Just as the brand consolidators of the last twenty years reach their breaking point and start selling off assets, including the brands they acquired over those two decades, the business model perfected by a few New York-based garmentos and old shoe dogs appears to be the savior—of the brand names if not the business—of footwear and apparel brands that have been important to varying degrees over that time.
The trick is to find the right brand with solid global brand awareness, acquire only the critical assets like trademarks, names, and patents, and then license that name to a third party that will build or rebuild that brand in a key geographic region, if not worldwide. You don’t own inventory, you don’t have the overhead of thousands of workers and you only have to work hard to ensure the integrity of the brand remains as you exploit it for the remainder of its life cycle—often at the end of a long tail.
As most industry watchers expected, the fate of the brands Delta Apparel, Inc. consolidated under its umbrella is the same.
With cotton prices rising, debt and inventories expanding and far-flung investments made in factories outside the U.S., Delta filed for Chapter 11 bankruptcy protection in late June and was subject to an asset auction last week. While the preliminary results of the auction are known, the final decision will come from The U.S. Bankruptcy Court in Delaware on September 5.
Delta Apparel reported seeing signs of improving demand for activewear during its second quarter but also noted that the prolonged industry slump that began over 18 months ago continued to impact operations and production levels. “Managing liquidity and maintaining access to capital remain our highest priorities, and our team has continued to execute well on initiatives to improve our balance sheet during the quarter. Our debt and inventory levels were both down favorably more than 35 percent year-over-year,” management said on a conference call with analysts.
The company was auctioning off assets from the Salt Life, Soffe and DTG2Go brands. Salt Life, the marine apparel brand acquired by Delta Apparel in August 2013, was expected to have the biggest ticket after the company indicated that it planned to sell certain of the brand’s assets for approximately $28 million to FCM Saltwater Holdings, which agreed to act as the stalking horse bidder at the court-supervised auction.
Delta said last October that it had received an unsolicited offer to purchase the Salt Life business from an unnamed party, and its Board had engaged Baird as its financial advisor at the time.
In a rare situation, stalking horse bidder FCM Saltwater Holdings, which is reportedly associated with investment firm Forager Capital Management, did not have the ultimate winning bid. Instead, a combination of a $38.74 million bid by brand licensor Iconix International, Inc. and retail liquidator Hilco Merchant Resources won the Salt Life business, with FCM’s final bid reported at a $37 million offer.
If the court approves the bid, Salt Life will join Ocean Pacific, Ed Hardy, Zoo York, and other street, sports and breach/marine brands.
Hilco Merchant Resources will liquidate the inventory and store assets related to the Salt Life brand. At last count, Salt Life, which started as a decal, had over 20 stores in operation.
Fanatics successfully bid nearly $258,000 to purchase 1,289,168 units of Fanatics blanks from the DTG2Go assets. DTG2Go, the print-on-demand service run by Delta, closed in mid-June.
Soffe, the other ubiquitous brand in the stable with its once popular must-have “Soffe Shorts” for girls, also had assets picked up at the auction. The winning bid of $15.3 million came from former cross-state hosiery manufacturer Renfro LLC. NG Labs, the owner of the Boxercraft, Headsweats and Recover brands, reportedly submitted a bid of $15.1 million.
Federal Bankruptcy Court Judge Laurie Selber Silverstein will rule on whether to approve the asset sales to the top bidders on September 5.
Delta Apparel’s activewear business, catering to the promotional products market and others, is reportedly being liquidated.
Image courtesy Salt Life
