American sportswear fashion brand Champion store seen in Hong Kong.
Chukrut Budrul | SOPA Images | Sipa via AP Images
Brand management firms WHP Global and Authentic Brands Group are both interested in buying Champion from its parent company Hanesbrands, which is considering offloading the sportswear line amid pressure from activist investors, CNBC has learned.
Hanesbrands announced it was evaluating strategic options for Champion in late September — a little over a month after activist firm Barington Capital Group began pressuring the company to cut costs and generate cash as sales fall. At the time, Hanesbrands said those options could include a potential sale of Champion or another type of strategic transaction. It also said it could hold on to the brand.
Hanesbrands has seen wide interest in acquiring Champion from a mix of buyers, including WHP and Authentic Brands, according to people familiar with the matter. Interested potential buyers include strategics and sponsors, the people said.
Champion has estimated annual sales around $2 billion, the people said.
A deal isn’t close to completion, and if Hanesbrands moves forward with a sale, it’s not expected to select a buyer until 2024, the people said.
“We are in the initial stages of evaluating strategic options and the right path forward for the global Champion business, and at the same time, remain committed to advancing Champion’s new, disciplined channel segmentation strategy, energizing the brand and leveraging the work already completed to globalize product design and segment and streamline our supply chain,” a Hanesbrands spokesperson told CNBC.
WHP and Authentic Brands didn’t return requests for comment. Goldman Sachs, which has been tapped as Hanesbrands’ financial advisor for its review of Champion, declined to comment.
A deal that could make ‘perfect sense’
Both WHP and Authentic Brands count a wide range of brands in their portfolios and would be well suited to add Champion to their lists. WHP recently acquired Bonobos from Walmart, and previously bought Toys R Us and Anne Klein.
Along with Champion, it’s also interested in buying Sperry from parent company Wolverine Worldwide, according to people familiar with the matter. Wolverine said in May that it was exploring a sale of the footwear brand best known for its boat shoes. The company didn’t return a request for comment.
Authentic Brands, which owns brands like Aeropostale, Brooks Brothers and Juicy Couture, recently partnered with mega-retailer Shein to sell a co-branded clothing line with Forever 21, among other ventures.
Neil Saunders, a retail analyst and managing director with GlobalData, said WHP and Authentic Brands’ interest in Champion “makes perfect sense.”
“This is exactly what these companies do. They buy up different brands that are struggling and they have a pretty good track record of turning them around and trying to reengineer performance,” Saunders told CNBC.
“They have a good operational backdrop that they can integrate these brands into, whether that be through licensing, through international expansion, through getting them into physical retail more, through selling them direct to consumer,” he said. “They almost have an operating model that you can just sort of drop brands into and start seeing better performance.”
Champion may be one of the best known sports brands on the market, but demand for its hoodies, workout clothes and branded apparel have declined globally, particularly in the U.S.
During the most recent reported quarter ended July 1, Champion brand sales dropped 16% year over year, declining 25% in the U.S. and 1% internationally. The company expects Champion sales in the U.S. to be under pressure throughout the rest of the year, executives said.
Sluggish sales at Champion are contributing to a broader slowdown across Hanesbrands, which saw revenue decline by about 8.5% in the six months ended July 1 as wholesalers pulled back on orders for its T-shirts, bras and underwear. Its stock is down about 34% this year.
In August, Barington sent a letter to Hanesbrands Chair Ronald Nelson saying the company “must immediately focus on cash generation and debt reduction” in order to create long-term value for shareholders.
A little over a month later, Hanesbrands announced it was undertaking “an evaluation of strategic options” for Champion as it looked to simplify and focus its larger business, while also driving growth and profitability.
Meanwhile, Sperry sales have also been sluggish for Wolverine Worldwide.
During the three months ended July 1, Sperry sales dropped to $57.4 million, down 23.5% from the year-ago period. That slowdown has contributed to a falloff at Wolverine, which saw total revenue decline to $589 million during that quarter, off 17% from the year-ago period.
Wolverine’s stock is down more than 26% year to date.