Dive Brief:
- Guess Inc. and WHP Global reached a definitive agreement to acquire Rag & Bone, the companies announced last week.
- Under the deal, Guess will pay $56.5 million to acquire Rag & Bone’s operating assets, while Guess and WHP will both own Rag & Bone’s intellectual property through a joint venture. Guess and the joint venture will enter a licensing agreement, which gives Guess the exclusive right to use Rag & Bone’s IP to manufacture Rag & Bone products worldwide and sell products in specified territories in exchange for Guess’ payment of a royalty fee, per the release.
- Rag & Bone will operate as an independent fashion brand under the Guess portfolio. The deal is expected to close during the first quarter of Guess’ 2025 fiscal year.
Dive Insight:
Guess and WHP Global said in the announcement that the transaction will allow Rag & Bone to boost its global expansion through both Guess’ and WHP’s distribution and licensee partners.
The deal also includes a potential earnout in which Guess will be responsible for up to $12.8 million, based on Rag & Bone’s sales performance over the course of its 2024 fiscal year.
Andrew Rosen, chairman of Rag & Bone’s board, said in the news release that the deal presents an opportunity to “take the brand to the next level” and create new possibilities for it on a global scale.
Rag & Bone, which was founded in 2002, will continue to be based in New York. It operates 34 stores in the U.S. and two in the U.K. and is also available in boutiques and department stores and through e-commerce, per the release. In 2023, the brand reported approximately $250 million in revenue.
Analysts for Jeffries wrote in emailed commentary that Rag & Bone “fits nicely” into Guess’ portfolio, but the deal could be a drag on Guess margins. The firm recently downgraded its outlook on Guess, due in part to wholesale account headwinds and revenue concerns in North America.
“[W]e believe this acquisition could help address but is likely not sizable enough to offset the underlying headwinds ahead,” the analysts wrote.
In November 2023, Guess reported $651.2 million in revenue in its most recent quarterly results, a 3% year-over-year increase. Its revenue in Europe for Q3 grew 6%, but its retail revenue in the Americas region fell 7%. Wholesale in the Americas increased 4%.
Meanwhile, Rag & Bone underwent some leadership changes in 2023. Marcus Wainwright, one of the brand’s founders, stepped down from his role of chief brand officer in July. He remains a board member and company shareholder.
The acquisition of Rag & Bone brings another denim brand to WHP’s fashion holdings. Last year, it acquired a majority interest in G-Star Raw. Some of its other fashion holdings include Anne Klein, Joe’s Jeans and Joseph Abboud.
