Fifth & Pacific Cos.’s Lucky Brand and Juicy Couture labels are attracting interest from private-equity firms and strategic buyers including VF Corp., said people with knowledge of the matter.
The brands could be sold together or separately, and their combined value is at least $700 million, said the people, who asked not to be identified because the process is private. Apparel-maker VF Corp., South Korean retailer E-Land Group and buyout firms Leonard Green & Partners LP and Advent International Corp. are among those that have signed confidentiality agreements for access to Fifth & Pacific’s financial data, the people said.
Authentic Brands Group LLC also may bid for Juicy Couture, said another person familiar with the situation. New York-based Fifth & Pacific has told bidders to submit first-round offers by the end of April, three of the people said, with the goal of a sale in July.
Representatives at Fifth & Pacific, Authentic and Advent declined to comment. Officials at VF Corp. and Leonard Green didn’t return calls seeking comment. Representatives for Seoul-based E-Land didn’t immediately respond to messages sent outside normal business hours. Fifth & Pacific hired boutique investment banks Perella Weinberg Partners LP and Centerview Partners LLC to handle the sale, said the people familiar with the situation.
Lucky Brand, founded in Los Angeles in 1990, is likely to fetch a higher price than Juicy Couture of at least $400 million, said one of the people. Its profitability -- as measured by gross margin -- expanded as its sales jumped 10 percent to $461.7 million last year. It operated 177 stores of its own as of February.
The revitalization of that denim-based business has been spearheaded in recent years by David DeMattei, hired away from Williams-Sonoma Inc. He built fashions and accessories around the denim line and added skinny stretch jeans to appeal to women.
Juicy Couture, known for its velour sweatsuits and whimsical feminine designs, will fetch at least $300 million, said one of the people familiar with the situation. The label posted a 6 percent drop in revenue to $498.6 million last year, as markdowns needed to clear inventory eroded its profitability.
Juicy Couture was hurt by focusing mainly on the high-end fashion content of the brand, which should have represented just 20 percent of the merchandise, Fifth & Pacific Chief Executive Officer Bill McComb said Feb. 21 on a conference call with analysts. Juicy Couture operated 78 full-priced stores of its own in North America and Europe at the end of 2012.
Juicy Couture’s 2013 adjusted earnings before interest, taxes, depreciation and amortization are projected to tumble to $5 million at most this year, according to a company statement in January, from $25 million in 2012. Lucky Brand’s adjusted Ebitda will be about $50 million to $55 million. Apparel labels such as Lucky Brand and Juicy Couture typically fetch about eight times earnings, said one of the people with knowledge of the matter. Potential buyers would also consider revenue growth, brand cachet and forward sales.