Should TSG invest $30 million in Urban Brands Idea

Two main entities involved;

TSG Capital fund &
Urban Brands
Relationship b/w: Urban Brands (clothing store)
seeking an investment from TSG to use the funds for
store expansion in other cities and overall growth.




TSG: Makes Funding available to small, medium
independent businesses either new or established.
They provide equity capital, long-term loans, debt
investments and management assistance
Comprises of team with strong academics and
successful acquisitions & financing
Strategic Focus: To invest in companies that operate
in underserved markets and to entrepreneurs who
are socially & economically disadvantaged.
E.g: racial minorities African-American & Hispanic

Parent Company, Operates Special Retail stores targeted
towards ethnic consumers (African-american, &
Hisphanic)
Typically manufactures womans clothing Plus sizes
segment
Expected to grow as huge potential in women apparel
Geographic concentration of African American and
Hispanic segments dispersed across East and Southern US
Other KEY drivers that make the investment sound for
TSG are: 1)increased % OF working women
2) Increased population of plus size consumers Obesity
3) more ethnically diverse population in years to come

Ashley Stewart: A niche retail store Concept
Catering to Plus Size Women
Most retail stores Stock petite and Standard
Fashion Sizes
Problems for Plus Size women, Particularly those
from African American and Hispanic Ethnic
Background
Urban Brands has Been Approaching several
private Equity firms and VCs for Equity
support

Proposal asks for US $ 30 Million for
Expansion and paying off Current Liabilities
Plans to open 25 30 Stores in the next 5
years, currently operating 21 stores on its
own

Should they invest??
Feasibility analysis is the process of determining
whether a business idea is viable.
It is the preliminary evaluation of a business idea,
conducted for the purpose of determining
whether the idea is worth pursuing.
Feasibility analysis takes the guesswork (to a
certain degree) out of a business launch, and
provides an entrepreneur with a more secure
notion that a business idea is feasible or viable.
3-8
3-9
For VCs, Feasibility can be a bit different
Product/Service Feasibility Analysis
Is an assessment of the overall appeal of the product or service that is part of the proposal

Product
Fashionable & Professional Apparel
Career Apparel 70%- Skirts, Jackets, Suits and coats etc
Causal Apparel 30% - Jeans, T-shirts and Sweaters etc
Target Consumer Profile
Women
Plus size- 16 or higher
Demographic segmentation
African- American and Hispanic Women
Ethnic Market
Working Women
Extremely High degree of Brand loyalty


3-10
Great product with competitive edge
VC look for a solution to a real problem that hasn't been solved
before.
Products that customers can't do without because it's so much
better.
VCs look for a competitive advantage in the market.
Fewer direct competitors, the better.

Bloomingdales Plus Sized Shop for Women- increased 20% sales
4 micro drivers:
Aging female population
Increased % of working women
Increase in population of plus size women
More ethnic diverse population

Untapped market Segment
- Couldn't purchase due to unavailability of stores
Estimated number of potential customers
- 28 million American African & Hispanic women in US
- 50% potential customers = 14 million
Average annual consumption per potential customer
On average 2 units- assumption
Average selling price
Jeans $30
14million * 2 units* $30 = $ 840 million
market potential


Industry/Market Feasibility Analysis
Growing Segment- Plus Size Segment Accounts for 23 %
of all Womens Garments sales
Niche Segment VCs generaly look for Identified
Distinctive Niche Segments
Allows for Quick Establishment of the Market( product Concept)
Urban Brands has an identified Specific Niche Segment: African
American and Hispanic Plus Size Females


3-14
Identification of a Niche Market
A niche market is a place within a larger market segment
that represents a narrower group of customers with similar
interests.
For a new firm, selling to a niche market makes sense for at
least two reasons.
It allows a firm to establish itself within an industry without
competing against major competitors head on.
A niche strategy allows a firm to focus on serving a specialized
market very well instead of trying to be everything to everybody in a
broad market, which is nearly impossible for a new entrant.
3-15
3-16
Characteristics of attractive industries for new ventures
Are large and growing (with growth being more important than size).
Fastest growing segment 1990-1995
Plus size apparel growth 43% VS All Womens Apparel 23%

Have high rather than low operating margins.
high Margins Demonstrated by Ashley Stewart
Are not crowded.
No other retail Brand Catering to segment
Being a first mover can confer the advantages of:
Brand loyalty and technological leadership
Preemption of scarce assets
Exploiting buyer switching costs
Reaping increasing returns advantages.
However, first movers often bear disadvantages also:
High research and development expenses
Undeveloped supply and distribution channels
Immature enabling technologies and complements
Uncertainty of customer requirements

3-17
Organizational Feasibility
Registered Business, already in operation
5 years of Successful operations 21 Stores already
running
Sitts Successful Launch as CEO company has been
profitable
Dont have a CFO- Cause for Concern

3-18
3-19
Financial Factors Associated With Promising Business Opportunities
Steady and rapid growth in sales during the first 5 to 7 years in a clearly
defined market niche.
High percentage of recurring revenue.
Availability of an exit opportunity for investors to convert equity to cash.
Financial Feasibility( All Figures in Millions)

3-20
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Net sales 0.703 5.401 8.332 11.971 22.355 36 62.929 101.062 149.17 209.33
GP 0.307 2.011 3.363 5.207 9.785 16.2 29 47.643 73.394 106.758
GPMArgin 44% 37% 40% 43% 44%
45% 46% 47% 49% 51%

N incomE -0.145 -0.773 0.056 0.224 0.178 0.56 1.375 4.539 10.871 19.553
Margin - - 0.7% 1.9% 0.8% 1.5% 2.2% 4.5% 7.3% 9.3%

Ahsley Stores 1 10 10 14 20 35 57 79 104 129
Per Store Sales 0.703 0.5401 0.8332
0.85507142
9 1.11775

Sales Growth - 768% 154% 144% 187% 161% 175% 161% 148% 140%
GP Growth - 655% 167% 155% 188% 166% 179% 164% 154% 145%
NP Growth - - -7% 400% 79% 312% 247% 330% 240% 180%
1995: TSG invested $30bn in URBAN
BRANDS
Till 2000: UB opened 115 stores in 20 states
1998: Sitt divested interest in UB and
engaged in development & acquisition of real
estate through THOR EQUITIES
2008-2010: incurred net losses, liabilities
grew
Filed for Bankruptcy( Chapter 11 ) in 2010
2010: UB filed for bankruptcy, sold GB Credit
for $20.6 m
Again Filed for Bankruptcy ( Chapter 11) in
2012
2014: Further liquidated 27 stores, sold to
Clearlake Capital Group for $18 m