Huda Beauty has made a big name for itself in the beauty industry, but now the founders, through their investment arm HB Investments, is taking its first big step into fashion with an undisclosed investment in fashion resale company The Luxury Closet.
Like Huda Beauty, The Luxury Closet is a Dubai-based business. Its CEO Kunal Kapoor met Huda Beauty co-founder Mona Kattan when they spoke at the same entrepreneurial conference last year. Kattan said HB Investments, which was launched in 2017, has been looking to invest in a fashion company for a while. The decision to go with The Luxury Closet sprung from the connection the two founders made that day.
The choice of a resale company, rather than a fashion brand or retailer, as HB Investments’ first fashion investment is significant and emblematic of how prominent the category has become in the last few years, particularly since the pandemic began. The Luxury Closet is not the only resale company getting attention from investors, with nearly $150 million in investment dollars going to a handful of resale platforms since March. The Luxury Closet had received $18 million in funding prior to the HBI investment.
“My family and I have always loved fashion, and I’ve always loved the fashion resale business,” Kattan said. “My sisters and I are self-made, and I remember not being able to afford luxury brands. I love the fact that resale allows consumers to access brands that they may not be able to afford if they were buying directly from the store. I also love the sustainability of the model, from consumers being able to buy pre-used items to sellers having a great option, as well.”
Kattan is also joining the board of The Luxury Closet. She said this is only the beginning of HB Investments’ fashion investments; the company is currently looking at other areas of fashion to invest in. Huda Beauty does not disclose revenue numbers, but a Forbes estimate from February put its annual revenue at around $200 million.
The Luxury Closet is on the higher end of resale, with an average order size of $700. Just three brands — Louis Vuitton, Chanel and Hermes — make up more than a third of the company’s sales. Kapoor said that the pandemic has accelerated interest in resale, especially for higher end brands and products.
“In the pandemic, resale has a much more appealing value chain,” Kapoor said. “Retail gets bogged down in inventory, and its about producing new things all the time. For us, it’s closet-to-closet. It’s more sustainable and more affordable, and right now, those are both areas where a lot of people’s minds are going.”
Kattan said the pandemic hasn’t had a major impact on her investment strategy, but she is looking for founders who can add strategic value to the portfolio — specifically ones who work in areas outside of the usual purview of Huda Beauty, but have an overlapping customer base. HBI’s only other investment is in the UAE-based cloud kitchen startup called Kitopi.