Since the newfound rise of online shopping and fast fashion following the pandemic, few brands have made as significant an impact as SKIMS. Co-founded by Kim Kardashian and Jens Grede in 2019, the brand quickly made it a habit to have sold out drops and viral campaigns, evolving into a multi-billion dollar enterprise encompassing loungewear, activewear, and more. Now, as SKIMS prepares for its initial public offering (IPO), investors and fashion aficionados alike are asking: is the SKIMS IPO a yay or nay?

SKIMS burst onto the scene with a unique proposition: to offer inclusive, body-positive shapewear in a wide range of sizes and skin tones. This approach, coupled with Kardashian’s massive social media influence, propelled the brand to rapid success. Recently, the company made headlines with its jaw-dropping $270 million funding round, elevating its valuation to an impressive $4 billion. This rapid valuation growth reflects the brand’s meteoric rise and the confidence it has garnered from investors.

What is an IPO? An initial public offering (IPO), often known as a stock launch, is a public sale in which a company’s shares are sold to institutional investors as well as retail investors. One or more investment banks generally underwrite an IPO, and the shares are then listed on one or more stock markets. A privately owned corporation becomes a public company through this procedure, which is also known as floating or going public. Initial public offerings can be used to generate fresh equity capital for businesses, monetise the stakes of private shareholders such as firm founders or private equity investors, and facilitate the trading of existing holdings or future capital raising by making them publicly traded. One of the primary reasons for considering the SKIMS IPO as a “yay” is the brand’s strong market position. SKIMS has successfully tapped into several lucrative segments within the fashion industry: shapewear and intimates, loungewear, and activewear. The rise of remote work and the increasing demand for comfortable yet stylish home attire has played to SKIMS’ strengths, while the fitness boom opens up substantial revenue streams in activewear. The brand’s strategic expansions and product diversification indicate a robust growth trajectory, making its IPO an attractive proposition.

Another compelling factor favoring the SKIMS IPO is the company’s impressive financial performance. SKIMS achieved an astounding 76% year-over-year revenue surge in Q1 of 2023, with projections for the year predicting a 58% increase in revenue, aiming to hit $758 million. The company boasts an adjusted EBITDA margin of over 23%. This financial stability, coupled with a strong customer base and high repeat purchase rates, bolsters the company’s investment appeal.

Kim Kardashian’s involvement with SKIMS cannot be overstated. Her global influence and savvy use of social media have not only driven sales but also fostered unparalleled brand loyalty. Central to SKIMS’ triumph is its remarkable rate of repeat purchases, with 456,000 repeat purchases recorded in Q1 of 2023, doubling from the previous year. This customer retention showcases the brand’s strong loyalty, which is a significant asset. However, relying heavily on a single personality does come with risks. Changes in public perception of Kardashian or shifts in social media trends could impact the brand’s fortunes. Prospective investors must weigh this celebrity risk factor.

While I acknowledge the success and appeal of SKIMS, I am not a fan of the price point. Additionally, Kardashian’s past business practices, marred by various allegations and lawsuits over the years, raise concerns. Despite these reservations, there is no denying that she has managed to build a real “fanbase” around this clothing line, which is a testament to her marketing prowess and the brand’s resonance with its audience.

While SKIMS enjoys a first-mover advantage in several areas, the competitive landscape is fierce. Established players in the shapewear and intimates market, such as Spanx, Victoria’s Secret, and new entrants such as Savage X Fenty, pose significant competition. SKIMS must continually innovate and adapt to maintain its edge.

Environmental, social, and governance (ESG) factors are increasingly important to investors. SKIMS has made strides in promoting body positivity and inclusivity, which resonate well with modern consumers. However, investors will be keen to see more comprehensive ESG strategies, particularly regarding sustainability in manufacturing and supply chain practices.

So, is the SKIMS IPO a yay or nay? On balance, the prospects look promising. The brand’s strong market position, impressive financial performance, and the unique leverage of Kardashian’s influence all suggest significant upside potential. However, investors should remain cognizant of the risks, including heavy reliance on celebrity endorsement and intense market competition.

For those with a keen interest in the fashion sector and a tolerance for the inherent volatility of celebrity-driven brands, the SKIMS IPO leans towards a “yay.” As always, potential investors should conduct thorough due diligence and consider their risk appetite before making any investment decisions.