Gymshark Receives Investment Valuing Athletic Apparel Brand at $1.3 Billion
I learned to sew in middle school, but all that got me was the ability to create a worthless furry University of North Carolina pillow that I threw away in a few years!
Ben Francis had a different result with learning the important life skill of sewing after buying a sewing machine (and screen printer) for just over $1000. The teeny tiny difference between our two sewing education stories is that Ben Francis leveraged his newfound skill into an athletic apparel business that is now valued at over $1 billion.
The apparel brand that I’m talking about is Britain’s fastest-growing fashion brand Gymshark.
For those looking for my normal functional CPG subject matter, here is the connection…
Gymshark actually started as an online supplement retailer.
Founding Story — Early Days
The headlines you’ll read right now by searching the Google machine is “Pizza Hut delivery driver turned entrepreneurial success story” (which is certainly true), but it undersells three key elements that aligned Ben Francis to today’s impressive result.
- He was building websites for businesses as a second job = this led him to creating Gymshark that sold mostly dropshipped supplements online
- He was passionate about the fitness lifestyle = this led him to being a student of the fitness industry and searching continuous knowledge
- He was 19 years old when Instagram and YouTube was taking off = this led him to seeking out like-minded individuals on social media to feel apart of a community
In his passionate accumulation of fitness cultural knowledge, he realized there wasn’t anyone really making clothes for the bodybuilding scene. That inspired him to pivot, spending his £1,000 in savings on a sewing machine and screen printer. Knowing nothing about sewing or garment making, he leaned on the knowledge of his mother and in the early days of Gymshark Ben Francis literally made every piece of clothing custom.
While walking the BodyPower Expo, Ben Francis realized he needed to have a booth there next year and he leveraged the whole bank account to secure a spot. Throughout that next year, they continued to hustle extremely hard to get the Gymshark brand name more exposure. That was when Ben Francis decided to send some of those like-minded social media “influencers” that he was following on Instagram and YouTube some free clothing in exchange for some feedback. That decision likely changed the trajectory of the business as these individuals started creating content with them wearing the Gymshark clothing. As the next year’s BodyPower Expo arrived, Ben Francis had secured some appearances from those early fitness influencers, which created tons of buzz at the show.
“What the Heck are those Muscle Shark Stingers?”
Immediately after the Bodypower Expo closure, the Gymshark website took £30,000 in sales orders. This led to a CAGR of 193% from 2013 to 2016. The success was driven initially by Gymshark becoming one of the first athletic apparel brands globally to make extensive use of social-media influencers.
So, this is when I show you that despite my “see around corners” reputation in the functional CPG world, I’m just a regular shmoe when it comes to a consumer category like fashion…
At the 2014 LA Fit Expo, I was walking the floor in-between client meetings, when I saw the Gymshark trade show booth. I stopped and watched for a bit and was astonished at the energy and excitement at the booth for these odd muscle shark screen printed garments. I didn’t believe in it. I completely wrote it off as another odd bodybuilding clothing brand that I’ve seen hundreds of times at these events.
Fact is, I’m sure I wasn’t the only person that doubted or misunderstood what Ben Francis was building at Gymshark back then, but the evolution from those early days until now is breathtaking.
Today’s Economics of Gymshark
Recent financials show the company finished the 7/31/19 fiscal period at;
- Net Sales = ~$225 million
- Pre-Tax Profit = ~$23.6 million
- Cash & Cash Equivalents = 2.5X current fiscal year profit
…and this is all with a growth rate still close to 75% YoY! Since those financials are now more than a year old, its not crazy to think they are were heading towards $400 million in revenue in FY20, but it’s highly likely that COVID-19 has slowed that growth down.
According to the HSBC International Track 200, which tracks the fastest-growing international sales of mid-market private companies, Gymshark is the highest-ranking fashion brand on the list and 18th globally (Note: Gymshark was highest-ranking globally last year)
How did Gymshark become so impressive?
While there is likely a master class in the making with Gymshark, I think it comes down to these four areas;
- Social Media/Digital/Influencer Marketing = Gymshark was one of the first to lean heavy on influencer marketing when the social media algorithms were giving organic reach out in a bigger proportion to follow size. Additionally, they stayed savvy on social and digital marketing strategies and tactics, and invested heavily to ensure they kept up with the best-in-class in the world (not just their consumer category).
- Cash Conversion Cycle = The importance of this should be really bought to light more often, but when you are growing fast in a category that requires physical inventory it can mean the difference in life or death of your business. Gymshark actually has a huge negative cash conversion cycle, which means they turn inventory before the accounts payable is due. That essentially means they can lean on their suppliers to fund their growth and it’s a main reason they haven’t needed to raise outside capital (until now).
- Community Management = Gymshark has done a great job of focusing on creating a strong community by not considering customers as just transaction numbers. They have done a great job of this through online and offline (events) strategies. The amount of daily organic user-generated content for Gymshark alone should show you the strength of the brand’s ability to grow a strong community.
- CEO Transition (Maturation of the Business) = In 2017, Ben Francis stepped down as CEO and they brought in Steve Hewitt, a seasoned executive from Reebok. This shows an immense amount about the character and vision of Ben Francis. For him to put Gymshark’s success ahead of his ego is impressive at any age, but at 24 you have to just applaud him for it. While Ben Francis is still extremely active and hands on daily, he’s brought in high-level people at all departments to really take Gymshark to the next level.
What does all this success get you?
No pun intended, but private equity firms circling you like a shark…
When I created the below YouTube on 7/26/20, I was only speculating that an exit was immanent, but on 8/14/20 private equity firm General Atlantic announced they were finalizing a $300 million investment for just over 20% of the business. This investment would value Gymshark at around $1.3 billion and would officially make it the next athletic apparel unicorn.
“I firmly believe Gymshark has the potential to be to the UK version of what Nike is to the U.S. and Adidas is to Germany, and today is a significant step to realizing that.” — Ben Francis
While it’s not fully known how the projected investment would be used, Ben Francis again reiterated that he sees Gymshark competing with Nike and Adidas in the near future. To attain that level of brand growth, Gymshark will need gasoline to throw on its bonfire. At the projected $300M investment, it would provide a lot of gasoline to explore new category opportunities or expand marketing programs.
For those that are inspired by Gymshark’s Founder Ben Francis, I would suggest checking out his personal YouTube page, as he’s been extremely transparent on building the business since 2017.