Tailored Brands to sell Joseph Abboud brand for $115M

Dive Brief:

Tailored Brands, Inc. on Friday announced plans to sell its Joseph Abboud trademarks to brand management firm WHP Global for $115 million. The agreement is expected to close by the end of March, subject to closing conditions.
The move is an opportunity to expand the brand internationally and for Tailored Brands to pay down debt, according to a press release from the companies. Designer Joseph Abboud himself will be leaving Tailored Brands "at the end of January to pursue new opportunities in the global fashion community," per the release.
The deal includes a licensing agreement for Tailored Brands to retain the exclusive rights to sell and rent Joseph Abboud branded apparel and related merchandise in the U.S. and Canada, while WHP expands it globally. Tailored Brands will also continue to own and operate the apparel factory in New Bedford, Massachusetts, the companies said.

Dive Insight:

The Joseph Abboud brand has been a bright spot in Tailored Brands' otherwise struggling portfolio. The company last year landed on Retail Dive's list of 28 retailers in danger of bankruptcy.

Sales and rentals of the brand's merchandise brought Tailored Brands some $600 million in sales, B. Riley analysts estimated in emailed comments last week, upon the companies' announcement of their deal. But without more information on what the new licensing fees will be, it's hard to say what the profit impact of the deal will be, the analysts also said.

The move is designed to ease the company's debt burden. "[H]owever, the company will have to thoroughly review outstanding debt covenants to review all of their options with the additional cash," B. Riley said.

The Joseph Abboud licensing maneuver isn't Tailored Brands' first attempt to extract cash from its stable — last year, the company sold a wholesale unit in August that included operations in the United Kingdom and the United States, under brands Dimensions, Twin Hill, Alexandra and Yaffy.

To turn things around, then, Tailored Brands is betting on its retail businesses, especially its largest banners Men's Wearhouse and Jos. A. Bank. But it also faces a harsh new reality, where men simply need fewer suits. "We are seeing heavy promotional activity in suits," CEO Dinesh Lathi told analysts in September, according to a Seeking Alpha transcript, noting later, "This trend of casualization ... it works against off-the-rack suits."