NEW YORK — Liz Claiborne Inc. has been making smaller acquisitions, but ones that provide the apparel giant with huge growth opportunities, according to financial analysts and bankers.
Last week, the company said it was buying Canadian firm Westcoast Contempo Fashions Ltd. and Mac and Jac Holdings for $23.6 million, which designs and sells the Mac & Jac, Kenzie and Kenziegirl apparel brands.
"In our opinion, this acquisition is another brilliant transaction in a series of successful deals that the company has made over the past several years....We believe these brands complement Liz's other contemporary labels, Laundry and Juicy," wrote Jennifer Black, of the firm that bears her name, in a research note.
Black noted that Mac & Jac is similar in market positioning as Anthropologie and that Kenzie is "reminiscent of a more feminine Abercrombie." She added that the lines have room to grow on the wholesale side as department stores are in need of differentiated brands. "In addition, we would expect to see line expansions in areas such as handbags, jewelry, etc.," she wrote.
Paul Altman, vice president at the investment banking firm The Sage Group, has sold four companies to Liz Claiborne, including Westcoast Contempo. The other three were Skylark Sports Marketing (prAna), Juicy Couture and C&C California.
"It is clear to see why Liz is interested in all of them, but for different reasons. Mac & Jac gives Liz a stronger presence in its offering of contemporary apparel to the younger consumer," Altman said, noting that his client also provides Liz Claiborne with an expanded international presence in Canada and China.
"Liz is very focused on the brand, not necessarily [just on] distribution. For Liz, it is always the brand, such as where it is sold as well as the strength of the brand," the banker said.
With Liz Claiborne's chief executive officer Paul Charron retiring at the end of the year, Altman believes the ceo will leave a company with strong growth prospects.
"The acquisition strategy at Liz is very disciplined and well thought out. The four companies [that we sold to them] all contribute different things to Liz's business, either a new brand or new distribution channel," said Altman.The banker gave as an example prAna, which gave Liz Claiborne a new distribution channel through the outdoor retailers. The diversification, Altman noted, allows firms such as Liz Claiborne to grow in new markets while at the same time broaden their channel risk.
"All of these acquisitions strengthen Liz for the next period of growth. The company is a stronger engine with more cylinders firing," said the banker.
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