Dive Brief:
- Authentic Brands Group will acquire the Champion brand and business from HanesBrands in a deal valued at $1.2 billion, with the potential to reach $1.5 billion in performance based earnouts, according to a press release Wednesday.
- The transaction was approved by the entirety of HanesBrands’ board of directors, completing the previously announced evaluation of the brand’s options, which the company launched in September 2023.
- In its own news release on the deal, Authentic said it plans to convert Champion into a licensed model and is in discussions with existing and potential operators. Part of Champion’s design, production and distribution in North America was previously licensed out to G-III Apparel Group.
Dive Insight:
The deal is expected to close in the second half of 2024.
HanesBrands will classify Champion as discontinued operations in Q2, and plans to update its full-year guidance as a result, according to its release.
Champion had been a drag on HanesBrands’ earnings for several consecutive quarters. In the company’s most recent report last month, global sales for the brand fell 26% year over year, and international sales fell 17%. In the U.S., sales fell 35%.
The strategic review of Champion also included various efforts to boost the brand’s value. Some of those initiatives included naming a new vice president and chief marketing officer, relaunching the Zone 93 sneaker, and debuting a sustainable collection of crewnecks and joggers.
The plan also included leading the activewear brand to long-term profitable growth through a “more disciplined” product and channel segmentation approach. The company previously said it would take a few more quarters to see their turnaround efforts take effect.
Selling Champion to Authentic is good for HanesBrands, Tom Nikic of Wedbush said in an analyst note. The sale allows HanesBrands to turn its attention to its innerwear and intimates business, which Nikic said is “more staple-like than Champion, with less fashion risk.”
Though activewear wasn’t HanesBrands’ only business segment experiencing declines, the company frequently pointed to the innerwear business as a bright spot.
In its Q1 results, the innerwear business saw sales decrease 8%, but the segment gained an additional 50 basis points of market share due to operating model enhancements, new product innovation and higher levels of brand marketing investment. The company previously said it wanted to build this segment in 2024.
HanesBrands expects to earn about $900 million in net proceeds from the Champion transaction, and it said it would use this money to pay down debt. Nikic pointed to this as a positive result for HanesBrands as well, saying this could save the company about $75 million in interest expense annually.
Authentic, a company known to buy struggling brands, owns a portfolio of more than 50 lifestyle, entertainment and media brands. Earlier this year, it bought Sperry from Wolverine World Wide Inc. for $70 million. Its other recent fashion acquisitions include the Boardriders portfolio and the intellectual property of Hunter Boots and Vince.
