uation. Neil Saunders, managing director at GlobalData, told Inside Retail that the company’s commercial success supports the proposed valuation. “Given that Reformation is commercially successful, the valuation is reasonable even if the asking price is ambitious and is based on a high multiple,” he said. “That’s where a lot of the scrutiny will be placed, and investors will be looking closely at whether Reformation has a defensible proposition and whether it can boost the bottom line. On the latter front, the latest results have been a little mixed, so this all relies on strong forward guidance and has little room for error.” Saunders said investors will be looking at Reformation’s record of execution against the backdrop of the ongoing volatility of the fashion sector. “Fortunately, this is solid as the company seems to have a good understanding of its customers and interpreting style for them.” On Monday, Reformation said it expected to price its shares at between US$15 and US$17 each. If the company hits the lower end of that range, it will be valued at US$886.1 million. Regardless of the amount raised through the IPO, Reformation plans to use approximately US$125 million of the net proceeds to partially repay a loan. The retailer also intends to use about US$9.5 million of the net proceeds to purchase additional outstanding shares and stock options, according to an updated S-1 filing released on Monday. If Reformation were to hit the market at a US$1 billion valuation, it would rank ahead of Canada Goose Holdings, which has a market capitalisation of about US$952 million, but behind Mytheresa and Net-a-Porter owner LuxExperience, which has a market capitalisation of about US$1.1 billion, and The RealReal Inc., which has a market capitalisation of approximately US$1.4 billion. Experts discuss the true meaning behind Reformation’s IPO Barney Stacher, CEO of consultancy Stacher & Stacher, believes the real story behind Reformation’s upcoming IPO isn’t its revenue or profitability, but the strength of the customer relationship it has built. “The IPO itself isn’t the most interesting story,” he said. “The bigger question is whether Reformation can continue proving that a premium, digitally native brand can scale while maintaining direct ownership of the customer relationship.” Stacher said Reformation’s direct-to-consumer model gives it a significant advantage over many apparel brands that still rely heavily on wholesale distribution or marketplaces. By owning the customer relationship, the retailer has greater control over pricing, merchandising, customer data and lifetime value – attributes investors increasingly reward. In today’s retail environment, he argued, customer ownership can be more valuable than simply growing sales. However, becoming a public company will introduce a new set of challenges. Reformation will need to balance continued growth with maintaining the brand exclusivity and disciplined inventory management that have helped it command premium pricing. He added that fashion is inherently cyclical, while public markets place tremendous pressure on quarterly performance. “I’m cautiously optimistic about the company’s post-IPO performance. If management can continue expanding physical retail thoughtfully, maintain strong full-price sell-through and avoid sacrificing long-term brand equity in pursuit of short-term earnings targets, the company has the ingredients to justify its valuation over time. However, if the focus shifts toward chasing quarterly growth at the expense of the customer experience or brand positioning, the public markets can become much less forgiving.” Further reading: What retailers can learn from Reformation’s bold, quirky brand voice