Etam, the 100-Year-Old French Womenswear Brand, Has Delisted — It Fell Twice in the Same Place

Etam could have learned from what went wrong in Europe. Instead it made nearly all the same mistakes in China. In the end, China only bought the company a few more years.

In 2016, the French womenswear brand Etam Developpement (Etam from here on) was still marking its 100th birthday with an exhibition of lingerie and swimwear at the Centre Pompidou. But the latest filing with the AMF, France's stock market regulator, shows that Etam formally delisted from the Paris Stock Exchange on August 9.

In June, Finora — controlled by the Milchior family, which founded Etam — reached an agreement with the two other big shareholders, Tarica and Lindemann, to take the company private at 49.3 euros a share. The three together hold 96.28% of Etam's shares and 97.92% of the voting rights, so the delisting was never in doubt.

Etam said it would move its focus from ready-to-wear to lingerie, above all in emerging markets such as Mexico, Chile and South Korea. About the future of one of its most important markets in the world — China — it said nothing at all.

China once supplied close to 40% of the group's sales. Even after the severe contraction of recent years, Etam's 2016 report showed that 29% of sales still came from China.

When it published those results at the end of 2016, Etam still had 2,596 stores in China. By July, when it released its second-quarter and interim figures for 2017, the number was 2,442. Closing 154 stores in six months means Etam was shutting a store in China almost every day.

It is easy to set Etam's decline in China beside the current fortunes of the American label Esprit and of ONLY, owned by the Danish group Bestseller. Nearly all of them did enter China in the late 1990s; all of them rode the boom in department-store retailing through a very good stretch of years and once set the trends; then fast fashion pressed in, young shoppers drifted away, and all of them retreated further into third- and fourth-tier cities.

But next to Esprit, founded in New York in 1964 by the man who founded The North Face, and ONLY, born in 1995, Etam's pedigree is much older. Its longer run through more complicated economic cycles, more varied markets and more mature company and brand management gave it no advantage at all in withstanding risk (not that the two are necessarily related).

What makes the story harder to watch is that a quick look back over Etam's hundred years shows a company that could have learned from its own rise and fall in Europe. Instead it repeated nearly every one of those mistakes in China. In the end, the market that might have been its comeback merely bought Etam a few more years.

Etam began as a lingerie business run by two families. In 1916 the German merchant Max Lindemann founded Etam in Berlin, selling mostly lingerie and hosiery. To cut the risk of going abroad, Lindemann hit on franchising, handing the right to run Etam to local partners. By 1928 his lingerie business had spread into Britain, France, the Netherlands and Belgium.

Meanwhile Martin Milchior, head of the Milchior family that is Etam's major shareholder today, was running a chain of lingerie shops in Belgium. In 1929 he opened his first store abroad, in Paris, and his business gradually shifted from Belgium to France. Then came the turn, in 1933: Martin Milchior bought 21 Etam stores in France and built factories, and control of Etam's operations passed to the Milchior family.

Martin Milchior's son Pierre took over his father's business in 1955. Martin died in 1958, and Pierre set about merging the two families' businesses into a single Etam brand. The young heir changed more than that — he became Etam's chief designer, and the company expanded from lingerie into ready-to-wear.

Etam also began to expand fast. Cheap and fashionable, it became one of the high-street womenswear brands that swept Europe after the 1960s. Through the 1960s and 1970s you could find Etam in the main British department stores of the day, and by the mid-1990s it had more than 200 stores in the UK. In 1980 Etam had 120 shops in France and passed 200 million francs in annual sales for the first time; in 1983 it entered Spain. To widen its profits, Etam (Etam GB) listed on the London Stock Exchange in 1984. Along the way it launched Tammy, a teen fashion brand, in 1975, and the more upmarket 1.2.3 in 1983.

But the hostile takeover by the South African company Oceania Investments in 1991 was the start of the slide. More fatal still, 1990 was the year the Spanish fast-fashion brand Zara began expanding abroad in earnest — its first store in Portugal, in 1988, is taken as the mark of its push into Europe. Sweden's H&M came a little later but also spread across Europe in the late 1990s, opening its first Paris store in 1998 and entering Spain in 1999.

