American sports fashion brand Champion store seen in Hong Kong.
Chukrut Budrul | SOPA Images | Sipa via AP Images
Brand management companies WHP Global and Authentic Brands Group are interested in purchasing Champion from its parent company. Hanesbrandsthat is considering ditching the sportswear line amid pressure from activist investors, CNBC has learned.
Hanesbrands announced it was evaluating strategic options for Champion in late September, just over a month after activist firm Barington Capital Group began pressuring the company to cut costs and generate cash as sales fell. At the time, Hanesbrands said those options could include a possible sale of Champion or another type of strategic transaction. He also said he might keep the brand.
Hanesbrands has seen strong interest in acquiring Champion from a combination 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 of about $2 billion, the people said.
The deal is not close to completion, and if Hanesbrands moves forward with the sale, it is not expected to select a buyer until 2024, the people said.
“We are in the early stages of evaluating strategic options and the right path forward for Champion's global business and, at the same time, we remain committed to advancing Champion's new, disciplined channel segmentation strategy, energizing the brand. and leveraging work already completed to globalize product design and segmentation and optimize our supply chain,” a Hanesbrands spokesperson told CNBC.
WHP and Authentic Brands did not respond to requests for comment. Goldman Sachs, which has been tapped as financial advisor to Hanesbrands for its review of Champion, declined to comment.
An agreement that could make “perfect sense”
Both WHP and Authentic Brands have a wide range of brands in their portfolios and would be well suited to add Champion to their rosters. WHP recently acquired Bonobos from Walmartand previously purchased Toys R Us and Anne Klein.
Along with Champion, he is also interested in purchasing Sperry from its parent company. Wolverine around the world, according to people familiar with the matter. Wolverine said in May that he was exploring selling the footwear brand best known for his boat shoes. The company did not respond to a request for comment.
Authentic Brands, owner of brands such as Aeropostale, Brooks Brothers and Juicy Couture, recently partnered with mega-retailer Shein to sell a co-branded clothing line with Forever 21, among other companies.
Neil Saunders, retail analyst and managing director at GlobalData, said WHP and Authentic Brands' interest in Champion “makes a lot of sense.”
“This is exactly what these companies do. They buy different brands that are struggling and have a pretty good track record of turning them around and trying to redesign performance,” Saunders told CNBC.
“They have a good operating context in which they can integrate these brands, whether through licensing, through international expansion, getting them further into physical retail or selling them direct to the consumer,” he said. “They almost have an operating model where they can bring brands in and start seeing better performance.”
Champion may be one of the best-known sports brands on the market, but demand for its hoodies, activewear and branded apparel has declined globally, particularly in the US.
During the last reported quarter ending July 1, Champion brand sales fell 16% year over year, 25% in the U.S. and 1% internationally. The company expects Champion's U.S. sales to be under pressure for the rest of the year, executives said.
Weak sales at Champion are contributing to a broader slowdown at Hanesbrands, which saw revenue decline by about 8.5% in the six months ended July 1 as wholesalers pulled orders for T-shirts, bras and underwear. Its shares are down about 34% this year.
In August, Barington sent a letter to Hanesbrands Chairman Ronald Nelson saying the company “must immediately focus on cash generation and debt reduction” to create long-term value for shareholders.
Just over a month later, Hanesbrands announced it was conducting “a strategic options assessment” for Champion as it sought to simplify and focus its broader business, while driving growth and profitability.
Meanwhile, Sperry sales have also been slow for Wolverine Worldwide.
For the three months ended July 1, Sperry's sales fell to $57.4 million, down 23.5% from the same period a year earlier. That slowdown has contributed to a decline at Wolverine, whose total revenue fell to $589 million during that quarter, down 17% from the same period a year earlier.
Wolverine shares are down more than 26% so far this year.
