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Men'sWeek issue 10/03/2013

PVH Corp. has inked a definitive agreement to sell its G.H. Bass & Co. footwear business to G-III Apparel Group Ltd. for about $50 million in cash. The transaction, revealed late Wednesday, is expected to close early in PVH’s fiscal fourth quarter, which begins in November.

This story first appeared in the October 3, 2013 issue of WWD. Subscribe Today.

PVH has sought to unload the struggling Bass division, which it acquired in 1987, so it can focus on its higher-growth Calvin Klein and Tommy Hilfiger brands. It began seeking a buyer for Bass following its acquisition of The Warnaco Group Inc. in February, said Emanuel Chirico, chairman and chief executive officer of PVH.

“Our retail heritage businesses have really been struggling for the past few years. This significantly reduced that exposure,” said Chirico. “[Bass] is a heritage brand that is well known, but we have not been investing in the brand from a marketing point of view. That has the ramification of putting sales and gross margin pressure on the business.”

Bass currently does $250 million in volume in about 160 outlet stores, or about 40 percent of PVH’s heritage brands retail business, which also includes Izod and Van Heusen stores. Sales are split evenly between men’s and women’s.

Another $30 million-plus in Bass wholesale sales comes from Harbor Footwear Group Ltd., which holds the license for men’s, women’s and children’s footwear in the wholesale channel.

For the six months ended Aug. 4, same-store sales dropped 9 percent in PVH’s heritage retail business, due mostly to continued weak performance in the Bass retail unit. PVH has no plans at this point to divest other heritage brands such as Arrow, Speedo, Olga or Warner’s, said Chirico.

G-III plans to improve product design, marketing and the in-store experience at Bass stores, said company chairman, president and ceo Morris Goldfarb. “It’s not often you are able to acquire a company that has two iconic components to it — Weejuns and Bucs are the heart and soul of American footwear,” he noted of two signature Bass designs. “It was a brand that wasn’t given the appropriate attention at PVH.”

G-III has deep relationships with PVH, holding licenses for women’s Calvin Klein apparel in North America and Tommy Hilfiger men’s and women’s outerwear and luggage.

The Bass business will be organized under G-III’s Wilsons Leather division, which operates about 150 stores, mostly in outlet malls. Kristin Burrows, president of Bass, will report to Bill Hutchison, president of Wilsons Leather.

The creative and sourcing teams at Bass will remain headquartered in New York, but other functions like retail operations and warehousing will be consolidated at Wilsons Leather’s headquarters in Minneapolis, said Goldfarb.

In Bass outlet stores, about 65 percent of sales are in footwear and 35 percent are in apparel and accessories. PVH will retain the Bass men’s apparel business, under license from G-III, which is also distributed in wholesale accounts such as J.C. Penney and Bon-Ton Stores. Goldfarb said he expects to sign new Bass licenses in additional categories.

“For the next year, we’re going to shore up the underpinning of the business and make sure it’s fueled for growth,” said Goldfarb. “We know we can improve on dollars per square foot generated, and we think we can grow the wholesale business quickly.”

PVH will use proceeds from the deal to make additional debt payments in 2013. Despite the sale, PVH reaffirmed its earnings per share guidance of $7 for the full fiscal year, on a non-GAAP basis. For the current third quarter, EPS is forecast at $2.25, up from prior guidance of $2.20.

PVH expects the deal to dilute its fourth quarter earnings by five cents per share, on a non-GAAP basis, and approximately 15 cents per share on an annual basis going forward. PVH said it will incur an approximately $20 million pre-tax loss in connection to the sale of the Bass assets.

G-III expects the acquisition to dilute its net income by 10 cents per share for the fiscal year ended Jan. 31, but accretive thereafter on an annual basis.

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