Apparel & Footwear M&A Fell in 2025; Multiples Sink

The Apparel, Footwear & Accessories sector is reportedly going through tougher times this year from a merger & acquisition (M&A) perspective. According to the latest Apparel, Footwear & Accessories M&A Report released by Capstone Partners, M&A activity in the sector has declined 14.6 percent year-over-year (y/y), amounting to 135 transaction this year to-date,  as strategic buyers remain cautious amid tariff uncertainty and consumer spending headwinds.. The report suggests the downturn may be the result of  business owners being hesitant to pursue inorganic growth strategies despite the more stable International Trade landscape through the latter half of 2025.

On the bright side, the firm also highlighted that, despite this pullback, private equity add-on acquisitions jumped 33.3 percent y/y – and denim continues to outperform broader discretionary categories.

Capstone said in its latest report for December 2025 that the Apparel, Footwear & Accessories sector is expected to see a challenging near-term backdrop for sales amid consumer spending headwinds.

“Consumers at the top end of the income spectrum have remained resilient, while lower-income households have navigated accelerating financial strains due to slowing wage growth, inflationary headwinds, a tight Labor market, and the resumption of student debt payments eating into disposable income,” the firm said in its report summary. “Despite this pressure on lower income consumers, discretionary spending on digestible, small- and mid-sized ticket items will likely prove steadier than purchases of big-ticket items. Consumers have displayed a strong willingness to engage with new and emerging brands, supporting prospects for middle market sector operators.”

The firm added that, for business owners, tariff mitigation strategies, the ability to pass cost increases onto consumers (without eroding demand) to preserve margins, and fashion risk control have remained core components of operational management moving into 2026.

Still, Capstone believes both private equity (PE) and strategic M&A decision makers are expected to accelerate dealmaking in 2026 as improved clarity around the true impact of tariffs on sector operations will likely emerge in the first half of the year.

Capstone highlighted a few key points:

• A pullback from strategic buyers has led to the 2025 decline, but M&A of highly synergistic targets, brand aggregator acquisitions, and underperforming asset divestitures have continued to uplift deal volume.
• PE firms have continued to tap into large dry powder reserves, with an increase in add-on activity offsetting a YOY decline in platform formations to date.
• While initially spooked by tariff shocks to the sector in early 2025, fund managers have begun to reenter the market, paving the way for a more competitive Apparel, Footwear & Accessories M&A market in 2026.
• Consumer financial health has diverged, as lower-income shoppers have exhibited more financial strain than higher-income households. Despite mixed consumer discretionary spending profiles, same-store sales (SSS) growth has continued to display resilience.
• Denim has emerged as a highly attractive pocket of the Apparel, Footwear & Accessories market, with strong tailwinds in the form of classic Americana style trends, durability, quality, and value.
• Market conditions seem ripe for increased deal volume in 2026. On the one hand, strategic buyers have largely worked through their tariff mitigation strategies and will begin to prioritize M&A once again. Meanwhile, financial buyers are sitting on large amounts of dry powder and will be attracted to sector targets that demonstrate high degrees of scalability and resilience.

Sector Sales Are Cautiously Optimistic

Capstone is suggesting that the Apparel, Footwear & Accessories sector is expected to see a challenging near-term backdrop for sales amid consumer spending headwinds as the market sees an emerging bifurcated consumer spending and confidence scenario.

“With the consumer continuing to feel the pressures of inflation, a bifurcated market is beginning to emerge,” said Jesse Betzner, senior director, Capstone Partners. “At the lower end of the market, we expect consumers to continue to look for value and will stay loyal to the brands they know. On the other side of the spectrum, we expect high income consumers to continue to shop with premium and luxury brands – including emerging brands as well as classic, time-tested brands.”

Consumers at the top end of the income spectrum have remained resilient, while lower-income households have navigated accelerating financial strains due to slowing wage growth, inflationary headwinds, a tight labor market, and the resumption of student debt payments eating into disposable income. Despite this pressure on lower income consumers, discretionary spending on digestible, small- and mid-sized ticket items will likely prove steadier than purchases of big-ticket items. Consumers have displayed a strong willingness to engage with new and emerging brands, supporting prospects for middle market sector operators. The firm suggested that for business owners, tariff mitigation strategies, the ability to pass cost increases onto consumers (without eroding demand) to preserve margins, and fashion risk control have remained core components of operational management moving into 2026.

