VF predicts the vertically integrated firm, which it bought last week for $110 million, can grow to at least a $350 million business from its current $57 million in annual sales, driven by opening at least 20 stores a year for the next 10 years.
Combined with its existing 50 units, that would bring Lucy's door count to at least 250 in a decade. Key areas for growth include the corridor between Boston and Washington, as well as clusters in the Midwest built out from Chicago.
"It could go faster than that, sure, but we need to prove out the model," said Eric Wiseman, VF's president and chief operating officer. "They started on the West Coast and as they've moved East, they haven't seen any stop signs. They've just seen 'go.'"
There are also e-commerce growth opportunities for the company, which was started as lucy.com in 1999 by Nike alum Sue Levin. The Portland, Ore.-based firm thrived during the Internet boom, but in 2001 shut its Web site and shed the majority of its 100 employees. The privately held company hired Mike Edwards as chief executive officer in 2004 and has been growing as a retailer ever since. Today, Lucy takes in 5 percent of its sales from its Web site.
VF, based in Greensboro, N.C., inked the deal to buy Lucy the same day it acquired Seven For All Mankind for an estimated $775 million. The two acquisitions form the foundation of the new VF Contemporary Brands division. While Lucy has the lower profile and is the far smaller of the two acquisitions, it still will get the full treatment for which the $6.21 billion apparel giant has become known.
Lucy's management team is expected to stay in place. Edwards will continue to run the business and will report to Mike Egeck, ceo of Seven For All Mankind and a former VF executive who will be named president of VF Contemporary Brands when the deals close, likely at the end of August.
"I really like the fact they allow their brands to be independent and be very innovative around their customers," Edwards said. "They've made it perfectly clear they want to retain this management team 100 percent and at the same time, they bring a host of resources and infrastructure to our company that it would have taken me years to create. So long-term we can focus on product."Edwards told WWD in May that he was open to pursuing an initial public offering or being acquired, particularly "by a strategic player with infrastructure already built." He contacted VF earlier this year and, according to Wiseman, Lucy's direct-to-consumer platform and status as a growing women's lifestyle brand appealed to the apparel conglomerate, which counts brands such as Wrangler and The North Face among its portfolio.
"We are a perfect fit for the VF portfolio," Edwards said. "We bring a certain expertise in managing better women's lifestyle brands that should help some of their other brands as well."
While the VF brand Reef appeals to the surfer, its Vans to the skateboarder and North Face to the outdoors aficionado, Lucy targets the wellness-oriented female, Wiseman explained. "Synergies with other brands was not a driver of the acquisition at all," Wiseman said. "Our focus will be building the Lucy brand through the Lucy stores, but if Mike and his team want some of our other brands for the stores, we are open to working with them."
Lucy stores already carry Reef, which saw business with the company soar more than 70 percent this year over last, according to Edwards, who added he "sees great synergy with North Face as well." More than 80 percent of Lucy's sales come from its own label, and the rest comes from Reef, Nike accessories, Splendid and Prana, which has led some analysts to speculate the Liz Claiborne-owned Prana could be another possible acquisition target for VF.
But Wiseman said VF has not discussed buying Prana, which Claiborne recently put on the selling block, nor did it look at Lululemon, which had an IPO last week. Women's brands, and specifically contemporary labels, will likely take precedence over activewear as a sector where VF is trying to expand. As always, Wiseman said, VF is open to acquiring "when the right company becomes available."
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