Most Likely to Succeed Dana Buchman, Ellen Tracy, Sigrid Olsen, Enyce, Prana and Laundry by Design should all attract significant interests, analysts predict.
Prana: Acquired in 2005, the brand was a "victim of timing," according to Brad Stephens, a retail analyst at Morgan Keegan & Co. Stephens, who dubbed the active line the most salable of the 16 companies under review. "I don't think it was given a chance at Liz."
Founder Beaver Theodosakis said, "They are betting on the proven winners, and we are a little bit of a long shot. Maybe we are a little early to be in a portfolio like that. In another year or so, it may have been different."
Some of the five companies that bid on Prana in 2005, plus others, have contacted Theodosakis about buying the brand. Theodosakis said he wants the company that acquires Prana to be one that helps immediately with resources to build a retail side, but that will also let Prana maintain its eco-friendly culture.
"What [Prana's founders] didn't want to happen is to get stuck into the bottom of the drawer — they want to be re-sourced for growth," chief executive officer William L. McComb said. "We didn't think we could move Prana to the rate it needed to compete with Lululemon with the funding it would get from the IPO."
The success of Lululemon's IPO last week, which raised more than $300 million, and Lucy Activewear's acquisition Thursday by VF Corp. could fuel interest in Prana, according to Stephens. Matt Powell, an analyst for consulting firm SportsOneSource Inc., said he could see VF buying Prana, which does an estimated $35 million to $40 million in wholesale volume. VF declined to comment.
Enyce: Analysts said Enyce, which they estimate at more than $100 million in volume, has enough bulk to be a winner, plus it has a clear niche in the urban market.
Enyce began as a men's brand in New York in 1996, founded by Evan Davis, Lando Felix and Tony Shellman, and three years later launched Lady Enyce. Claiborne bought the urban brand in November 2003 for $114 million.Although "urban is not as hot as it once was," said consultant Emanuel Weintraub of Emanuel Weintraub Assoc., Enyce has done well within the channel, which has also received its share of attention from buyers. Iconix Brand Group Inc. bought Rocawear earlier this year and in 2004 Kellwood Co. acquired Phat Fashions, of which Baby Phat has thrived even while Phat Farm has stumbled.
"It's not the strength of the brand in the channel, it's the strength of the channel the brands are in," Stephens said.
Laundry: Claiborne acquired Laundry in 1999 for about $45 million when the brand had about $100 million in volume. Claiborne then thought the brand could grow to $250 million, but today wholesale volume is closer to $75 million. Claiborne closed the company's three signature stores this year.
In October, Trish Wescoat Pound started as Laundry's president, moved the headquarters to New York from Los Angeles and grew the design team from eight people to 24. The relaunched line, which hits shelves this month, is sectioned into contemporary occasion dresses under the label Laundry by Design, lbd for sportswear and lbd Beneath for lingerie and loungewear.
Sold at Bloomingdale's, Neiman Marcus, Saks Fifth Avenue, Macy's and Nordstrom, the line is positioned on the lower end of the contemporary market. The dress trend has helped Laundry, according to McShane, who added that a retailer might be interested in buying or licensing the brand.
Sigrid Olsen: With more than 50 signature stores, Sigrid Olsen initially looked like it might fall on the power brand side of Claiborne's new divisional split. But after two years of product stumbles, the better-priced brand's estimated $80 million of sales didn't prove to have the growth potential Claiborne is after.
"I was a little surprised by Sigrid Olsen making the list because, even though it was an underperforming brand, it did seem a brand they had been committed to in comments previously," McShane said. "Sigrid in theory should be fantastic: It is a Baby Boomer brand, one of the most sought-after demographics. But they just couldn't get the design right."
Designer Sigrid Olsen founded her eponymous brand in 1984 and sold an 84.5 percent stake to Claiborne for a reported $54 million in 1999, when sales were said to be about $60 million."There were a lot of operational things working against us," Olsen said. "The back end controlled the front end instead of the other way around. Our design team was decentralized and geographically fragmented. We were just getting lost a little in the maze of the portfolio. I'm excited about the possibility of finding a partner who has a profound understanding of a design-driven company."
The company replaced its design and management team in the last quarter, and Olsen thinks that, with a new owner, the brand could expand into categories such as interior design, children's and accessories.
Dana Buchman: The label sprouted organically in 1987 from within, since Buchman previously was a designer at the core Liz Claiborne brand. As a result, its exit from the group would be particularly bittersweet.
"I was friends with Liz and was part of the company for 25 years," Buchman said. "My first reaction was an emotional one — shock and sadness and disappointment — just like people deal with grief. But now the decision is making sense to me and I am excited about the opportunity. It's like a rebirth."
Buchman plans to stay on with her brand, increase her involvement and even possibly take a stake in it. She thinks that through proprietary stores and catalogues her brand can grow beyond what analysts estimate are sales of $75 million to $100 million today.
Since 2005, like many bridge brands, Buchman has unsuccessfully walked the line between being fashionable enough to welcome a younger customer and not alienating its core clientele. Analysts agree Buchman still has brand equity, despite product missteps.