“Wealthy households have driven a disproportionate share of consumer spending to-date, with consumers in the top 10 percent of U.S. income distribution accounting for 49.2 percent of total spending in Q2 2025 – the highest proportion since 1989, according to Bloomberg,” the firm noted. “These consumers have undoubtably buoyed sector sales for value oriented, smaller-ticket items, as well as high-end accessories. Among clothing and accessories businesses, same-store sales (SSS) growth has surpassed 2 percent y/y in each of the past five months as of October 2025, according to Fiserv point of sale (POS) data.”

Capstone said this growth demonstrates that consumers across the income spectrum have continued to spend on smaller ticket items. Meanwhile, they highlight that jewelry, watch, and silverwear stores have seen more positive momentum, with sales rising 10.8 percent y/y in October 2025 and failing to dip below 2.5 percent since July 2025.

“Despite its higher price points, this pocket of the market has continued to benefit from its higher-income customer base, trends of self-gifting, and the categories’ use as a unique form of self-expression,” Capstone said. “Companies will likely continue monitoring the financial health of their customers, executing tariff mitigation playbooks, and innovating product portfolios to drive sales amid expectations of conservative discretionary spending heading into the 2025 holiday season and early 2026.”

Apparel M&A Market Rebound Needs Strategic to Re-Engage

Capstone revealed in its report that strategic acquisitions have declined to 95 transactions in YTD 2025, compared to 119 in the comparative YTD 2024 period. Public strategic buyers have reportedly displayed persistent capital spending risk-aversion amid heightened shareholder scrutiny on margins and tariff mitigation strategies, with deals falling to 13 deals YTD from 23 in the prior-year YTD period. Private strategic deal volume has also declined year-over-year, falling 14.6 percent to 82 acquisitions. The firm offered that highly synergistic deals, brand aggregators, and underperforming asset divestitures have continued to uplift deal volume, though strategic buyer appetite may remain challenged until the true tariff impact on consumer purchasing behavior is realized in 2026.

Private equity (PE) firms have seen a slight uptick in sector transaction volume to date, Capstone said, attributing it to add-on activity rising to 20 deals in 2025 YTD compared to 15 in the 2024 YTD period. Alternatively, platform deals have retreated by four deals YOY to 20 transactions. Despite the decline, the asset class has remained active, comprising 29.6% of total sector deal flow. These buyers have comprised 30.5% of sector M&A annually between 2017 and 2024, indicating financial sponsor appetite in the sector has continued despite tariff-induced cash flow concerns. Steady PE activity, Federal Reserve interest rate cuts, a reemergence of strategic buyers, and more high-quality businesses coming to market are key factors expected to create a more competitive M&A dynamic in the sector moving through 2026 and boost total deal volume and valuations.

The firm reported that average EBITDA multiple in the Apparel, Footwear & Accessories sector has declined to 8.1x in the 2023 to 2025 YTD period, compared to 12.0x in 2020-2022 and 9.5x in 2017-2019.

“This multiple reflects an influx of deals for underperforming assets and elevated activity from value buyers such as brand management company, Authentic Brands,” the report noted.

Capstone said that although the 2023 to 2025 YTD average represents a decline, strong brands have continued to trade at healthy multiples, highlighting the September 2025 Bluestar Alliance acquisition of Dickies from VF Corp. for $600 million , or 1.2x EV/Revenue and ~20.0x EV/EBITDA and the Coats acquisition of footwear insole manufacturer OrthoLite for $770 million (3.0x EV/Revenue, 10.0x EV/EBITDA) in July 2025.

Looking ahead, Betzner said the Apparel, Footwear & Accessories market continues to undergo consolidation, with buyers searching for value, growth, and synergies.

“Brand aggregators will continue to provide liquidity in the marketplace, increasing the competitive dynamic in sale processes,” he offered. “We expect this trend to accelerate in 2026.”