Etam Developpement SA

69-73, Boulevard Victor Hugo
93585 Saint-Ouen Cedex
France
Telephone: (33) 1 49-48-70-70
Fax: (33) 1 49-48-70-01
Web Site: http://www.etamdeveloppement.com

Public Company
Incorporated: 1997
Employees: 10,286
Sales: EUR 1.03 billion ($990 million)(2000)
Stock Exchanges: Euronext Paris
Ticker Symbol: TAM
NAIC: 422330 Women’s, Children’s, and Infants’ Clothing and Accessories Wholesalers; 448150 Clothing Accessories Stores

Etam Developpement SA is Europe’s leading designer and retail distributor of women’s lingerie and ready-to-wear fashions for the women’s and young girls’ markets. The company operates an international network of more than 1,100 retail stores as Etam and 1,2,3. Etam represents the company’s core lingerie and ready-to-wear brand and head of its largest segment of stores—more than 700 company-owned and franchised stores. The 1,2,3 brand offers high-quality, premium-priced ready-to-wear coordinated fashions. This brand has been developed into its own network of more nearly 300 primarily France-based stores. Etam’s third brand, Tammy, targets the young girls’ market, with sales made through the company’s larger-format, ready-to-wear stores. Etam’s store formats range from the petite Etam Lingerie shops, at an average sales space of just 90 square meters to its latest mega-store all-in-one stores, with over 1,000 square meters of floor space, as well as its eight-story Parisian flagship stores, the more than 4,000-square-meter “Cité de la Femme.” The company has retail operations in Germany, Belgium, China, France, Great Britain, Italy, Lebanon, Luxembourg, Portugal, Reunion, and Saudi Arabia, and Spain, with many of its foreign markets operating through franchise agreements with local partners. More than 40 percent of the company’s sales come from outside of France. Etam Developpement has long pursued a policy of maintaining in-house design staff but outsourcing production to contractors in France and Asia. Etam has been traded on the Paris stock exchange since 1997. The company is led by Pierre Milchior, son of one of the Etam’s founders, who himself has acted as chairman for more than 40 years. In 2000, Etam Developpement posted more than EUR 1.1 billion in sales.

Stylish Stockings in the 1920s

Etam was launched by Max Lindemann, a German stockings manufacturer. In 1916, Lindemann decided to venture into the retail arena, launching his own line of lingerie and opening his first store in Berlin. Lindemann chose the name Etam for his retail activity, a name taken from the etamine fabric used in much of his undergarment production.

By the 1920, Lindemann was ready to expand the Etam brand internationally. Rather than risk his fortune by opening company-owned stores in its new foreign market, Lindemann set up a network of local partnerships who in turn developed the Etam franchise in their own markets. As such, the Etam brand was introduced to the United Kingdom in 1923, with a first store opened on London’s Oxford Street. Through the rest of the decade, Etam stores opened in other markets, including France, Argentina, the Netherlands and finally Belgium in 1928.

By then, Martin Milchior, founder of Milchior et Cie of Belgium, had launched his own chain of retail lingerie stores. The first Milchior store opened in 1925 and Milchior quickly expanded the store format throughout Belgium. In 1929, Milchior himself went international, opening a boutique in Paris. Over the next 25 years, Milchior’s expanded deeper into France and the Milchior family eventually transferred its headquarters to Paris. A major step in this transition came in 1933 when Milchior acquired a chain of 21 stores. The company transformed its new chain of stores into lingerie boutiques, then adopted the Setamil store and brand name in 1941.

Pierre Milchior joined his father’s business in 1955 and took over the lead of the company when Martin Milchior died in 1958. The younger Milchior was to prove the chief architect of the company’s success, transforming the relatively small company into the European leader in its segment by the end of the century. Meanwhile, Etam had continued to establish itself as an important brand name, especially in the United Kingdom, where, in 1952, Etam Great Britain (Etam GB) launched its first line of ready-to-wear clothing.

Back in France, Setamil and Etam France, operated under parent company Elan SA, were preparing to join forces. This process started in 1961, when Milchior acquired Elan, taking control of the Etam France network. By 1963, Milchior had reached an agreement to merge his operations into Etam parent Max Lindemann, and the two companies began the process of merging the Etam, Elan, and Setamil store brands, resulting in the 49-store Etam chain. At the same time, the newly enlarged company launched a line of Etam-branded ready-to-wear clothing for the French market. Milchior was placed at the head of the company, now known as Groupe Etam, and became its principal shareholder.

