William L. McComb’s pitch for Lucky Brand includes an emphasis on outlets and big and tall — and an even bigger price tag.
McComb, chief executive officer of Fifth & Pacific Cos. Inc., is working to spin off Lucky and Juicy Couture to help fund Kate Spade’s growth.
Lucky is drawing more interest. First-rounds bids for the brand were due Tuesday, according to financial sources. The outline of the brand’s prospects is said to include an emphasis on its outlet business and a push in the big and tall arena.
McComb is said to be looking for northward of $400 million for Lucky. That has struck some close to the process as a high price tag. A sale price of $400 million would give the company a multiple of 11.5 times adjusted earnings before interest taxes, depreciation and amortization of $34.7 million last year.
Multiples of more than 10 times EBITDA are generally reserved for companies in their prime and while many would-be buyers see potential in Lucky, at least some are hesitant to give Fifth & Pacific credit for growth that is planned for but hasn’t happened yet.
A number of would-be investors are said to have taken a look at Lucky, including Leonard Green & Partners, Iconix Brand Group Inc. and South Korean retailer E-land. It’s not clear if any of those companies actually submitted bids to Perella Weinberg Partners, which was hired to sell the business, according to sources. Neither Perella Weinberg nor the potential suitors replied to requests for comment Tuesday afternoon.
First-round bids in an auction process are often very tentative and are adjusted later in the process after investors get a chance to meet with a company’s management and learn more about the internal workings of the business.
At the end of 2012, Lucky had 177 full-price stores in the U.S. and abroad and 47 outlet stores. Sales tallied $461.7 million.
Mary Ross Gilbert, a stock analyst at Imperial Capital, has previously said that Fifth & Pacific needs to sell off Lucky and Juicy or take on $100 million in debt to fund plans to accelerate the growth of Kate Spade.
In February, McComb teed up the prospects for Lucky during a conference call with analysts.
“Lucky is now poised for sales growth, having addressed the operations and merchandising and design functions,” the ceo said. “Innovation is now the story fueling growth. This year we’ll have a full-year impact of the plus-size launch. The reconceived outlet product will deliver all year. We launched our kids’ license for spring, and we’ll launch our new handbag license in the fall.”
The company was also looking to move into six international markets during the third quarter and expand its offerings as well, adding more women’s tops and introducing two “new major denim initiatives for 2013.”
Lucky’s comparable-store sales, which rose 3 percent in the fourth quarter, are slated to expand by the mid- to high-single digits this year.
McComb told Wall Street that the comp-sales projection was supported by numerous initiatives. “It’s the initiatives that the team has in place on tops,” he said. “It’s the launch of handbags in the back half. It’s the addition of kids to the business, which is largely [e-commerce based], but in more than a dozen stores right now, and expanding to two dozen by the back half. And those things are productivity boosters.”
Investors have been clamoring for Fifth & Pacific to focus on Kate Spade, which is seen as its strongest growth vehicle with a base in accessories and significant potential abroad.
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