With the intention to boost shareholder value and get the best out of its brands portfolio, Fifth & Pacific Companies Inc. ( FNP ) 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. ( CTRN ), DSW Inc. ( DSW ) and Christopher & Banks Corp. ( CBK ). All of these stocks carry a Zacks Rank #1 (Strong Buy).