Private equity firm Golden Gate Capital on Thursday said that it has established a new operating company, PSEB Group, combining Eddie Bauer and Pacific Sunwear (PacSun), two of its portfolio companies. The firm will invest additional equity in PSEB to support its growth, according to a company press release.
PSEB will run more than 700 stores and is on track for some $1.5 billion in sales this year, including $400 million in e-commerce, the firm said, noting "Both brands are performing well." Same-store sales last year rose 6.5% at Eddie Bauer and 5% at PacSun, and so far this year they're up 6% at Eddie Bauer and 8% at PacSun, according to the release.
Golden Gate acquired both companies during Chapter 11 proceedings, PacSun in 2016 and Eddie Bauer in 2009. A number of times in recent years, Eddie Bauer has tried unsuccessfully to sell itself.
This move was anticipated and despite Golden Gate's insistence that both are robust, solves a number of problems at each.
The combination of the two retailers — one a 100-year-old brand launched as a hunting and fishing store in the Pacific Northwest, the other as a Newport Beach, California surf shop in 1980 — is an efficiency play. Their customers and fans won't see any change in their store or online experience, Golden Gate Capital Managing Director Josh Olshansky said in a statement.
"We look forward to the competitive advantages that a unified shared services platform will provide us, while we continue to invest in the two brands' consumer connections and distinct identities," he also said.
PacSun has already shrunk somewhat since its rather smooth bankruptcy process two years ago, having struggled for years and posting losses since 2008 ahead of its Chapter 11 filing.
In addition to expense cuts, the move helps solve Golden Gate's ongoing problem of unloading Eddie Bauer. The brand spent most of the 21st century burdened with debt, surviving two trips to bankruptcy court, one in 2003 and again in 2009, when Golden Gate took it over. Last year Eddie Bauer was reportedly looking to sell itself; a 2014 deal for a takeover by menswear retailer Jos. A Bank ultimately fell through and there's been scant interest since.
In a note late last year, Moody's Investors Service called out Eddie Bauer for needing good holiday sales in order to avoid further downward rating pressure, and last July the company made it onto Retail Dive's list of retailers at risk of bankruptcy.
The brand is in the midst of a recently launched "Why I Hike" campaign, with that hashtag blasted across social media to promote a photography contest and a project where proceeds from select merchandise go to three outdoors-related nonprofits and The Heroes Project. The campaign recalls REI's blockbuster #OptOutside campaign, which began as a subversive anti-Black Friday effort but has expanded to become a defining principle of the brand.
The PSEB transaction is expected to close in the third quarter and is subject to certain closing conditions, Golden Gate said.
Correction: An earlier version of this story incorrectly stated that store closures were anticipated and has been corrected.