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NEW YORK — Women’s sportswear has a new billion-dollar giant looming on the horizon — VF Corp.
The Greensboro, N.C.-based firm, already a behemoth in jeans and innerwear, got a jump-start Wednesday when Nautica Enterprises Inc. shareholders approved its merger into VF at a special meeting at the firm’s headquarters, completing the deal that carries a total consideration of about $600 million.
In time, 25 percent of VF’s sales could be derived from sportswear, said chairman and chief executive officer Mackey McDonald. Nautica brings with it an established men’s business, so much of that growth will come from women’s sportswear.
Last year, VF produced sales of $5.08 billion, while Nautica raked in $693.7 million. Sportswear now makes up about 10 percent of VF’s business.
“It’s been an objective of VF’s for some time to enter the sportswear category,” said McDonald. “We weren’t in the market for a brand. We were in the market for a leadership team with a strong brand and that’s what we have in Nautica.”
VF will approach the Nautica business with a multibranded, multichannel distribution channel strategy in mind.
McDonald, along with Nautica’s founder, David Chu, and Eric Wiseman, who has been named chairman of VF’s new sportswear coalition, discussed their plans during an interview at Nautica’s 57th Street headquarters in New York.
Harvey Sanders, who had been chairman, president and ceo of Nautica, will leave the company. Chu, who is now ceo of Nautica’s branded business, said his goal is to “build this business into a really global brand.”
His first task, though, will be to stabilize Nautica’s men’s business. Key to that will be reasserting the brand’s classic though modern positioning, which has lost its focus as of late.
By signing on with VF, Nautica, which is more of a design business, received a boost on the operations and logistical side. As Chu noted, the deal “adds a little bit of rocket fuel to the business.”
Nautica women’s sportswear, though, will take some time to put together and would bow, at the earliest, in 2005.
“We are going to be very deliberate,” said Wiseman of the firm’s approach to women’s sportswear. “Without question, we see that as an opportunity.”
In addition to running the new sportswear coalition, which includes the Nautica, Earl Jean, John Varvatos and E. Magrath brands, Wiseman will continue as vice president and chairman of VF’s global intimates coalition, which includes the Vanity Fair, Vassarette, Bestform and Lily of France brands. Reporting to him are Chu and Varvatos, among others.
While the firm is expanding some of its offerings into women’s, Earl Jean is already established in the field. E. Magrath is a men’s golf line.
The new coalition is VF’s base for its sportswear expansion.
“Sportswear is half of the apparel industry’s sales,” noted McDonald, highlighting the firm’s opportunity in the category.
In addition to stabilizing the men’s business and getting women’s sportswear rolling, VF’s to-do list includes accelerating growth at Nautica’s other businesses such as men’s and women’s jeans, evaluating opportunities for the smaller Earl Jean and Varvatos businesses and exploring retail opportunities.
Whether or not the Varvatos business, which includes men’s and a forthcoming women’s line, would become a part of VF had been in question before the deal’s completion.
“As of today, we are owned by VF,” Varvatos said following the shareholder meeting. “We will be in discussions, working out the future plans and what it all will mean for us. VF has been very supportive and very excited about Varvatos because it represents a business they don’t have.
“We are moving fast and furious with the women’s line,” he added. “It will be a full collection, from evening to casual sportswear, and including shoes and handbags,” the designer said, of the collection set to launch for fall 2004.
Initially, plans are to include the women’s collection in the existing freestanding Varvatos stores. So far, four are in existence, with two more opening next month, one in Short Hills, N.J., and the other at the Forum Shops at Caesar’s in Las Vegas. The game plan is for worldwide distribution. The firm already has a partner in Japan, Onward Kashimaya, Varvatos noted. Kashimaya recently began distributing the John Varvatos Collection of men’s wear.
Varvatos also disclosed he is looking to open a freestanding women’s store in SoHo, near where the existing store is located.
Wiseman said Varvatos “can be a really big and important apparel brand in this country and we’re discussing with [the designer] how we can get it there.”
The merger makes Nautica a wholly owned subsidiary of VF. Nautica’s stockholders will receive $17 cash per share from VF. The firm also completed the purchase of David Chu & Co.’s rights to receive 50 percent of the net royalty income from licensing the Nautica trademark.
VF said the acquisition could add profits of 5 cents to 8 cents a share this year. Accordingly, overall earnings are slated to rise by 5 to 7 percent compared with the income of $3.24 created by ongoing operations in 2002.
Nautica could add at least 10 cents a share to the firm’s 2004 earnings.