After a very quiet 2009 on the M&A scene, Kellwood Co. and Jones Apparel Group are eager to perk up their portfolios through acquisitions in 2010. In just the first few weeks of the new year, Kellwood scooped up outdoor performance apparel firm Isis. And this looks like just the start, as the firms shift back into their familiar roles as consolidators in the fashion industry.
“I see undervaluation going on right now, and a lot of great brands out there that have been running paycheck to paycheck,” said Michael W. Kramer, Kellwood’s president and chief executive officer, late last year. “The economy has hit these firms hard, and they are forced to come to the table due to the liquidity crunch.”
Jones president and ceo Wesley R. Card likewise is looking to put the $156.9 million in cash and cash equivalents on the company’s books to work. “This is really the best time to be making acquisitions,” Card said. The company also is working on other ways to grow, for instance, launching Glo jeans as an exclusive in Kmart this month and backing the business with a national ad campaign.
And while there’s plenty of interest in brands that have both recognition and room to grow, experts don’t expect Kellwood or Jones to be bidding against their traditional sportswear competitor, Liz Claiborne Inc. Claiborne is expected to spend this year preparing the Liz Claiborne brand for its move to J.C. Penney Co. Inc. and working to right its Mexx operations in Europe.
The company has a much different profile than it did in years past, when it dominated many a better sportswear floor.
“Liz is beginning to morph into a specialty retailer,” said Scott Tuhy, debt analyst at Moody’s Investors Service.
Tuhy said the firm’s Juicy Couture, Lucky Brand and Kate Spade retail businesses would improve with the economy, and that the turnaround Mexx European business was a work in progress.
Even as these companies move forward, last year’s cost- saving measures are expected to live on.
“Every business is trying to control its destiny,” said consultant Emanuel Weintraub. “They’re paying attention to creating value, to improving their brand, improving their logistics, watching their inventory.”
And there are signs that the sector has finally hit bottom.
Moody’s recently changed its debt outlook for U.S. apparel producers to “stable” from “negative,” indicating the sector’s credit conditions will hold steady for the next 12 to 18 months.