👉 Background: Culture Kings is the Australian streetwear retailer known for their DJ's, hairdressers and major giveaways in stores. And, they've also managed to attract big names like Drake, ASAP Rocky, and even Ronaldo to their stores.

👉 What happened: Culture Kings was such a success that it was snapped up for over $600 million in 2021. But now, the new owners of Culture Kings are being forced to massively discount its stock because consumers are becoming more picky with their spending.

👉 What else: This isn't sitting well with Culture Kings' new owner, a.k.a Brands. They have written down Culture Kings' goodwill value from $400 million to $0.

What's the key learning?

💡Goodwill is the intangible value of a business. It's the premium paid for a business, above its tangible asset value.

💡And this goodwill can be super valuable one minute, and out of style the next—just like a trendy sneaker. Put simply:

• Company A acquires Company B for $100 million
• Company B has $75 million worth of assets (stock, office equipment, technology)
• The remaining $25 million of value is the goodwill. Think: IP, customer loyalty and brand value.

💡But, the value of goodwill can be readjusted over time. This write-down from $400 million to $0 is a.k.a Brands' way of saying that Culture Kings hasn't quite performed up to its expectations.

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