Savage X Fenty IPO: 3 reasons why Rihanna’s lingerie brand could be a smart bet for investors

Everything seems to be work, work, working for singer and fashion icon Rihanna’s inclusive lingerie brand Savage X Fenty. The brand emphasizes inclusivity and describes itself as “disrupting” the lingerie industry and “redefining” sexy.

“Savage X means making your own rules and expressing your mood, character and style for you—not for someone else,” quoth Rihanna on the brand’s website.

Savage X Fenty launched in 2018 and raised $125 million in funding in January, the same month it also opened its first five stores. Last week, Bloomberg reported the company is working on an IPO, valued at a potential $3 billion, with Goldman Sachs and Morgan Stanley among others. (We reached out to Savage X Fenty for comment and will update this post if we hear back.)

The rumored IPO is particularly notable given that IPO activity has slowed down this year. Last year there was an explosion of IPOs, the highest number since the dotcom boom. According to Barron’s, in 1996, 848 companies went public raising $78.6 billion, while last year 1,006 companies went public raising a collective $315.6 billion.

However, returns have been mostly poor—the average return is down 25% from its offer price, Renaissance Capital’s Matt Kennedy told Crunchbase—and only about 25% of IPOs are trading above their issue price. Since the third quarter of last year, IPO activity has dried up. In addition, very few female-owned companies go public. (Exceptions last year included dating app Bumble and the healthcare apparel brand Figs.)

Market analysts point to several reasons why Savage X Fenty is attractive to investors.

First, Savage X Fenty is in the right business. The lingerie market has been fairly pandemic-proof and is forecasted to double over the next five years, according to Melissa Bane, managing director at advisory firm Escalent.
Secondly, consumers are hungry for inclusive fashion, and as a fashion icon Rihanna is perfectly positioned to redefine sexy. “Rihanna’s . . . been the perfect ambassador for the brand in that she gives it the sex appeal that brands in the sector need, but still allows them to drive their body inclusivity message,” Matt Moorut, a senior principal at Gartner, told Fast Company in an email.
Finally, Savage X Fenty has made several smart decisions, from expanding into swimwear—a $19 billion opportunity, Bane commented—to partnering with Amazon as a distributor.

Analysts warn that while Savage X Fenty has several advantages, it still needs to focus on steady growth. Moorut notes that Victoria’s Secret’s revenue was $6.79 billion last year, while he estimates Savage X Fenty’s revenue is presumably in the low hundred millions. The potential IPO valuation of Savage X Fenty brings it to a similar market cap as Victoria’s Secret, which is currently valued at $4.22 billion. “Savage X Fenty’s ability to continue growth will hinge on its ability to live on beyond the celebrity and grow upon its operational successes, and that’s hard for any brand,” Moorut says.