Brooks Brothers, clothier to Abraham Lincoln, JP Morgan and Clark Gable, will be bought by the owner of the Casual Corner women's clothing chain for US$225 million, less than a third of the price that UK parent Marks & Spencer Plc paid 13 years ago.
Analysts had expected Brooks Brothers to fetch US$400 million to US$500 million before the Sept. 11 terrorist attacks delayed the sale. Closely held Retail Brand Alliance Inc said it will pay cash for Brooks Brothers, the oldest US retailer.
Sales at Brooks Brothers have been flagging as rising unemployment and a slowing economy led US consumers to reduce spending. The business posted a loss in the six months ended Sept. 29. Retail Brand Chief Executive Claudio Del Vecchio is acquiring Brooks Brothers to expand into men's clothing, after buying Adrienne Vittadini and Carolee Designs for women earlier this year.
PHOTO: AP
"The price is low for the quality of the business," said Andrew Bell, who helps manage Euro $3 billion (US$4.2 billion) in equities at Carr Sheppards Crosthwaite, including Marks & Spencer.
"The brand value has been deteriorating under Marks's stewardship, and earnings have been depressed."
The shares of Marks & Spencer fell on Friday. They have surged 79 percent this year, the second-best performance on the FTSE 100 Index. Britain's largest retailer is selling stores and businesses outside the region after two years of sliding profit.
Del Vecchio is son of the founder of Italy's Luxottica SpA, and co-chief executive of the Milan-based maker of Ray-Ban sunglasses. He has formulated new designs and marketing for Casual Corner in the US, according to the chain's Web site.
"A purchase such as Brooks Brothers was too good to pass up," said Mark Schulman, chief operating officer of Enfield, Connecticut-based Retail Brand. "We've acquired a wonderful brand with a great image and an opportunity to expand the business."
In 1988, Marks & Spencer paid US$750 million for Brooks Brothers, founded in 1818. The US retailer started to struggle in the late 1980s when consumers tired of its clothes. In recent years, it has added more contemporary, casual lines for men and women.
In the first half of this year, sales fell to Euro $199.5 million from Euro $204 million, and Brooks Brothers had an operating loss of about Euro $800,000 compared with a profit of Euro $2.5 million a year earlier. The chain has 155 outlets, mainly in the US and Japan.
Marks & Spencer, led by Chairman Luc Vandevelde, blamed the loss on a ``difficult economic climate'' and the Sept. 11 attacks.
One Brooks Brothers store, on Liberty Plaza in New York, was damaged in the attacks and later used by rescue workers. Another, inside the World Trade Center, was destroyed.
Brooks Brothers stores in downtown Atlanta and San Francisco were decked with sales signs today, the first official shopping day of the holiday season. Sport shirts were buy one, get a second for 40 percent off at the Atlanta store, while ties were buy one, get a second for 30 percent off. Cashmere crew sweaters were US$199 at the San Francisco shop, regularly US$248, and shoes were 40 percent off the second pair purchased.
The Atlanta store also was offering 20 percent off of items purchased with a Brooks Brothers credit card until 11am on Friday.
The same discount was available from 8am to 11 am yesterday.
One shopper in San Francisco was surprised by news of the company's sale.
"I'm shocked," said Sandy Kearney, 48 years old. "What's going to happen to the quality of the clothes?"
Another, Jim Burke, has been shopping at Brooks Brothers since the 1980s for his favorite white oxford shirts.
"They've gotten more casual," Burke said. "I like things more traditional, but times change."
He said he had a hard time finding the white shirts today.
Proceeds from Brooks Brothers and the anticipated sale of Kings Super Markets, a 27-store US chain, mainly in New Jersey, will be used as part of a plan to return 2 billion pounds to Marks & Spencer shareholders by March next year, spokesman Louis Hill said.
"We're happy with the deal. It allows us to move on and concentrate on our UK retail business," he said in a telephone interview, adding the company is in advanced talks to sell Kings.
The chain will probably fetch about Euro $110 million, estimated Jeremy Richardson, a retail analyst at Schroder Investor Management, which owns about 510,000 Marks & Spencer shares.
Marks & Spencer last month agreed to sell and lease back 78 outlets in the UK to raise Euro $348 million and sold 19 shops in France. On Nov. 2, it said it would sell its nine Spanish stores for an undisclosed sum.
The sale of Brooks Brothers is subject to regulatory approval and is expected to be completed by March next year, the end of its fiscal year, Marks & Spencer said.
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