DSW, Authentic Brands team up to acquire Camuto for $375M

Dive Brief:

Authentic Brands Group and DSW on Wednesday have purchased a majority stake in the intellectual property of the Camuto Group's proprietary brands. Total consideration paid to the Camuto Group will be approximately $375 million, according to a DSW press release.
DSW will contribute about $56 million to acquire a 40% stake in the intellectual property of Camuto Group's proprietary brands (including Vince Camuto, Louise et Cie, Sole Society, CC Corso Como, Enzo Angiolini and others), and Authentic Brands Group will take the majority of 60%, the companies said.
DSW will also contribute some $200 million to acquire all of Camuto Group's global production, sourcing and design infrastructure, including operations in Brazil and China, a new distribution center in New Jersey, plus working capital of about $100 million. DSW said it will acquire licensing rights for the Jessica Simpson footwear business, the footwear and handbag licenses for Lucky Brand and Max Studio, and joint venture participation in Camuto's ED Ellen DeGeneres and Mercedes Castillo brands.

Dive Insight:

After battling for Nine West and Bandolino at a bankruptcy auction this summer, ABG and DSW have found some common ground.

The arrangement preserves the Camuto Group operation, which will continue to service its current partners, ABG Chairman and CEO Jamie Salter said in a statement. Salter called the tie-up with DSW "a game changer" and said the company is "now linked to a footwear authority whose sourcing and manufacturing expertise will extend across our portfolio."

In a separate deal, Ariel Chaus, CEO of women's apparel maker Bernard Chaus, will buy up 100% of the brand's shares from Camuto Group to reclaim full ownership. In the process, Bernard Chaus and ABG will share interest in the Chaus intellectual property and work together to expand the global footprint of the 1.STATE, CeCe and Chaus brands.

The deal, which ABG compared to acquisition to its May purchase of Nautica, also entails a dizzying array of licensing opportunities for both companies, along with what they said are opportunities for "new category development with a focus on building out each brand's lifestyle offerings."

For DSW — which has looked to kids footwear and experiential elements for growth of late — the retailer gets from the deal a healthy brand portfolio, potential for substantial growth, new revenue opportunities within a larger market, and a new talent base in design, sourcing, marketing and sales. DSW CEO Roger Rawlins said in a statement that the deal "transforms DSW Inc. into one of the largest footwear companies in North America, with industry-leading capabilities in product design, development, sourcing, production and marketing."

But not everyone is so confident. Wedbush analyst Christopher Svezia warned in comments emailed to Retail Dive that the deal "adds to near-term uncertainty" for DSW. "After recent momentum around comp growth and an expected slightly accretive acquisition of Town Shoes, DSW is now acquiring a business that is expected to be earnings dilutive and that requires incremental expertise and focus," he said. He added that while incremental revenue gains and margin benefits may appear in the long term, the near-to-medium term holds risk, especially around tariffs, which may already be hurting handbag sales. There could be additional risks around investments and general integration, he added.

DSW said it will fund its portion through current cash and its existing credit facility. The transaction has been approved by the retailer's board and is expected to close within thirty days.