CANDIE’S INC. MARCHES TO BEAT OF BONGO DRUM

Byline: Jennifer Weitzman

NEW YORK — Candie’s Inc. apparently has developed an enhanced appetite for apparel.
In addition to reporting slimmer fourth-quarter and yearend losses Wednesday, the New York-based marketer of junior footwear signed an agreement to acquire the remaining half of Bongo’s jeanswear licensee Unzipped Apparel LLC from Sweet Sportswear LLC, its joint-venture partner for Bongo.
For the portion of Unzipped it didn’t already own, Candie’s, best known for its fun and quirky footwear, will pay Sweet 3 million shares of Candie’s common stock and $11 million in preferred stock, redeemable in 2012. Investors reacted to the acquisition and the improved results by lifting Candie’s shares 70 cents, or 25.5 percent, to close at $3.45 in Nasdaq trading Wednesday. The stock briefly matched its 52-week high, reached Aug. 16, of $3.57 in intraday trading.
While Candie’s had an obligation to purchase Bongo in January 2003, the acceleration of the deal is expected to immediately benefit Candie’s links to the 78 million “millennials” in the Generation Y demographic, as well as its top and bottom lines. Unzipped is expected to contribute 4 to 7 cents per share to Candie’s fiscal 2003 earnings and add roughly $50 million in wholesale revenues during the remaining nine months of the fiscal year. Earnings accretion in year two “will accelerate significantly,” said Neil Cole, chief executive officer of Candie’s, in a statement.
“Bongo is doing so great right now,” Cole told WWD. “It’s in the middle of hyper-growth and we want to take advantage of its success. Having two strong brands just gives us great opportunities, like increased sales and the ability to source a lot of apparel vertically.”
The combined entity and its licensees will be responsible for over $500 million in retail sales.
While mum on other details, Cole said Candie’s will “put a lot more money and effort to develop Bongo,” including a new fall marketing campaign with increased print advertising. In addition, he said Candie’s is slated to open 30 stores this year and another 45 next year.
Cole did acknowledge that there were opportunities to greatly expand Candie’s jeanswear line, which is currently sold exclusively by Gadzook’s, the Dallas-based specialty store group. Candie’s also is seeking licensees for intimate apparel and outerwear, Cole reported.
In a related revision of its earnings guidance, the company now expects to report first-quarter earnings per share of roughly 2 cents on sales of $24 million and, for the second quarter, EPS ranging between 18 and 22 cents on sales from $50 million to $52 million. For the full year, it forecast EPS between 44 and 47 cents on sales ranging from $160 to $170 million.
For the fourth quarter ended Jan. 31, Candie’s narrowed its losses to $3.9 million, or $19 cents a diluted share, compared with losses of $7.4 million, or 38 cents, in the comparable period last year. Sales inched up to $17.8 million, a 5.1 percent increase over last year’s $16.9 million. Sales through the firm’s 13 retail stores increased 30.4 percent to $2.3 million, driven by four new stores and a comparable-store sales increase of 3.6 percent. Licensing revenues were $1.1 million, from $0.9 million last year.

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