IN LATE NOVEMBER, US designer Michael Kors threw a big party for the opening of his first namesake boutique in Singapore at the newly opened Scotts Square. Just days later, Kors, who founded the luxury sportswear, accessories and apparel firm, was performing the opening bell ritual from the narrow marble balcony overlooking the main trading floor of the New York Stock Exchange to herald the successful IPO of his iconic firm. While Kors raked in US$116 million ($145.9 million) as part of the listing, reducing his personal stake in the company from 11.7% to 8.6%, the biggest gainers were its real owners: two middle-aged men who have made billions from taking over fashion firms, turning them around and selling them in IPOs or to private equity investors.

 

Hong Kong-based billionaires Silas Chou, 65, and Lawrence Stroll, 52, are an odd couple. Chou, a Hong Kong native, hails from a family that has been in the textile business for five decades. Stroll, a native of Montreal, is the son of an entrepreneur who was once the Pierre Cardin franchisee in Canada. He later owned and ran the main Polo Ralph Lauren retailing franchise in Europe. Over the past 25 years, the two have worked their magic acquiring, building and selling fashion brands. When a fashion house is in trouble, needs a cash injection, expertise in beefing up its supply chain, retail capabilities or help extending its brand, often the first call is to their company.

 

Fashion industry insiders say the two men have a to-die-for Rolodex. From moneybag financiers and investment bankers to just about anybody in the rag trade, Chou and Stroll know them all by their first name. It is not surprising then that their total profit from just the listing of Michael Kors in December was more than US$1 billion. They are still controlling shareholders of the company, with a remaining stake worth more than US$2 billion.

 

Chou began his career working for his Hong Kong-based family firm, Novel Enterprises, one of the leading vertically integrated textile and apparel manufacturers in the world. Novel is a key cog the global fashion supplychain wheel — it buys cotton and yarn, makes textiles, sources materials, designs and makes apparel in huge plants in China, Vietnam and South Asia for global brands. The Chous are an old-money family in Hong Kong with interests in textiles, property and transportation. In the 1980s, the family helped set up Hong Kong’s private airline Dragonair, now a subsidiary of Cathay Pacific. Chou declined to talk to The Edge Singapore for this piece despite repeated requests. Stroll, who was reportedly travelling, could not be reached.

 

Kors’ rise, subsequent fall and phoenix like rise again from the brink of disaster is the stuff of legends. In the late 1990s, the talented US designer then running a smallish luxury sportswear retail business ran his firm aground with tens of millions in debt as bankruptcy loomed. Kors had first filed for Chapter 11 bankruptcy in 1993 and somehow kept his business afloat for a decade. Enter Chou and Stroll, who through their Hong Kong-based private equity group, Sportswear Holdings, reportedly paid US$85 million in late 2002 for the troubled firm.

 

Nine years and an extreme makeover later, the duo is looking at a combined US$4 billion in profits from their Michael Kors holdings alone, of which they have already cashed about half. That’s a 47-fold return. Not even Apple Inc, the world’s biggest company by market value and visibly the most successful over the past decade, can match that. Clearly, the payday from turning a troubled brand into a successful luxury IPO on the NYSE can be huge.

 

Under Sportswear Holdings’ watchful eye, Michael Kors the company grew by leaps and bounds. Revenues soared from around US$50 million annually a decade ago to US$803 million in the financial year ended April 2011. Profits were up 1,950% over a four-year period to US$72 million in the last financial year. Nomura Securities forecasts the company will rake in US$118 million in net profits in the financial year ending April on revenues of US$1.26 billion.

 

“There are few stories that come along in retail these days that are as exciting as Kors’,” Nomura’s luxury retailing analyst Paul Lejuez gushed in a recent report on Michael Kors. While his report readily conceded that it didn’t yet have the cachet of some of the European luxury brands, he was confident it was well on its way. “We believe strongly that the company will [ultimately] achieve greatness,” the analyst cooed. “It is off to a remarkable start with impressive brand momentum.” Only another sell-side analyst touting a newly listed luxury brand stock would be more in awe.

 

So how did they do it? Soon after they took charge, Chou and Stroll pushed Michael Kors, which is headquartered in Hong Kong, aggressively into US department stores. Then as the brand began to catch on, they helped it to roll out standalone stores. To resurrect the brand, the duo hired John Idol, a veteran of Polo Ralph Lauren and Donna Karan, as its CEO. Idol was CEO of the parent company of Anne Klein before he was lured to spearhead the Michael Kors ship in the treacherous waters of luxury retailing. Since the collapse of US investment bank Lehman Brothers, when US retailing was almost given up for dead, Michael Kors has been one of the handful of US brands whose backers have been willing to spend on expansion. The timing couldn’t have been better. Malls were hollowing out and keen to give away prime space for a song. As its peers pulled back, Kors boldly expanded to become the US’ most desirable label.