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NEW YORK — Vince’s future may be outside of Kellwood Co.’s umbrella.
Financial and market sources said Kellwood’s parent, private-equity firm Sun Capital Partners, is looking to partially monetize its investment in the apparel group. While a sale of Vince had been under consideration, more recent discussions are centering on an initial public offering of the brand.
Vince was founded in 2002 by Rea Laccone and Christopher LaPolice. The brand’s roots are in the women’s contemporary space. In 2007, the company launched a men’s collection, which now accounts for about 35 percent of sales. Kellwood acquired the brand in 2006 for an undisclosed amount when it was still a public company under the leadership of Robert C. Skinner. Annual volume at the time was about $35 million. Sun took Kellwood private, having acquired it in 2008 for $762 million.
Market and financial estimates have Vince’s annual volume at around $150 million. That’s compared with estimates of $120 million in volume for J Brand, the high-end denim brand that’s currently considering both an IPO or a sale of the company.
J Brand recently hired Morgan Stanley to explore its strategic options. The company is expanding beyond its jeans roots and positioning itself as a lifestyle fashion name. That evolution has been aided by Star Avenue Capital, which bought a majority stake in the business from founder and chief executive officer Jeff Rudes in 2010. Star Avenue is a partnership of the John Howard-led Irving Place Capital and talent agency CAA.
There are differences between the two brands. Vince is better established as a sportswear label, with a denim component added in 2010. Although J Brand has recently added ready-to-wear, it’s still viewed primarily as a denim brand, some investment bankers said.
Financial and market sources compare Vince’s growth trajectory to Theory, a popular contemporary brand for women and men featuring apparel that’s both sexy and comfortable, with a high-end line designed by Olivier Theyskens. They also believe that Vince, although already carried in high-end retail doors — such as Harrods, Harvey Nichols, Holt Renfrew, Isetan and Lane Crawford — in 40 countries, still has room to grow overseas. Even in the U.S., the business only has 20 freestanding stores.
Global retail sales for Vince are estimated at $250 million. Distribution overseas typically involves licensed partners. While sometimes companies with between $120 million to $150 million in annual volume are considered too small for an IPO, there are other factors that can come into play.
In the case of Vince, sources familiar with the business estimate that operating income is around $75 million, with operating margins slightly north of 25 percent. Those are considered fairly attractive and compelling data points for businesses of Vince’s size.
The ultrasuccessful IPO of Michael Kors Holdings Ltd. in December — which made the designer’s early investors hundreds of millions and now values the company at $10.7 billion — has reawakened the market to the potential of growing fashion brands. In some respects, Vince and J Brand can be viewed as the offspring of Kors in the IPO world, provided they can get the attention of institutional investors.
For Sun Capital, it can find a buyer and cash out now, or go for the IPO and get the higher valuation. In the latter option, the private-equity firm would likely retain a controlling stake in Vince, allowing it to float a secondary public offering or two at a later date. That would mean less liquidity up front with the stake it retains, but it would give the financial firm other options, such as tapping the equity markets as currency, if it chooses, down the road, to make acquisitions under the Vince umbrella.
Both a Kellwood spokeswoman and a Sun Capital spokesman declined comment.