With the intention to boost shareholder value and get the best
out of its brands portfolio,
Fifth & Pacific Companies Inc.
) agreed to divest its Juicy Couture brand to privately held
Authentic Brands Group LLC.
Last year, Fifth & Pacific had initiated a study to estimate
its capital and resource needs, as well as risks and
opportunities related to the operation of its three brands - Kate
Spade, Lucky brand and Juicy Couture, while also focusing on
maximizing shareholder value. Meanwhile, the company continued to
work toward the turnaround of Juicy Couture and proceed with the
expansion of Lucky Brand Jeans, while evaluating the market value
of these brands alongside.
Under the terms agreed, Fifth & Pacific will receive $195
million in cash from Authentic Brands Group for the sale of the
intellectual property of its leading lifestyle brand. This
transaction contingent upon regular closing conditions is
expected to be completed in November.
In addition to the sale terms, Fifth & Pacific has agreed to
a short-term deal with Authentic Brands Group to smoothly
transition to the latter by mid-2014. For this, the company has
agreed to pay a $10 million guaranteed minimum royalty to
Authentic Brands Group. Working towards the transition, Fifth
& Pacific expects Authentic Brands to execute licensees and
affiliates to take over the operations of Juicy Couture,
comprising the company's workforce, retail stores, wholesale,
international and elements of the e-Commerce site.
The company did not disclose the restructuring charges and impact
of the sale on its financial outlook. In a statement, however,
the company said that it expects the transition and restructuring
charges to be significant, which it seeks to minimize through
talks with Authentic Brands Group and its associates. Centerview
Partners and Perella Weinberg Partners are the official advisors
of Fifth & Pacific for the transaction.
Juicy Couture posted net sales of $94 million, making for about
24.6% of total company sales. However, sales in the quarter
reflected a decline of 10.7% from the year-ago quarter, driven by
a 4% decline in direct-to-customer comparable sales. Further, a
decline in the brand's wholesale apparel and wholesale
non-apparel operations pulled down results.
Fifth & Pacific currently has a Zacks Rank #3 (Hold). Other
stocks performing well in the apparel-shoe space include
Citi Trends Inc.
Christopher & Banks Corp.
). All of these stocks carry a Zacks Rank #1 (Strong Buy).
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FIFTH PACIFIC (FNP): Free Stock Analysis
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