Wolverine World Wide Inc., which operates a large portfolio of lifestyle and footwear brands, has sold the Keds brand to Designer Brands Inc., the parent company of footwear retailer DSW.
Wolverine also disclosed Wednesday that the company intends to grant an exclusive license to DBI for Hush Puppies footwear in the U.S. and Canada, where DSW has been the exclusive retail partner for Hush Puppies since last year.
The sale of Keds and the license agreement will generate more than $90 million in cash, including the monetization of working capital, according to Brendan Hoffman, president and chief executive officer of Wolverine. “The proceeds will be used to pay down debt and strengthen our capital structure,” Hoffman added.
“Selling Keds and licensing the Hush Puppies brand for the United States and Canada is an important step as we continue to advance our strategy to simplify the portfolio and direct resources to our growth brands,” Hoffman said. “We are confident this will place Wolverine on an accelerated path to improved profitability and long-term shareholder value creation. We are particularly pleased to have reached this agreement with Designer Brands, a longtime retail partner of ours and a natural fit to guide the iconic Keds brand into its next phase.”
Wolverine has been making progress in its turnaround efforts. Last year, Wolverine converted its former Michigan and Boston groups to active, lifestyle and work groups in an effort to clarify the business, get greater synergies out of the business and become more agile. The company also formed a “profit improvement office” to find ways to cut costs, improve margins and determine investments for the future.
Last January, at the ICR Conference in Orlando, Florida, Hoffman described Keds as “a great legacy business, but it’s under $100 million, with low profit margins.” He also said that growing other brands in the Wolverine portfolio requires far less of a lift and that the company is “morphing into more of a direct-to-consumer business, from being wholesale-driven, and to really become brand builders.”
Last December, Wolverine revealed the selloff plan. The company also recently laid off some workers but did not disclose how many. Wolverine is scheduled to report its fourth-quarter and year-end results on Feb. 22.
The transaction includes all Keds’ products, including Pro-Keds, as well as the brand’s e-commerce business. The deal expands Designer Brands’ Owned Brands portfolio into casual and athleisure footwear in the direct-to-consumer and wholesale channels, supplementing the recent additions of Le Tigre and Topo Athletic. The acquisition also marks Designer Brands’ first Owned Brand wholesale business within the kids footwear segment.
“Our growing strength in Owned Brands is evident, given that just 12 months ago, the athleisure category was a massive white space opportunity for us, and we now control high-quality brands across multiple price points,” said Doug Howe, incoming president and CEO of DSW. Howe was formerly the chief merchandising officer of Kohl’s, which continues to search for Howe’s successor.
“Our acquisition of Keds, which has an important presence in the athleisure space, is particularly exciting as it is an iconic brand with broad appeal for our customers and their families that gives us the potential to explore new opportunities both online and internationally,” Howe said.
In its statement on the transaction, DSW characterized Keds as an iconic brand for women, men and kids “with a legacy of being versatile, comfortable and fashionable. From a place in the wardrobes of Marilyn Monroe and Audrey Hepburn, to a central role in the 1980s classic movie, ‘Dirty Dancing,’ Keds has been at the center of cultural conversation for decades.”
The Keds sale closed four days ago and the Hush Puppies license should go into effect July 1. Wolverine will provide more information on the impact of these transactions in its upcoming fourth-quarter earnings call scheduled for Feb. 22.
Wolverine also noted that it is continuing to evaluate strategic alternatives for its Wolverine Leathers business.
Wolverine’s portfolio also includes the Merrell, Saucony, Sperry, Sweaty Betty, Hush Puppies, Wolverine, Chaco, Bates, HYTEST and Stride Rite brands.
Designer Brands is a large designer, producer and retailers of footwear brands and accessories, including Vince Camuto. The company operates a billion-dollar e-commerce business and nearly 650 stores across the U.S. and Canada under the DSW Designer Shoe Warehouse and The Shoe Company banners.