People tend to stop in their tracks when Wellington Management, one of the oldest and most conservative asset management firms in the world, leads a $270 million funding round into a company that Kim Kardashian co-founded. Wellington doesn’t follow fads. It makes investments in long-lasting companies. Therefore, it wasn’t a celebrity endorsement ploy when the company intervened to anchor SKIMS’ most recent raise, increasing the brand’s valuation to $4 billion. It was an indication.
In 2019, SKIMS began selling shapewear online in a low-key manner. Women’s undergarments, bodysuits, and loungewear were categories that venture capital and institutional investors had mostly overlooked, but the brand managed to make it one of the most talked-about clothing companies in the nation. After four years, the company projected sales of about $758 million in 2023 and reported $500 million in revenue for 2022. According to data analyzed from the company’s investor pitch materials, that represents a 58% increase year over year with an adjusted EBITDA margin above 23%. These are unusual numbers for a direct-to-consumer clothing brand operating in an environment where investors have mostly given up on the category.
It’s important to consider the context of the $4 billion valuation. Around the same time, Victoria’s Secret, a company that defined intimate apparel for a whole generation, was trading at a valuation of less than $2 billion due to declining sales and a severely damaged brand image. Even at the age of four, SKIMS was worth more than twice that. That comparison is subtly noteworthy because it shows how quickly consumer preferences have changed and how few legacy players were prepared for it, rather than because it proves SKIMS will outlast its competitor.
The discrepancy between what people believe made SKIMS successful and what actually did is a significant part of its story. Indeed, Kim Kardashian has more than 360 million Instagram followers. Indeed, the platform helps the brand in ways that most startups would never be able to. However, the number of followers does not result in repeat business. SKIMS recorded 456,000 repeat purchases in the first quarter of 2023 alone, which is twice as many as it was in the same quarter the previous year. What distinguishes a legitimate business from a viral moment is that kind of customer retention. Numerous DTC brands have experienced viral success. Few have converted them into true allegiance.
Celebrity gloss doesn’t seem to be the foundation of what Kardashian and co-founder Jens Grede created. The product itself, with its body-neutral marketing, soft fabrics, and inclusive sizing, arrived at the perfect cultural moment.
Instead of sticking to their niche, the business cautiously branched out into swimwear, loungewear, and now men’s apparel, with plans to open flagship stores in New York and Los Angeles. Many DTC darlings have tried and failed at this shift toward what the industry refers to as omnichannel retail. Allbirds was forced to change direction after opening 19 physical locations in a single year. Although physical retail is never a surefire way to succeed, SKIMS seems to be moving more purposefully.
Although Grede has stated in public that the company is not in a rush to go public, it is difficult to ignore the signs. Attracting Wellington, a company that supports businesses in the pre-IPO stage, hiring a CFO, and increasing revenue at this rate all imply that an eventual IPO is more of a question of when than of if. Since Kardashian owns about 35% of the business, a successful IPO would significantly alter the calculation of her already substantial wealth.
It makes sense that when a celebrity brand reaches this level of valuation, people tend to be skeptical. There are many cautionary tales in the history of famous faces introducing consumer goods, such as lifestyle brands that never found true customers beyond the initial excitement and beauty lines that faded. Although it’s still too soon to say with certainty that SKIMS has completely broken free from that pattern, it feels different. The brand is now venturing into more competitive markets, such as men’s apparel, activewear, and physical retail, all of which carry greater execution risk than selling bodysuits online to an 11 million-person waiting list.
Even so, it’s difficult to deny that something genuine was created here when you see institutional capital pouring into a company that began with Kim Kardashian squeezing into her own shapewear and posting about it online. What transpires next will determine how well the $4 billion wager ages. However, the investors who write those checks don’t have a reputation for speculating.
