HONG KONG – Global Brands Group reported first-half net profit of $26 million, up from $1 million in the same prior-year period, boosted mainly by the sale of the intellectual property rights to bootmaker Frye.
In the six months ended Sept. 30, the brand licensing and management company’s top line fell 3.2 percent to $1.79 billion, which Global Brands Group said was due to the shift of retail buying toward the end of the year; anticipated cessation of the license for Quiksilver, the bankrupt surfwear brand, and the ending of the Coach footwear license, which was taken in-house.
Authentic Brands Group acquired the IP rights for Frye on Oct. 3, although Global Brands will still oversee the day-to-day management of the label.
Global Brands is expecting a bump in its second-half revenue, driven in part by the acquisition of the BCBG Max Azria Group operations, which it acquired for just under $28 million. Marquee Brands and Authentic Brands Group purchased the group’s various IP rights.
“Brands are hard to build,” said Bruce Rockowitz, Global Brands Group chief executive officer, during a press conference. “It takes a long time, and what we see is a lot of opportunity in brands that are still relevant, still doing a large business, but are impaired because they are operated inefficiently – too much staff and getting killed by too many retail stores.”
Rockowitz said he didn’t see a need to alter the brand image or product design for the BCBG lines. He attributed their problems to mismanagement and said the designs were still completely relevant for the current customer.
At the time of the sale, BCBG Max Azria Group was generating about $600 million a year via more than 480 stores in the U.S. and 90 outside its home market. Global Brands has kept 42 of the group’s stores – all already profitable and located in the U.S., Rockowitz said – and will expand its wholesale business via shop-in-shops and e-commerce.
“What we paid for this deal really was the cost of inventory, that’s it. We didn’t buy any stores,” Rockowitz said.
He added: “The sales will come down, on an annualized basis it will be about a $300 million dollar business, so a much smaller business, but you can look at the attraction. With no money basically, we were able to create a business that’s $300 million on an annualized basis.”
Global Brands Group total margin improved to 30.5 percent from 28.3 percent, primarily due to sourcing optimization, the firm said.