NEW YORK — Duck Head has found a new home at Goody’s Family Clothing Inc.
Adding another chapter to the growing saga of stores owning or launching proprietary brands, the 330-door retailer, based in Knoxville, Tenn., acquired the Duck Head trademarks and four related licenses from Tropical Sportswear International Corp. for $4 million cash.
Robert Goodfriend, chairman and ceo, in a telephone interview, said the Duck Head brand should grow into a $35 million to $40 million business within three years. The men’s offering under the label will be expanded while women’s and kids’ offerings will be added. Women’s, which will launch next spring, could grow to exceed the men’s side, he said.
“The strongest area in our business is women’s casual sportswear and that’s exactly where the Duck Head brand fits,” said Goodfriend. “We just have mounds of potential on the women’s side.”
Claiming its market capitalization fails to reflect the true value of its business, Tropical retained Merrill Lynch & Co. to assist in evaluating strategic alternatives.
“We want to grow our business, we want to enhance our shareholder value and Merrill Lynch is going to tell us the best way to do that,” said president and chief executive Christopher Munday in a telephone interview. Possible avenues for the Tampa, Fla.-based vendor include selling the business, merging with another company or staying put.
“There are all kinds of options,” said the ceo. “There’s not a secondary agenda. We’re not talking to anybody. We’re just going to explore the alternatives.”
Carl Icahn, a mainstay in the world of mergers and acquisitions, who earlier this year noted there were some good investment opportunities in retail and apparel, upped his stake in Tropical to 920,000 shares, or 8.3 percent, of the common stock as of May 5. Roughly a month earlier, Icahn held 7.3 percent of the shares.
With news of the transaction and the search for strategic options there was some good news on the market cap front. Shares of Tropical shot up $1.27, or 21.8 percent, to close at $7.11 on Monday. This made for a market cap of $78.5 million at the end of trading.Goody’s also received a boost from investors, who drove shares of the firm up 48 cents, or 7.1 percent, to $7.25. This made for a market cap of $236.1 million.
Both issues trade on the Nasdaq exchange.
Private label accounts for about 30 percent of Goody’s business and, according to a research note from Merrill Lynch analyst Virginia Genereux, Goody’s was responsible for about three-quarters of Duck Head’s wholesale volume.
The retailer will be putting some marketing muscle behind its new Duck Head brand. “We’ll put millions of dollars behind the label, plus in-store fixturing, just like the great brand that Duck Head is,” said Goodfriend.
The retailer plans to continue the four licenses acquired from Tropical, including deals for shoes, eyewear and accessories, as well as a Japanese license.
“We will not try to expand the license until mid- to late-2004. Once we get a couple of lines under our belt, we will take that product and license it into Europe,” said Goodfriend.
John Payne, senior vice president of men’s, will become senior vice president and brand manger of the Duck Head business and report to Max Jones, Goody’s executive vice president of merchandising.
Under the agreement, Tropical will continue to sell existing Duck Head inventory for a period of time and Goody’s will purchase certain remaining inventory.
As reported, Tropical, in January, said it would exit its Duck head retail outlet business as leases expire. With the sale of the trademark, the closures will be accelerated and a substantial portion of the $4 million in proceeds from the Duck Head divestiture will be used for the exit. The 13 remaining retail outlet stores are now slated to go dark by November.
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