Shortly two years after buying both brands as part of its acquisition of American Sporting Goods (ASG), Brown Shoe Company, Inc. announced last week that it had sold Avia and Nevados for $74 million.
The acquirer was Galaxy Brand Holdings, Inc., the same group that acquired And1 from Brown Shoe in October 2011. And1, the basketball brand, was also part of the original ASG acquisition.
The CEO of Galaxy is Eddie Esses, who is president of E.S. Originals, the New York based firm that claims to be largest privately held footwear importer in the world with volume of over $1 billion. The Galaxy group, according to sources, partnered with Brown Shoe last year in a licensing to bring the Avia brand to Walmart.
With the sales of Avia and Nevados, an outdoor brand, that leaves only Ryka remaining from the acquired ASG portfolio. Brown plans on retaining Ryka, and will use the proceeds from the sale of Avia and Nevados to pay down debt.
“Although we were not actively marketing Avia for sale, it’s a great brand with a strong heritage that appealed to Galaxy Brand Holdings, said Diane Sullivan, president and CEO of Brown Shoe, in a statement. As a result, they made an offer which we believe is in the best interest of our shareholders to accept,” “Were excited about continuing to expand and strengthen the Ryka brand, which is the most integral and relevant part of the ASG acquisition for Brown Shoe Company.”
As part the realignment and integration related to the transaction, Brown will take a charge of $15 million to $17 million in fiscal 2013, or approximately 28 cents to 33 cents per share on a GAAP basis. Of this amount, $11 million to $13 million is expected to be non-cash
Brown Shoe acquired ASG in February 2011 for $156.6 million in cash, including debt assumed by the company of $11.6 million. All four acquired brands became part of Brown Shoes Healthy Living segment, which also includes Naturalizer, Dr. Scholls Shoes and LifeStride.
Rykas business appears to be regaining some momentum, with sales up 10.6 percent in 2012 and climbing more than 25 percent in the fourth quarter. Although some market observers see a sale of Ryka as well, one source felt Brown Shoe officials always felt Ryka had the most potential of the ASG brands and also fit well with Brown Shoes other largely women-focused wholesale brand portfolio.
Avia sales, however, were down last year and the fourth quarter fell short of plan, according to Brown Shoes financial statements.
After acquiring ASG in Spring 2011, Brown Shoe promised investments in innovation, people and branding as part of an ambitious plan to reestablish both Avia and Ryka as premium athletic brands. By the fall, a number of athletic industry veterans, including Tim Joyce, Jim Hoff, Brad Little, Jorge Cabrera and Alan Vickers, had joined the company in forming the Brown Athletic division. In January 2012, Avia signed on as Presenting Sponsor of XTERRA, the offroad triathlon and trail run series, in what seemed like the first step in reestablishing Avias credibility within the running community.
But Brown Shoe later in 2012 gave Galaxy the right to license the Avia name to Walmart. The ASG team continued to sell Avia through more traditional athletic and family shoe channels although some accounts did not want to carry a brand that was marketed in Walmart. The Galaxy group, who were one of the original suitors for ASG, eventually made an offer to acquire Avia and Nevados.
The Galaxy group, which also reportedly includes Isaac Levy of Happy Kids, the childrens apparel firm, has also brought the And1 brand to Walmart in a similar fashion since acquiring the brand. E.S. Originals had previously earned recognition from Walmart for successfully helping establish the Starter brand as a house footwear brand at the discount giant.
Prior to acquiring each brand, E.S. Originals also held a kids license for both Avia and And1. While supplying full-range of branded and private label footwear, E.S. Originals particularly focuses on kids shoes in the licensed space. Licensed brands include Nautica, Oilily, Garanimals, French Toast, Rampage, Everlast, Paul Frank, Hello Kitty, as well as Ryka.
“We are excited by the tremendous potential in both Avia and Nevados, and look forward to building on their foundations in the athletic and outdoor space,” said Galaxy Brands Esses, in a statement. “Both brands enjoy a loyal consumer base, and we are committed to continuing a tradition of serving all of our retail partners with innovative, high-quality products. We see significant opportunity — in both domestic and international markets – to drive the growth and continued development of these brands.”
Officials at Galaxy Brand and Brown Shoe could not be reached for further comment.