The development of the Etam brand remained country-specific, with each local market partner operating as a separate company with operations independent of the largely French-market-focused Groupe Etam. As such, the Max Lindemann family retained control of the Etam Belgium franchise. In the United Kingdom, Etam GB began extending its own operations with the launch of a new brand, Tammy, targeting the young girls’ market. That brand was unveiled in 1975 and helped Etam GB extend its network to more than 200 retail stores by the mid-1990s.

In France, Milchior and Groupe Etam continued to develop the Etam network, reaching 120 stores by 1980, with sales of more than Ffr 200 million per year. The company launched a new retail franchise format, Kiosk, that same year. The Kiosk operation led Etam into extending its operations from the retail sphere into the wholesale market. In 1981, Groupe Etam bought out the Lindemann family’s stake in Etam Belgium.

Transition to European Leader for the 21st Century

The 1980s marked a transition period for the Etam brand. By 1985, the company had more than doubled its revenues, and by 1990 sales had topped the FFr 1 billion mark. During this time, Etam stopped looking to Hong Kong for its garment manufacture—and instead began contracting for much of its clothing needs from manufacturers in France. This policy enabled the company to react more quickly to fashion trends, while also giving it better oversight on quality. Another important move came with the birth of the company’s 1,2,3 store format, launched in 1983. The 1,2,3 store allowed Etam to branch out from its mid-market position to capture a higher-end lingerie and ready-to-wear clientele. These moves helped Etam outpace its competitors, and by the end of the decade Etam had captured more than 10 percent of the French market for lingerie. Meantime, Etam began extending its brand name into Spain, with the first Etam Lingerie opening in that country in 1983.

Etam GB also enjoyed success through the 1980s. That company went public in 1984 and began building onto its retail network through a series of acquisitions. In 1987, Etam GB acquired the Snob retail chain of 28 stores and the Snob brand name, paying £4 million. That same year, Etam GB paid £6.5 million to acquire Gladesmore Holdings, which operated the Peter Brown retail group. In 1991, however, Etam GB became the target of a hostile takeover by South African group Oceania Investments, which bid some £121 million.

Groupe Etam restructured its organization in 1991, now grouping its operations around its core brands. This restructuring led the company to exit the wholesale market, and switch the Kiosk franchise over to the Etam Lingerie format. From 1992, Etam moved to extend the 1,2,3 store format internationally, opening stores in Germany. The following year, the company acquired complete control of the struggling Etam Belgium group. Etam succeeded in restoring its new subsidiary to profitability, in part through the introduction of the 1,2,3 store brand. Across the Channel, Etam GB was finding success with its newest label, Etam Plus, targeting large-sized customers. Two years later, the France-based Etam brought its brand to China, where the company joined with a local partner to open its first stores in that country. Back home, Groupe Etam prepared a new retail store format, the 1,2,3 Lingerie offshoot of the 1,2,3 retail chain.

By the mid-1990s, however, Etam GB had lost its momentum. The company’s sales were slipping and it quickly slid into an extended period of losses. By late 1997, the company acknowledged that is was looking to sell out its operations. Meanwhile, Groupe Etam was preparing to go public. The company had come under pressure from the arrival of a number of foreign clothing groups, notably Sweden’s H&M, the United State’s Gap, and Spain’s Zara, which were attracting growing numbers of Etam’s traditional customer base. The public listing, under the name of Etam Developpement, was a step toward achieving Etam’s newly developed international expansion goals, which aimed at balancing the company’s domestic operations. Despite competitive pressures, Etam remained France’s leading women’s clothing retailer, posting nearly FFr 4 billion in sales for the 1997 year.

The company seized the leadership position for the European market the following year when it made a friendly takeover offer for Etam GB, paying £93 million for its 215-store ’cousin’. The immediate effect of the acquisition was a slump in Etam’s stock price, particularly as the company discovered that Etam GB’s financial condition was in worse shape than Etam had initially believed. Instead of the £30 million investment Etam Developpement had counted on making to restore the luster to its new United Kingdom wing, the company’s rebuilding of Etam GB was to cost more than twice as much.

