L.A. private-equity firm to buy Lucky Brand Jeans for $225 million
Lucky Brand Jeans is coming home again.
Los Angeles private-equity firm Leonard Green & Partners has agreed to pay $225 million to acquire Lucky from New York fashion company Fifth & Pacific Cos.
The acquisition means that Lucky, founded in Vernon in 1990 and moved last year to a 1940s Art Deco building in downtown Los Angeles, will be locally owned once again.
Denim veterans and Lucky co-founders Gene Montesano and Barry Perlman used clever marketing — including the “Lucky You” label stitched into the fly — to create one of the country’s most popular mid-level denim jeans.
The company was sold in 1999 to Liz Claiborne Inc. in New York, which changed its name last year to Fifth & Pacific after selling the Claiborne brand to J.C. Penney Co.
Executives at Leonard Green did not respond to requests for comment. The firm, which has raised more than $15 billion in equity capital, holds stakes in such well-known names as J. Crew, Jo-Ann Stores, Container Store, Del Taco, Petco and Sports Authority.
Lucky sells jeans, handbags, jewelry and other accessories at about 240 of its own stores, most of them in the United States. It also sells its clothing through major retailers, including Macy’s and Nordstrom.
Lucky’s new owners will have some challenges, particularly because the company’s most loyal customers are getting older, said Marshal Cohen, chief retail analyst with research firm NPD Group in New York.
“As customers age, they buy less and less jeans. Their body style changes,” Cohen said. “It’s crucial for them to continually resurrect the image of the brand.”
Cohen said Lucky should take a lesson from bigger rival Guess Inc. and create a lifestyle brand focused on much more than denim.
“It still has good, strong recognition and loyal followers,” Cohen said. “The key is: How do you expand the brand to go beyond denim? To really get growth they’ve got to do a better job of creating innovative and diversified products.”
That said, Lucky has posted strong growth in recent years. Fifth & Pacific said Lucky’s net sales rose to $461 million last year from $418 million the previous year and $387 million in 2010. Sales are expected to increase 14% this year, said Corrina Freedman, an analyst with Wedbush Securities Inc.
“The sale of Lucky is not an indication that the brand is impaired, quite the contrary,” Freedman said. Fifth & Pacific is “just refocusing on their growth division of Kate Spade.”
William L. McComb, Fifth & Pacific’s chief executive, acknowledged as much, saying the Lucky sale is part of his company’s plan to concentrate on expanding its Kate Spade brand. The company recently sold its Juicy Couture line.
“The decision to sell Lucky Brand Jeans is the result of a process we began last year: studying [the] operating risks and opportunities associated with a multibrand portfolio,” McComb said.
“We believe that by focusing all of our resources on the huge opportunity at Kate Spade, we can deliver the strongest value creation opportunity for our shareholders,” he said. “This is all about bringing Kate Spade to its full potential.”
Leonard Green is buying the company with $140 million in cash and a three-year loan for $85 million from Fifth & Pacific. The deal is expected to close by the end of March.
Fifth & Pacific shares fell 21 cents to $32.91. Its stock is up more than 160% this year.
