Boohoo-owned US brand Nasty Gal has recorded soaring revenue, and is taking its celebrity pair-ups to the next level with model Cara Delevingne.
It was the fashion fairy tale that sparked a book and a Netflix series – before ending in failure. US entrepreneur Sophia Amoruso started womenswear label Nasty Gal in 2006, aged just 22, armed with nothing more than her laptop. She went on to build a multimillion-dollar vintage-inspired brand that became a byword for California cool. Amoruso published #GirlBoss, part autobiography, part business guide, in 2014, later followed by the Netflix series of the same name.
But behind the media gloss, all was not well. By 2015, despite revenue of $85m (£68m), it was struggling to develop internal systems that could keep up with its growth. Profits waned. Nasty Gal filed for Chapter 11 bankruptcy protection in November 2016, and Amoruso resigned her role as executive chairman.
Nasty Gal was always a brand we admired over the years, so it was a natural addition to the group
Kelly Byrne, Boohoo
The business was thrown an unlikely lifeline from across the pond. Boohoo Group, the Manchester-based fast fashion empire founded by Mahmud Kamani and Carol Kane, bought Nasty Gal’s intellectual property rights and customer databases for $20m (£16m) in early 2017. Nasty Gal’s headquarters are now in Manchester, although it has offices in the US, France, Australia and Ireland.
Boohoo Group, which also owns MissPap, Coast, Karen Millen and PrettyLittleThing, has been busy rebuilding the brand. A combination of trend-led product, high-profile collaborations and competitive pricing has proved successful at driving sales.
Last week, with much fanfare, it unveiled what is arguably its most starry collaboration to date: a 40-piece festive collection with model and actress Cara Delevingne that draws on female musicians from the 1970s and 80s. Delevingne commands a 43 million-strong following on Instagram.
Revenue at Nasty Gal was up 148% to £43.9m in the six months to 31 August – the largest increase among the group’s brands. The number of active customers more than doubled, rising 112% to 1.5 million, and Nasty Gal was described as “gathering momentum” across all markets. The group does not reveal profits for individual brands, but profit before tax across the business was up 83% to £45.2m during the period.
Although still the baby of the Boohoo Group – bigger siblings Boohoo and PrettyLittleThing generated £281m and £237.6m respectively in revenue in the six months to 31 August – Nasty Gal has big ambitions.
“Nasty Gal was always a brand we admired over the years, so it was a natural addition to the group,” the Boohoo Group’s Manchester-based commercial director for the brand, Kelly Byrne, tells Drapers. “The focus was on rebuilding initially in the US, where most of the market share is. Before Boohoo purchased it, it was almost entirely a US brand. We knew that we could plug it straight into the Boohoo infrastructure, customer services, back-of-house functions, accounts and human resources.”
Boohoo Group was well placed to buy Nasty Gal, says retail analyst Mark Pilkington: “There was never much wrong with the basic Nasty Girl business model: embrace mobile shopping to avoid the cost of stores; invest in heavy marketing to target millennials with a sexy image and great prices; live on social media and court influencers. But it is a typical start-up cautionary tale. It got out of control after venture capital funding led to a mad rush for growth and over-investment in fancy offices, warehouses and stores.”
He says the group’s logistical strengths and knowledge of the fast fashion customer are boons for Nasty Gal: “Boohoo understands Nasty Gal’s demographics and online model, as they are similar to its own. It has given the [Nasty Gal] team operating independence, rather than trying to squeeze it into the wider Boohoo team, as happens in many failed acquisitions.
“Boohoo has promoted from within, entrusting the brand to group veteran Kelly Byrne [who worked at Boohoo for eight years]. It has leveraged the shared group logistical and administrative platforms across its growing brand portfolio, giving it the economies of scale necessary to support sustainable growth.”
Taking a more agile approach to product while maintaining Nasty Gal’s vintage-inspired handwriting has been at the heart of efforts to refresh the brand, Byrne explains. Key pieces for autumn 19 include trend-led products such as 1980s-style oversized suiting, beaded jackets and sheer tops. Retail prices range from £14 for tops to £160 for leather jackets, although the brand often heavily discounts its products.
Nasty Gal’s product is more vintage-inspired and slightly edgier but it needs to make sure it stands out
Emily Salter, GlobalData
“We started off with 400 products on site, and we’ve now got more than 10,000,” adds Byrne. “When we bought the brand, we wanted to retain the DNA of vintage California, but find out what inspired our customers, too. In the last year we’ve grown the product team to 50 people, and now have an in-house design team.
“Being part of the Boohoo Group has also allowed us to be part of a test-and-repeat model, with short lead times. Not going too wide and deep with the buy has allowed us to be really agile with Nasty Gal. We’re seeing that come through in its performance.”
Emily Salter, associate analyst at GlobalData, says Nasty Gal needs to maintain a distinct handwriting: “Nasty Gal’s product is more vintage-inspired and slightly edgier than the wider group, but it is similar in that it focuses on going-out styles at a low price. It needs to make sure it stands out. There’s a danger of it becoming the same as its sister brands.”
Heavy discounting could also become a fly in Nasty Gal’s ointment. At the time of writing, it was offering 50% off “winter essentials” and 40% off all other stock. Gross margin at Nasty Gal during the six months to 31 August fell 480 basis points to 54.2%.
“Frequent discounting can devalue a brand in the eyes of the customer,” cautions Salter.
However, Byrne argues that price cutting is built into Nasty Gal’s model: “The reality is that discounting is part of the strategy from all retailers, especially online. You haven’t got the same overheads to contend with as high street stores do, so there is more room in those margins. Discounting is part of our strategy, and won’t go away any time soon.”
Anusha Couttigane, principal fashion analyst at Kantar Consulting, adds: “In a lot of western markets, consumers almost demand discounts for them to consider making a purchase.”
Nasty Gal has also been prepared to spend big – very big – on marketing to reach customers. As well as Delevingne, the label has previously partnered with US model Emily Ratajkowski (24 million Instagram followers) and British influencer Emma Louise Connolly (390,000).
Byrne tells Drapers such pairings are worth the investment: “The Emily Ratajkowski collaboration helped us to gain global awareness. We’ve seen a big response from bigger collaborations, but also from smaller, cool and edgy partnerships, such as with Emma Connolly.
“Customers love these girls and follow their every move. High-profile names work, but smaller girls do, too. We wouldn’t continue to do it if there wasn’t a big return on investment.”
Product and celebrity collaborations are not its only channels of investment. International expansion is next up on Nasty Gal’s agenda. It is currently sold in 150 markets and is seeking to grow its presence in markets such as Australia.
The brand has already travelled a long way from sunny Los Angeles. So far, Boohoo’s turnaround of the once-struggling Nasty Gal appears to be bearing fruit. However, it must maintain a unique design handwriting that stays true to Amoruso’s original vision, and keep bringing vintage California to its Manchester home, to stand out from the crowd.