Company Perspectives:

Etam Developpement, women’s fashion specialist, offers its clients throughout the world innovative fashions that correspond to their desires at the best prices. Etam Developpement assures its employees and partners a quality environment to permit them to develop their creativity and professionalism to the maximum. Finally. Etam Developpement is working to increase its profitability and to create lasting value for its shareholders.

Etam GB continued to drag on Etam Developpement’s profits through the end of the century. By its 2000 fiscal year, the company had slipped into losses for the first time. Part of the company’s difficulties stemmed from its heavy debt burden, which topped FFr 1.2 billion in 1999. Etam Developpement was also in the process of launching a new large-scale “megastore“ format, three to four times larger than its traditional format. The company also faced difficulty when fire broke out during the renovation of its new, nearly 4,000-square-foot flagship store on Paris’ Rue de Rivoli, which set back that store’s opening date several months. Losses on that store alone topped EUR 12 million. Meanwhile, industry observers remained skeptical of Etam’s large-scale store format, which depended too heavily on the women’s market.

Despite these short-term difficulties, Etam Developpement continued to invest in its long-term growth. In 2000, the company brought the long-successful Tammy brand to the European continent, with a launch in Belgium. The company also moved into the Japanese market with its Etam Japan subsidiary. Meanwhile, the company added several new foreign markets, notably Saudi Arabia, Lebanon, French Antilles, New Caledonia, and Reunion in 1999.

Etam Developpement continued to roll out its mega-store format at the turn of the century, opening seven megastores in 2000 and planning an additional 15 the following year. Among these new stores was a first mega-store opened in Barcelona, Spain. That country, along with Portugal, became new primary target markets for Etam, which pledged to invest some 900 million pesetas to expand its network of stores in those countries to 100 by 2005.

Principal Subsidiaries

1,2,3 GmbH (Germany); 1,2,3 Luxembourg; Di Carla; Etam SA; Elan SARL; Elan Industries; Etam Belgique; Etamil Bruxelles; Elan Belgium; Etamint (Belgium); E.I.S. (Belgium); Etamil GmbH (Germany); Etam Italie; Etam Japan; Etam Luxembourg; Etam PLC (U.K.); Gamier SA; IFEM (Spain); Intermoda (China; 60%); Modasia Luxembourg (60%); Nortex SA; SARL Entrepôts Compans; S.C.I. Breucq; S.C.I. Sebu; Strasbourg Sélection; Texindia; U.B.O. (India).

Principal Competitors

Abercrombie & Fitch Co.; Arcadia Group plc; Benetton Group S.p.A.; Diesel SpA; Esprit Holdings Limited; Guess?, Inc.; H&M Hennes & Mauritz AB; Marks and Spencer p.l.c; New Look Group pic; NEXT pic; The Gap, Inc.; Zara SA.

Key Dates:

1916:

Max Lindemann opens first Etam store.

1923:

Etam Great Britain is formed.

1925:

Martin Milchior founds Setamil.

1928:

Etam Belgium opens.

1933:

Milchior acquires 21 stores in France.

1941:

Milchior stores adopt Setamil name.

1958:

Pierre Milchior leads Setamil.

1961:

Etam France is acquired.

1963:

A merger with Max Lindemann forms Etam Developpement.

1974:

Etam GB launches Tammy brand.

1980:

Kiosk franchise is launched.

1983:

1,2,3 brand is launched; Etam GB begins doing business in Spain.

1984:

Etam GB lists on London stock exchange.

1991:

Reorganization of Etam Developpement occurs.

1993:

Etam Belgium is acquired.

1995:

Etam Developpement enters Chinese business market.

1997:

Etam Developpement lists on Paris bourse.

1998:

Etam Developpement acquires Etam GB.

1999:

Etam Developpement enters Saudi Arabia, Lebanon, French Antilles, and New Caledonia.

2000:

Etam Developpement launches megastore format, and introduces Tammy brand in continental Europe.

Further Reading

Carr, Miranda, “Etam Goes to French for Pounds 93m,” Daily Telegraph, November 13, 1997.

Cousteau, Libie, “Etam: Toujours plus,” Enjeux les Echos, January 1, 1998, p. 42.

Michel, Caroline, “Etam se rétame,” Capital, February 2001, p. 42.

Peyrani, Beatrice, “Etam, la marque préférée des lolitas,” Expansion, November 5, 1998, p. 168.

—M.L. Cohen