By and  on October 19, 2010

Private equity firm Golden Gate Capital is exploring options, including a possible sale, for its portfolio firm Orchard Brands, which operates a slew of apparel brands sold mostly in direct channels.

Based in Beverly, Mass., Orchard Brands, which generates more than $1.1 billion in annual revenues, is the umbrella firm that owns catalogue and Internet brands including Blair, Haband and Norm Thompson. Two nameplates, Appleseed’s and Draper’s & Damon’s, operate retail locations.

The San Francisco-based private equity firm is said to have hired Moelis & Co. as adviser on its options, including the sale of Orchard Brands. Officials at Moelis and Golden Capital declined comment.

Orchard Brands owes more than $700 million to lenders, according to sources. Golden Gate also owns apparel retailers J. Jill, Eddie Bauer, Express and recently invested in jewelry chain Zale Corp., none of which are part of the Orchard Brands umbrella.

RBC Capital Markets issued a report Monday noting that, with growth prospects limited, firms were on the hunt for acquisitions “to drive investment performance, improve their future prospects, or become part of a larger whole.

“With average M&A premiums exceeding 30 percent over the past several years, we believe owning a basket of compelling takeover targets could be a compelling investment strategy,” the report concluded.

Howard Tubin, RBC’s analyst, wrote that possible takeover candidates include American Eagle Outfitters Inc., Aéropostale Inc. and Christopher & Banks Corp.

• Coldwater Reduces View: Shares of Coldwater Creek Inc. dropped more than 25 percent in after- hours trading Monday after the Sandpoint, Idaho-based specialty retailer reduced its third-quarter guidance. The firm, originally expected to generate earnings of 1 cent to 4 cents a share, now expects a loss of between 14 cents and 19 cents based on a decline in same-store sales of between 18 percent and 21 percent. Dennis Pence, chairman and chief executive officer, said the company had made changes in its merchandising ranks and increased its promotional activity after failing to “offer products that resonated with our customers.” The quarter ends on Oct. 30 and earnings are scheduled to be released on Dec. 1.

• Retail Stocks Sputter: After rising 0.7 percent last week, retail stocks started the new week off with a decline. The S&P Retail Index dropped 2.14 points, or 0.5 percent, to 464.76. Lifted by a stronger-than-expected third-quarter profit at Citigroup Inc. that elevated the financial sector, the Dow Jones Industrial Average finished the day at 11,143.69, up 80.91 points or 0.7 percent. The S&P 500 advanced by the same percentage, gaining 8.52 points to close at 1,184.71.

— With contributions from Arnold J. Karr

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