The ‘internet’s favorite underwear’ goes mainstream: Gen Z brand Parade agrees to be bought

Privately owned Ariela & Associates International has agreed to buy Parade, the VC-backed intimates startup that created “the internet’s favorite underwear,” CNBC has learned. 

The deal brings Parade’s relevance, digital savviness and loyal customer base to Ariela, a Fruit of the Loom licensee that’s been a longtime player and manufacturer in the intimates space. In turn, it offers the startup its infrastructure, know-how and the ability to scale as some digitally-native companies look for an exit amid a tough funding environment.

“[It] does fit with the whole ‘DTC winter’ thing. As interest rates rose, VC money for a lot of startups dried up,” Nikki Baird, a longtime retail analyst and current vice president of strategy at retail technology company Aptos, said about the deal. “Consolidation is the big opportunity, especially for big, traditional brands to acquire more digitally savvy upstarts. This fits right into that pattern.” 

Parade was last valued at $200 million in August 2022. The price of the deal and Parade’s current valuation wasn’t disclosed. The Information first reported that Parade was exploring a sale. 

“Parade’s commitment to inclusive fast fashion which doesn’t compromise on its sustainable mission aligns seamlessly with our core principles and we believe that this union will allow us to create powerful synergies,” Ariela Esquenazi, Ariela & Associate’s CEO, said in a statement.

Parade didn’t immediately comment.

Founded in 2019 by Columbia University dropout Cami Téllez, Parade has been on a mission to disrupt the intimates category and be the opposite of Victoria’s Secret by focusing on inclusivity, body positivity and sustainable manufacturing. 

The rise of Parade is part of an ongoing trend in the intimates space, which has been evolving over the last decade to focus more on sizing and comfortability and move away from a sole focus on sexiness. The category is valued at $13 billion in the U.S. and is growing. Globally, it’s valued at $45 billion.

Soon after it launched, Parade won big online through its use of micro-influencers. It quickly became a favorite among Gen Z consumers eager for comfortable and affordable underwear that fit their body style and personal values. 

However, scaling a direct-to-consumer business and charting a path to profitability amid high interest rates and rising customer acquisition costs has become increasingly difficult for retailers, which is leading to more consolidation. While some digitally native retailers have managed to achieve profitability and go public and others will continue to do so, some have opted for strategic acquisition to help them get to the next level.

In July, FullBeauty Brands announced its acquisition of CUUP, a digitally native intimates company that focuses on size inclusivity, just three months after it announced its acquisition of ELOQUII, a plus-size apparel brand, from Walmart. 

Earlier this year, Parade went beyond its direct-to-consumer roots and rolled out a series of products with Target in a bid to acquire more customers and meet consumers off of its website. As part of Ariela, Parade will now be able to tap on the firm’s manufacturing muscle to scale up and become more of a mass-market brand, said Jessica Ramirez, a senior analyst with Jane Hali and Associates. 

It’ll also be able to lean on Ariela’s supply chain, product design and development prowess, as well as its gmdistribution abilities both on the wholesale level and digitally, said a person familiar with the matter.

Ariela sells more than 60 million garments a year. It already owns Curvy Couture, which it acquired in 2019, and Smart & Sexy. It has also held the master license to Fruit of the Loom’s bras for more than 20 years.

“They have the design, they have the sourcing, so they seem to have it all under one umbrella and they are intimate specialists,” said Ramirez. “From the brands that have kind of come through the disrupter stage, there’s other ones that have grown more. I think Parade hasn’t as much … this would make sense to propel it on a larger level.”