Men's wear firm Perry Ellis International is breaking back into the women's apparel business by buying C&C California and Laundry by Design from Liz Claiborne Inc. for $37 million.
Perry Ellis' purchase of the two brands from Claiborne comes as the $4.99 billion vendor decided to shutter better label Sigrid Olsen and keep urban brand Enyce. Perry Ellis is also in the bidding for at least one of Claiborne's remaining five brands under review — Ellen Tracy, Dana Buchman, Prana, Kensie and Mac & Jac — although Perry Ellis chairman and chief executive officer George Feldenkreis declined to name which one.
"We like to be niche players, and contemporary is the only area in the women's business that is selling," said Feldenkreis. "Having a women's platform now, it will be easier for us to make acquisitions. We made an offer for some of the other brands, which are still in negotiations with several other companies. We will get one of them probably."
Perry Ellis plans to combine its two acquisitions with the Original Penguin brand to create a contemporary business platform — and an entrée into women's.
In a conference call Tuesday morning, Feldenkreis said Perry Ellis has long been trying to return to its flagship brand's roots in women's, and it has been evaluating brands to acquire. It expects sales from the two acquired brands to be flat around $60 million this year, but then for the next five years, it expects double-digit annual growth. Perry Ellis could also use the platform, including staff that it plans to retain, for additional acquisitions and for developing a women's side for the Perry Ellis brand over the long term.
That wouldn't be the company's first attempt to relaunch a higher-priced Perry Ellis women's wear line. Three years ago, it shuttered the Perry Ellis Signature collection designed by Patrick Robinson even though the line generated strong buzz among the fashion press and retailers.
Perry Ellis financed the purchases of C&C California and Laundry through existing cash and borrowings under its existing credit facility. The amount is subject to inventory adjustment — Perry Ellis anticipates $40 million worth of inventory — with Claiborne retaining approximately $5 million in net working capital. The transaction is expected to close Feb. 4.
Feldenkreis added that one of the reasons Claiborne chose his company as a buyer is the approximately 75 employees who work for the two brands, almost all of whom it plans to retain when it forms its women's platform, which will be run under the Perry Ellis umbrella. But one employee notably will be missing: Trish Wescoat Pound, whom Claiborne hired to lead Laundry's design team in October 2006, left at the end of last year after the company said it would be closing Laundry's sportswear division, according to a Claiborne spokeswoman.
Perry Ellis plans to keep Laundry's and C&C's New York and Los Angeles showrooms.
Claiborne acquired Laundry in 1999 for about $45 million when the brand had about $100 million in volume, projecting it could increase to $250 million. Perry Ellis estimated Laundry did $30 million in revenues last year. Laundry has seen a lot of changes in the last 18 months. Wescoat Pound took over as president of the brand, which changed its name from Laundry by Shelli Segal to Laundry by Design. She moved the headquarters to New York from Los Angeles and expanded the design team to 24 people from eight. Claiborne closed the brand's three stores last year and the line relaunched last summer, divided into contemporary occasion dresses under the label Laundry by Design, lbd for sportswear and lbd Beneath for lingerie and loungewear.
Perry Ellis plans to expand Laundry internationally and add licenses this year and sportswear in 2009, after improving the performance of the dress business.
Former actresses Cheyann Benedict and Claire Stansfield (who left C&C in 2006 and 2007, respectively) formed C&C California as a niche T-shirt brand in 2003 and increased sales to $21 million the following year. Claiborne bought the Los Angeles-based brand in 2005 for $28 million. Perry Ellis estimated C&C California's annual revenues for 2007 at $23 million, saying that it "has enjoyed double-digit growth since it was acquired by Liz Claiborne in 2005," with a peak in 2006 at more than $30 million, according to Feldenkreis, who noted that uncertainty about the brand's ownership had hurt sales in 2007 and 2008.
Perry Ellis plans to add C&C licenses and expand the children's business this year. It also expects to use its expertise to increase the men's side, which the brand has just tested, eventually developing it into a $10 million business. Perry Ellis expects that the acquisition of the two brands will have no impact on fiscal 2008 and accretion of 8 cents to 10 cents in fiscal 2009.
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