📘 Case Study:
“Cash-Strapped but Trending: Turning Around FabbFit Apparels”
Company Overview
FabbFit Apparels Ltd. is a UK-based direct-to-consumer (DTC) fashion startup launched in 2021. It targets Gen Z and millennial customers with sustainable, body-positive, and limited-edition streetwear. The brand quickly went viral on TikTok and Instagram with its bold aesthetic, inclusive sizing, and influencer collaborations.
By early 2023, FabbFit was hailed as the next Gymshark or PrettyLittleThing. However, behind the social media success, the company struggled with supply chain complexity, rising customer acquisition costs, and poor financial discipline. By mid-2024, it had become a classic example of a “hype brand in financial distress.”
Business Snapshot (2024)
| Metric | Value |
| Annual Revenue (2023) | £19.4 million |
| Gross Margin | 38% |
| Net Profit Margin | -14% (Net Loss: £2.7M) |
| Inventory Turnover | 2.1x |
| Return Rate | 18% |
| Customer Acquisition Cost (CAC) | £31 |
| Customer Lifetime Value (LTV) | £62 |
| Active Customers | ~84,000 |
| Instagram Followers | 650,000+ |
| Staff Count | 48 (with 9 in finance/ops) |
What Went Wrong?
- Unsustainable Growth Spending
FabbFit raised £4.5 million in 2022 and spent heavily on influencer campaigns, pop-up stores, and international expansion. However, none of these were tied to measurable performance goals. Over 35% of spend went into marketing, with unclear attribution. - Poor Inventory Planning
Viral collections led to stockouts, while other lines sat unsold. The company lacked a proper demand forecasting system. Warehousing costs ballooned due to slow-moving SKUs and high return rates. - Weak Financial Controls
The finance team used spreadsheets and a basic POS system. Cost-of-goods data, cash flow forecasting, and supplier payment planning were inaccurate or delayed. - Lack of Product Margin Visibility
Several products were sold at or below breakeven due to bundling or “flash discounting” without checking margins.
The Turning Point (Mid-2024)
After breaching a covenant with its primary lender, FabbFit’s board appointed turnaround advisor Sonia Malik as interim CFO. Sonia’s goal is to design and implement a turnaround plan over the next 12 months to return the company to breakeven and prepare for future investor conversations.
Strategic Dilemma: Which Levers Should Sonia Pull?
Option 1: Inventory Discipline & SKU Rationalization
Cut 40% of slow-moving SKUs, introduce real-time inventory dashboards, and tighten pre-order thresholds. This could reduce warehousing and write-downs but may hurt trend agility.
Option 2: Financial Overhaul & Data-Driven Budgeting
Invest in ERP-lite systems for margin analysis, SKU-level profitability, and financial planning. Slows growth in the short term but builds discipline and investor trust.
Option 3: CAC Reduction via Owned Media & Loyalty
Reduce dependency on paid influencers and shift to UGC (user-generated content), micro-ambassadors, and loyalty-based referral systems to cut CAC by 25%.
Option 4: Rebrand for Profitability (Not Virality)
Drop celebrity collabs and switch to limited, high-margin “essentials” collection (hoodies, cargos, tops). Easier to plan, produce, and replenish profitably—but risks losing cultural hype and followers.
CFO Sonia Malik’s Goal
Sonia has 3 board meetings left before the next funding round. She must:
- Improve gross margin by 8%
- Reduce monthly burn rate by £150,000
- Rebuild lender confidence with reliable forecasting
- Identify the top 2 levers that deliver the biggest financial turnaround with minimal damage to brand equity
📊 Student Discussion Questions
Financial Analysis & Turnaround Strategy
- Analyze FabbFit’s financial position using the provided metrics. What red flags should be addressed immediately?
- Which two levers should Sonia prioritize for a 12-month turnaround plan? Justify your choice using financial and brand implications.
- Estimate the impact of improving CAC:LTV ratio and margin uplift. How can these two KPIs reshape cash flow and investor confidence?
Operations & Planning
- What systems or processes should FabbFit adopt to improve inventory forecasting and cash flow control?
- What are the risks of SKU rationalization, and how can they be mitigated without losing trend appeal?
Marketing & Customer Loyalty
- Evaluate the cost-benefit of reducing influencer marketing spend. Can owned media and referrals realistically replace the reach of paid campaigns?
- How can FabbFit maintain community engagement during a brand repositioning?
Strategic Leadership
- How should Sonia approach change management internally? What leadership style is appropriate in a fast-paced, Gen Z-focused company?
- What should FabbFit’s investor communication strategy look like during the turnaround?
- Looking ahead 3 years—what should FabbFit’s business model evolve into if the turnaround is successful?