Weintraub speculated that Kellwood could buy it, "because they are buying all sorts of small companies," as could a venture capital firm or a privately owned classic vendor.
Ellen Tracy: Sources peg Ellen Tracy's volume at around $75 million to $100 million, well below the $171 million the brand was doing when Claiborne bought it for $180 million in 2002 from Herb Gallen, who founded the company in 1949 as a blouse manufacturer, and his wife, Linda Allard.
Allard stepped down in 2003 after designing the brand for 40 years, and the bridge mainstay subsequently alienated its core customer by becoming too modern. Claiborne said the new design team "wasn't consistent with the brand's core heritage," and in April 2005, Escada's George Collins Sharp was hired to turn the brand around, though it has still not fully recovered, according to industry sources."Ellen Tracy is a pure department store brand and is bridge — both hard sells," McShane said. "But there's still strong brand equity and it could be an appealing sale to a retailer as private label."
Small but Contemporary: The contemporary market is a prime target for acquisitions, but these small brands that didn't take off at Claiborne may be beneath many radars.
Claiborne scooped up C&C California two years after it was founded, with hopes that it would flourish like fellow California casual acquisition Juicy Couture.
Former actresses Claire Stansfield and Cheyann Benedict formed C&C California in 2003 with a goal of making lightweight, layering T-shirts, and grew to sales of $21 million the following year. Claiborne bought the niche brand in 2005 for $28 million. Benedict and Stansfield left C&C in 2006 and 2007, respectively.
While the brand expanded into cashmeres, dresses, maternity wear and kid's wear, it has yet to flow into the world of accessories and cosmetics that had been discussed when it was acquired. Sources estimate the brand does about $35 million in sales.
Stephens said: "Everyone was so excited about it, but sometimes a T-shirt brand is a T-shirt brand."
Mac & Jac and Kensie (formerly Kenzie) fell into the last-in, first-out trap. Claiborne bought the brands, plus the KensieGirl label, together in January 2006 for $23.6 million. Analysts speculate the contemporary brands still do about $50 million in sales.
"The same people who looked last year will probably be looking again," Stephens said.
Moderate Interest: As retail consolidated, upgraded and focused on private label, moderate brands have been near untouchables in the M&A market.
Though 30 years old, Tapemeasure took on a new identity in 2005 when Claiborne relaunched the label as a moderate-priced, trend-driven line. Analysts speculate Claiborne's brands like Tapemeasure might not inspire much interest, as most department stores have abandoned the moderate channel and discount department stores are favoring private label.
But interest could come from Lou Breuning, president of better vendor HMS Productions Inc., who said, "Tapemeasure was a very specific label to a casual approach. But there's a price to pay when you go out looking for a company, so first we look to see if we can find something internally."Claiborne created Emma James in 1996 as an entrée into the upper-moderate zone, as part of its special markets division. The brand got off to a rocky start, with Claiborne executives saying in 1997 that, "Of all the brands we recently launched, Emma was the toughest, from retail reception to profitability." The line bowed in 225 doors, but a year later, that was reduced to 100.
Claiborne tweaked the line in 1998 by reducing prices about 10 percent and making it more oriented to items and knitwear. By 2000, business had dramatically improved and door count was up to 700. But as department stores have turned their backs on moderate, sources feel Emma James will be a tough sell.
J.H. Collectibles was an important player in the better market in the Eighties with annual sales of around $100 million, but Claiborne bought the trademarks in 1997 at a bankruptcy auction. After a six-year hiatus, J.H. Collectibles relaunched in 2002 as a moderate label. The new incarnation targeted 35- to 65-year-olds, hoping to capture the customers who wore it during its heyday. Analysts doubt it will be a popular target.
Exclusive Moderate Lines: Although McComb holds up Claiborne's new collaboration with J.C. Penney Co. Inc. on its Liz & Co. diffusion line as an example of how the vendor wants to partner with retailers, he has put four other retailer-exclusive moderate lines on review. Analysts think the respective retail partners are the logical buyers for the lines, though the price may not be high and licensing may be more likely than a straightforward purchase.
Intuitions at Dillard's: Claiborne launched Intuitions as an exclusive for Dillard's Inc. in 2004 and analysts predict the retailer will bite. Dillard's could not be reached for comment.
Stamp 10 at Kohl's: The collection launched last year as an exclusive for Kohl's Corp. The denim-based brand complements other Claiborne-Kohl's exclusives Villager and Axcess, both of which fall under the Liz Claiborne brand family umbrella, which the company is keeping.
Tint at J.C. Penney: Tint launched as an exclusive denim brand with Penney's in 2005, but while the success of Liz & Co. for women and Concepts by Claiborne for men at the chain has received much attention, little is said about Tint.First Issue at Sears: First Issue began as a chain of stores for Liz Claiborne, but the company closed the 77 units in 1995. The next year, it revived the label as a moderate-priced exclusive line for Sears. Stephens doubted whether the line was important enough to Sears for the retailer to either buy or license it, and he predicted the line would close. Sears could not be reached.
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