Zara and H&M felt new to young shoppers. Against the two of them Etam could not hold, nowhere more plainly than in Britain. Both Metro and the Daily Mail have described Etam as part of the childhood of British girls; Metro even sketched the scene — girls in their teens buying sparkly vest tops, flared jeans and fashionable T-shirts at Tammy while their mothers shopped next door at Etam. Etam left the British market for good in 2005.

Etam Developpement, the group rebuilt after the takeover, did list in France in 1997. But under pressure from fast fashion Etam posted its first loss in fiscal 2000, with debts of 1.2 billion francs. And just as Europe looked ready to give way, China became the lifeline.

In 1994 Etam set up its first wholly owned subsidiary in China, Shanghai Yingmo Garment Co., and a year later opened its first store in Shanghai. Department stores then were full of womenswear labels like Shunüwu, and Etam — along with Esprit, which arrived in China in 1996, and ONLY, which arrived in 1997 — was scarce enough to become a first choice for fashionable young women. Two years after entering China, Etam had 723 stores there and annual sales above 900 million yuan.

As we wrote in a piece on the old department-store women's shoe brands, these companies also caught the boom in Chinese commercial property that began in 2000. National Bureau of Statistics figures show that investment in commercial premises grew between 15.4% and 39.5% a year from 2001 to 2007. That stretch was exactly when Etam grew fastest in China, spreading quickly through franchising. In 2011 Etam began reporting its China results separately; that year it had 3,286 stores in China, 73.67% of its stores worldwide.

In March 2009 Pierre Milchior, then 73 and the founder of the Etam Developpement group, told reporters in Shanghai: "Demand in the Chinese apparel market is still very strong, and we will invest more." By then Etam was already meeting in China the crisis it had met in Europe, the rise of fast fashion: Zara and H&M entered China in 2006 and 2007 respectively, and Uniqlo, which had come earlier, began expanding quickly after repositioning itself in 2005.

According to a report in the New Financial Observer, reposted by Sina Finance, people close to the company said Etam had in fact prepared against "repeating past mistakes" — design, production, retail management and logistics were all handled by local Chinese teams so that the company could respond to the market faster. But the ownership and management upheaval of 2007 undid some of that preparation. Etam was still growing at the time, so afterwards the problem drew little attention.

In fiscal 2010/2011, Esprit's sales in China were still growing 227%; then they slid, year after year, from 439 million euros to 382 million euros in fiscal 2014. It was not only fast fashion eating in. Fashion on Taobao had already turned over several times, and influencer e-commerce now pulls away young people in large numbers.

Last year Esprit went to Opening Ceremony, the buyer's boutique of the moment, for a joint collection called Esprit by Opening Ceremony, and poached the former Zara executive Jose Manuel Martinez Gutierrez. Even so, its recent recovery comes mostly from cutting costs; becoming fashionable again will take much longer.

Etam, for all its size, looks ready to drop ready-to-wear outright. Outside China, in Europe and elsewhere, it is already a brand that mostly sells lingerie. "Etam's lingerie has been reinvented and is now the dominant part of the brand," a spokesperson told The Daily Telegraph in 2010.

The move from ready-to-wear to lingerie began in 2009, when Etam signed the former Russian supermodel Natalia Vodianova as its face and launched a lingerie line she designed, Natalia Pour Etam. Vodianova is the wife of LVMH CEO Antoine Arnault and the mother of four children, and she has shot ads for Guerlain, Tom Ford and Calvin Klein. Such a talked-about ambassador brought Etam attention it had never had before; the ad video passed 1.3 million views.

From 2013 Etam began staging an annual lingerie show, much as Victoria's Secret does, and inviting musicians such as Breakbot and Kavinsky to play during fashion week. Having turned to lingerie, Etam grew louder. In the first half of 2017 its net sales in Europe rose 3.4% year on year.

The same push out of ready-to-wear is speeding up in China. In November 2015 Etam opened a shop of just over 100 square meters at Shanghai's Super Brand Mall that sells nothing but lingerie. It was Etam's first store in China given over entirely to lingerie, and it copied the layout of Etam's stores in France.

"We're busy looking for new sites — not only in Shanghai, we also want stores in major Chinese cities like Shenzhen and Chengdu," said Etam general manager Marie Schott.

After all the turns, Etam is back where it started. But to Chinese shoppers it now has to tell a brand-new lingerie story from scratch, and its reputation as a brand whose day has passed will make that harder.

Cover image from LiveJournal

Graphics by Feng Xiuxia