By Suzanne Kapner
Six And A Half For All Mankind, anybody?
Apparel conglomerate VF Corp. said Friday it wrote down the
value of the once hot denim brand Seven For All Mankind along with
two other contemporary lines by $396 million.
The move was an acknowledgment that the brand hadn't lived up to
VF's lofty expectations when it paid $775 million for Seven in 2007
during the heart of the premium denim boom. The brand itself helped
sparked that boom with jeans that ran to $200 or more and were worn
by celebrities including Sarah Jessica Parker and Heidi Klum. Since
then, a plethora of newer and edgier labels have flooded the
market, as demand for premium denim has slowed.
"The niche brands have taken share from some of the more
mainstream brands, and that is why Seven has suffered," said Neil
Saunders, managing director at Conlumino, a retail research and
consulting firm. "It hasn't been seen as cool enough."
The other two brands being written down are Ella Moss and
Splendid, which sell basics like a jersey T-shirt for $88 that Mr.
Saunders said are priced too high.
The write-down helped push the company's profit for the last
three months of the year down 67% from a year earlier, to $122
million. But revenue jumped 9% to $3.5 billion on the strength of
its outdoor and action sports division.
Shares of VF rose 6% to $75.39, not far off the record high of
$76.89 reached a month ago.
The bad bet on Seven was a rare misstep for VF, which has a
track record of acquiring hot brands and turning them into
powerhouses, something it has done with North Face, Timberlands and
Vans, brands that anchor its outdoor and action sports
division.
Revenue for that division grew 13% to $2.2 billion for the three
months through Jan. 3. Timberland's revenue was up 11%, while North
Face's revenue grew 12% and Vans jumped 17%.
VF also owns the Lee and Wrangler brands, part of its Jeanswear
division, which has struggled as women have put aside their denim
in favor of active wear. Sales for that group grew 3% in the
quarter to $755 million.
Seven was founded in 2000 and grew quickly thanks to a
reputation for a flattering fit. When VF bought the brand, it had
revenue of about $300 million. VF said the deal would make it the
leader in premium denim. But it faced the complicated task of
transforming a one-hit wonder into a broader brand with staying
power.
"We bought Seven For All Mankind in the summer of 2007, and our
outlook for it didn't anticipate a lot of the environment that
we've seen since then," Chief Executive Eric Wiseman said on a
conference call Friday. "That means we're standing today not where
we thought we'd be."
Write to Suzanne Kapner at suzanne.kapner@wsj.com
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