The Value of Patient Capital
I’ve been thinking a lot about how Permanent Equity might find, invest alongside, and nurture consumer brands that might benefit from being aligned with unlevered, multi-decade ownership rather than risk brand impairment via oversaturation in the pursuit of short-term sales growth. So it was serendipitous that Tapestry, the fashion conglomerate behind Coach and Kate Spade, recently announced that it was acquiring Capri Holdings, the fashion conglomerate behind Michael Kors and Versace.
Analyzing the deal, The Wall Street Journal said this:
Crucially, there is one thing that scale won’t be able to bring for Tapestry: Patient capital. European giants such as LVMH, Kering, Hermes, and Richemont are all family controlled, which means they tend to be conservative on debt and have the luxury of making decisions that preserve brand cachet–even at the expense of slower near-term growth. By contrast, Tapestry’s executives are subject to the shorter-term whims of shareholders that place more importance on quarterly results.
That got me to thinking: How valuable is patient capital? So I ran the numbers…
For context, the broader stock market was +179% over the same time period. In other words, I would call this a victory for patient capital…and it’s not close!
Now is this a small sample size? Sure. And is stock market return the right way to measure success? Perhaps not. But it’s still an interesting A/B test of the results of different approaches to brand stewardship, and the results over the past decade speak for themselves.
In other words, I hope we find some brands to help steward.
– By Tim Hanson
