Luxury ski- and outerwear company Perfect Moment Ltd.’s stock fell 17% Thursday in its trading debut, after the company’s initial public offering priced at $ 6 a share, the low end of its range.
The company sold 1.33 million shares, up from an earlier plan to offer 1.23 million, to raise about $ 8 million in proceeds. With 15.2 million shares expected to be outstanding once the deal closes, the company PMNT, -15.83% has a valuation of $ 91.2 million.
Proceeds of the deal will be used for general corporate purposes, including working capital, sales and marketing, and general and admin matters.
The stock is trading on the NYSE American exchange under the ticker PMNT.
ThinkEquity and Laidlaw & Co. (UK) Ltd. were the sole underwriters on the deal.
The company has its roots in Chamonix, France, where in 1984, professional skier and filmmaker Thierry Donard started to make performance clothing for his crew of skiers and surfers that would be easier for his camera to capture.
“It was born of necessity as he couldn’t see skiers coming down a mountain in the muted tones of the time,” chief executive Mark Buckley told MarketWatch. “He needed clothes that looked cool and colors that popped, so he made them himself.”
The brand was relaunched in 2012 by husband-and-wife team Max and Jane Gottschalk, who moved to position it as a luxury brand. Max Gottschalk is now chairman of the board, while Jane Gottschalk is chief creative officer.
Today, Perfect Moment operates as a direct-to-consumer company with a wholesale network, although it may open bricks-and-mortar stores in the future. Like many consumer brands, it uses social influencers and celebrities to promote its products across the full range of social-media platforms.
Perfect Moment
The company had a loss of $ 4.18 million in the six months through Sept. 30, 2023, which was narrower than the $ 11.11 million loss posted in the year-earlier period.
But revenue grew 110% to $ 6.88 million and e-commerce revenue rose 40% to $ 2.05 million.
Still, the company’s IPO filing documents contain “going-concern” language, to reflect the risk posed by the $ 44.44 million deficit the company had accumulated as of Sept. 30, 2023, and a shareholders’ deficit of $ 5.78 million. While that language could be expected in the paperwork from a biotech that has yet to have a product approved, it’s less common for a consumer company.
“Management’s plans to alleviate the conditions that raise substantial doubt include pursuing this offering and exploring sources of long-term funding in the private markets, taking out short-term loans and debt factoring to assist with working capital shortfalls, closely monitoring the collection of debt, and putting other strategies and plans in place to deliver positive Ebitda in the next fiscal year,” says the prospectus.
Investors on the roadshow appeared unfazed by the language, said Buckley, with just one investor asking a question about it.
“We were able to talk through the losses, some of which are noncash, some are related to fees for consulting and legal services,” he said.
The company is expecting to turn a profit in the short to medium term, on an adjusted Ebitda and eventually net profit basis, as it moves to take advantage of a luxury ski market that’s estimated to be worth $ 2.3 billion, and an outerwear market estimated at $ 23 billion by 2028, he said.
The company recently secured $ 3 million in bridge loan financing, “and bankers didn’t struggle to get that money. They see the potential in the business. And it’s not an exit for the founders, they’re committed to the company.”
The company is planning to develop its winter and summer product ranges at improved gross margins, and will expand into more year-round lifestyle ranges, according to its prospectus. It will also work to drive more sales through its marketing strategies and test pop-ups, along with physical retail stores.
Reducing its exposure to wholesale customers from two-thirds share of sales to 40% over time is expected to drive a double-digit percentage point improvement in gross margin.
Within skiwear, it plans to reduce its product range to eliminate lower-margin lines and avoid markdowns and discounts.
“We believe our bold fashion and technical proposition resonates with the modern fashion-conscious consumer that sees value in authentic European heritage and statement-design tailored for an active and healthy lifestyle at a compelling quality-to-value price point,” says the prospectus.
Future plans also include changes to its supply chain. For now, Perfect Moment’s clothes are made mostly in China by a small group of cut-and-sew vendors, but that’s likely to change.
“We are expecting our supplier base to evolve as we source fabrics and trims more efficiently and introduce new finished good suppliers with better commercial terms (such as lower labor costs or better duty rates due to factories being based in the EU, UK or Vietnam),” says the prospectus.
That would also help it avoid the high duty on luxury goods imported into the U.S. from China, said Buckley.
The company is incorporated in Delaware, and that holding company owns 100% of a Hong Kong unit, which in turn owns 100% of units in the U.K. and Switzerland. Most of the company’s sales for now are based in the U.S., U.K. and EU, but China remains a key target market.
Buckley comes to the role from Rapha Racing Ltd., a maker and retailer of cycling clothing, where he served as CFO from February 2020 to October 2022. The executive has also done stints at Burberry Ltd. and U.K. retailer Marks and Spencer Group Plc.
The deal comes after Finnish company Amer Sports Inc., which also makes skiwear, went public last week in a deal that priced below the proposed price range at $ 13 a share, but ended its first day of trading up 3%.
Amer Sports owns outdoor brands Arc’teryx, Salomon and Wilson and operated 261 stores globally as of Sept. 30.
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