Case studies

Theory: money can feel like a dirty word in the fashion industry

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In brief

Coface Credit Insurance means Theory’s luxury clothes can now be seen in more stores.

The customer

Founded in New York in 1997, Theory produce luxury clothing for men and women which are renowned for their style, fit and comfort. The company arrived in Europe in 2002 and is part of the multi-national Fast Retailing Group.

Theory has more than 500 standalone retail stores and concessions worldwide and its collections can also be found in department stores and independent retailers. The EMEA Division covers the UK, mainland Europe, Russia, the Middle East, and parts of North America.


“Theory operate in many diverse countries and we must have a good understanding of payment behaviour across these different markets,”

Syed Nauman, EMEA Credit Manager.

At the same time, the fashion industry presents distinctive challenges when it comes to credit management. “Retailers buy many months ahead of time but there are many variables which can affect sales and have an impact on payment times”, Syed explains. “For example, a boutique may struggle to sell winter clothes because it’s 20°+ outside, or the inverse could be true.”

In these situations, it could be counterproductive for Theory to take an aggressive stance. “If a customer has a problem we often try to help them, perhaps by taking back stock and  coming up with options to help the client which is led by our sales team,” reveals Syed. “In our business, the service element is really important and much depends on building and maintaining strong personal relationships with our customers across all levels.”

But while Syed recognises that “money can feel like a dirty word in the fashion industry,” Theory  emphasises the importance of credit management. “The company is very commercially aware,” he says. “The credit and finance department is central to the customer ‘on boarding process’, we set the credit terms taking opinions from the sales team into consideration”

Coface Cs with colourful background

Choosing Coface

Syed already had a positive experience of Coface credit insurance in previous media and fashion roles so when he joined Theory, he was naturally keen to persuade his new Company to get on board. “I was constantly talking to Head Office about it,” he smiles.

Theory Europe began by using Coface credit reports and collections services but by 2017, the uncertainty surrounding Brexit was one factor that prompted the company to look again at credit insurance as a way of mitigating risk.

Coface were the obvious choice says Syed: “Coface had already served us well and shown that they really understood our business. It is really important that Coface is so attuned to the way we operate because all fashion businesses and wholesalers are different.”

Coface helps to keep Theory looking good, even when customers pay fashionably late.

Business benefits

“The Coface policy gives us endorsed limits but we have found them to be super-flexible and they do not shy away from risk,”

Reports Syed

In particular, the discretionary element of the policy gives Theory the freedom to trade with customers up to a certain amount, without the need to apply for a formal credit limit. This saves time, and helps move things along a lot quicker.

“There might be an independent boutique in Italy for example that stocks all the top brands and we should be there too,” Syed explains.

“Their credit might not look good on paper for various reasons – perhaps they’ve had dispute with a supplier who delivered late or they have a dispute regarding returns / missing stock- but our sales team have known them for a while and know they are a good store. The discretionary cover enables us to do business with these prospective customers although by the same token, we have to take responsibility for our credit management decisions and ensure we carry out proper due diligence on all our credit customers”.

Syed praises Coface for helping to make his credit policy watertight. “If Coface ever refuses cover we know they have a valid reason and this may have a knock on effect with our approach. At the same time, they provide a wealth of information about trade risk in different countries which I can feed into our credit risk matrix. And if I call for advice, my Account Manager and Sales Manager will always get straight back to me, even if it’s outside office hours.”

Growth opportunities

Although Theory has been doing well consistently over the years, Coface Credit Insurance has opened the door for more business by giving us the confidence to accept more risk,” concludes Syed. “It means we have taken on a lot of new accounts this year.

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