Lands’ End and WHP Global on Monday said they are forming a joint venture, with the brand management firm paying $300 million in cash to acquire a 50% controlling stake in the apparel brand.
The brand in turn will hand over all of its intellectual property and related assets, including its licensing business, and will continue to be in charge of its direct-to-consumer and business-to-business operations.
Lands’ End, which struggled for years and is in the midst of a turnaround, plans to use proceeds from the sale to pay off an outstanding term loan of about $234 million “and for general corporate purposes.” Those purposes include paying royalties to license its own brand; the agreement includes annual minimum royalty payments per year, starting at $50 million for the first year, per the release.
In its most recent quarter, Lands’ End’s gross merchandise value — which includes branded merchandise sold through business-to-consumer and business-to-business channels, plus the estimated value of merchandise sold through third-party channels — rose by low-single digits year over year. Net revenue in Q3 fell 0.3% to $317.5 million. Gross margin expanded about 120 basis points to 51.8%, thanks to higher average unit retail and the expansion of the licensing business, partially offset by tariffs. The retailer swung into the black in Q3, reaching net income of $5.2 million, from its $0.6 million net loss a year ago.
The deal fulfills Lands’ End’s effort since March to explore strategic options, but could alter slightly. Under certain scenarios, for example, Lands’ End may have the right or obligation to exchange its interest in the joint venture for equity in WHP Global, per the companies’ press release.
