from a mild recession in the U.S. and weaker economic prospects in many parts of the world,” S&P Global reported in an outlook across a wide range of consumer product categories.
“Apparel companies will likely resort to promotional pricing to drive sales and clear excess inventory.” The inevitable result of which is to put pressure on profits.
However, there is one bright spot for fashion retailers: dressing people for the things they are dying to do after being held hostage at home due to the pandemic.
“When consumers emerged from the pandemic, they eagerly exchanged their sweatpants for dressier attire. We have seen apparel manufacturers and retailers who cater to occasion-wear benefit from consumers’ pent-up demand for in-person activities, including special events and travel,” shared Sarah Wyeth, S&P Global Ratings’ consumer and retail sector lead.
While other fashion brands may find a shortlived boom in special occasion dressing this year, Windsor has perfected the special-occasion business model. It’s turned it into an evergreen market opportunity, unlike other retailers that only add a limited selection of evening dresses or focus primarily on one special occasion, such as David’s Bridal.
Windsor dresses women for all the special occasion events in her life, from her teens for proms, homecomings and graduation, through her twenties and thirties for date nights, club events and other special occasions. Then it’s honed the technique of bringing her back again with her teen daughter as she starts her life’s 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. Except for a blip in 2020 caused by the pandemic, it has grown year after year, boasting a CAGR of 21% in sales and 41% in EBITDA since 2010.
Now with 320 primarily mall-based stores, though in 2022 it opened its first street store in Manhattan, it has just about the same number of stores as David’s Bridal.
But Windsor has potentially greater opportunity since it has a recurring calendar of special occasions throughout the year.
“Customer acquisition starts with homecoming around the 9th or 10th grade,” CFO Paul Hoffman shared with me. “Then she cycles through prom and graduation.”
Added to what the company calls these school milestone or “rite of passage” events are recurring annual holidays, such as Valentine’s Day, Halloween, December holidays and New Year’s Eve. Plus the company caters to every day special events that happen throughout the year, like birthdays, date nights and dinner with friends.
And while Windsor doesn’t specialize in wedding dresses, like David’s, it does a big business in weddings for the wedding party and guests, including all the parties surrounding wedding celebrations.
“These three ‘buckets’ of occasions create a special retail environment where we actually have four quarters of equal revenue and profitability,” president Andy Solomon added. “We aren’t dependent upon the fourth quarter, and that makes for a unique year-round opportunity.”
And Hoffman notes customer acquisition costs are low (about $2.47 per new customer) 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 acquire these customers,” he adds.
The intensity of her desire allows the company to charge full retail, with greater than 90% of sales made at full price. And those retail prices are highly affordable, compared with the competition, with prices averaging $60 to $80 and going up to about $200.
Windsor’s Secret Sauce
Windsor’s core customers are GenZ and Millennial women; 35% of customers are aged 16 to 34 years, but then the cycle repeats with mothers shopping with their daughters.
Consumers aged 45 to 54 make up 26% of the customer base, and 12% are aged 55 to 64. And women 35 to 44 years, who represent 20% of its customer base, may be dressing for themselves and outfitting their daughters.
Being a fashion brand able to span the generations is the secret sauce that Windsor has mastered. “Some fashion brands are really successful with young people, but then they get stuck figuring out how to age into the next group of customers. We’ve figured that out,” Solomon said.
It also caters to the often last-minute, impulse nature of her purchase. While online represents about 20% of sales, the company understands its primary customers want to see, feel and try-on their special occasion outfits.
“Our busiest week last year was the week between Christmas and New Year, especially the two days before New Year’s. Obviously, these aren’t e-commerce days. She needs an outfit at the last minute. Our stores are an oasis when she is under pressure to find the perfect dress for her special occasion,” Solomon adds.
Overall, the company eyes a total addressable occasion wear market of about $80 billion, including $24 billion in holiday fashions, $15 billion in night out, $14 billion in vacation, $17 billion in wedding parties and guests, $8 billion in school milestones and $3 billion festivals.
It holds less than 1% of the TAM but is intent on expanding its penetration by increasing its store footprint – with 320 stores in 45 states, including five stores in Puerto Rico, it’s got most of the major population centers in the country covered. It is also looking to expand internationally, focusing first on our neighbors Canada in the near-term and Mexico in the future.
The business has a long history starting in 1937 when brothers Albert and Maurice Zekaria opened a lingerie and hoisery store in Los Angeles, then transitioning to special occasion pieces in 1957.
In 1997 Maurice’s son Leon took over and has remained the company CEO for 35 years. The company’s first store outside California opened in 2001, and it reached 142 stores in 27 states by 2016.
In 2017 Sun Capital made an investment that enabled the company to enhance its e-commerce capability and further expand its store footprint, as it strengthened the company’s executive talent. The Windsor team sees an achievable runway to double business from over $500 million today to $1 billion in the foreseeable future.
“Somehow we’ve flown under the radar, but we are a highly profitable business that is growing fast with a unique business model and discipline in all the areas of our business,” Solomon concluded.
Read More: Windsor Taps An Evergreen Market Opportunity Dressing Women For Special Occasions Year Round