Acquisitive Authentic Brands Group has announced its first deal of the year — the purchase of Wolverine Worldwide’s footwear brand, Sperry.
But its approach has been a little different with this acquisition. Authentic Brands Group has entered a strategic licensing deal with footwear retailer Aldo Group, which it says will “launch Sperry into a new era” and is expected to modernise and rebuild the brand in a currently tough footwear market.
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Under the terms of the agreement, Aldo Group will operate Sperry’s North American wholesale, e-commerce, and store operations, in addition to overseeing footwear design, production, and global distribution.
Inside the deal
Wolverine Worldwide had been mulling a sale of Sperry for some time, mostly because its sales have fallen, which has weighed on the group’s overall performance. The sale is expected to generate total proceeds of approximately $130m in the first quarter, earmarked to fortify Wolverine Worldwide’s financial position through debt reduction.
Sperry, described by GlobalData retail analyst Neil Saunders as a “classic brand” has faced challenges in recent times, with declining sales leading to uncertainty about its future within the Wolverine portfolio.
In the wake of the company’s first-quarter results (Q1) the lifestyle retail group, which includes footwear brands Sperry and Hush Puppies, saw a revenue decline of 8%. Sperry revenues slid by 13% to $63m.
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By GlobalDataThis prompted Wolverine Worldwide to mull options for Sperry in May as it looked to invest in its core growth brands Merrell, Saucony and Sweaty Betty.
Chris Hufnagel, Wolverine Worldwide’s president and chief executive officer, said as part of the Sperry sale announcement: “We conducted a rigorous process that considered a comprehensive set of strategic alternatives for the brand, and we believe this is the best outcome for the company and our vision for the future.”
But Authentic sees Sperry as an opportunity. It plans to leverage its global network of category experts and operating partners to expand the brand’s product offerings and market share globally.
Authentic aims to convert Sperry into a licensed model, focusing on lifestyle offerings such as rainwear, sportswear, bags, and accessories. There’s a particular emphasis on expanding Sperry’s presence in the Asia-Pacific (APAC) region, indicating a global growth strategy.
The Aldo Group’s involvement is stressed as a crucial partnership, with David Bensadoun, CEO of the Aldo Group, highlighting its commitment to adding value to Sperry and leveraging its extensive retail experience.
Here’s why the deal matters
This deal comes at a time that seems most beneficial for Wolverine Worldwide, which in November, reported a 23.7% decline in total revenue in its third quarter ended 30 September and announced steps to advance its strategic transformation with a global workforce restructure.
Senior equity analyst in footwear and apparel from Williams Trading, Sam Poser follows Wolverine Worldwide’s performance and states that from a dollar perspective, the acquisition is surely a positive one.
However, he is convinced that Wolverine needs to concentrate on finding the right “niche” for the Saucony, Merrell and Sweaty Betty brands it is choosing to put its focus on and steadily progress as competition in the footwear market is heating up.
Thanks to Authentic Brands Group’s resources and Aldo Group’s expertise, Sperry stands a good chance of being revitalised.
Poser believes this divestment is “a little small” for Authentic but given its number of brands, it is well-positioned to help Sperry.
He explained that Authentic can afford to make a few mistakes being such a big company: “Not to say Sperry is a mistake, but if a percentage of their deals are working well and some aren’t, I think their math likely works for them pretty well.”
GlobalData analyst Neil Saunders agrees Sperry stands to benefit from the deal, as well as from financial investment, time, and strategic planning to rebuild the brand, a further advantage is better distribution, better operational control and improved marketing.
However, Saunders notes that boosting Sperry’s fortunes will take time, particularly in the current challenging footwear market, and achieving a quick turnaround may prove difficult given the industry’s current performance.
It’s currently uncertain if Sperry will thrive under Authentic’s ownership, just as it is for Wolverine’s ability to turn around its core brands and whether it has any plans to replace Sperry.
Poser hopes the latter is not true and advises Wolverine to get its “house in order” before it attempts to do anything else.
He explains: “We’ve seen companies, do that and generally it creates less focus and then causes problems in the long term.”
Key takeaways for the fashion industry
Authentic’s decision to execute the Sperry acquisition as a licensing deal with Aldo Group is an interesting one, but it’s not the first time we’ve seen this move from the company. It announced a similar route with Centric Brands LLC in November where the latter would design, manufacture, and distribute kids’ apparel for Quiksilver, Billabong, and Roxy in the US and Canada.
This direction is different from its run-of-the-mill acquisitions, of which there have been many with the most standout ones being its agreement with SPARC Group and Simon Property Group to take a minority interest in Shein; its $253.5m buyout of Ted Baker in 2022 and its acquisition of Hunter in June 2023, shortly before it completed the sale and rescued US footwear brand, Rockport out of bankruptcy.
Of course, Authentic’s other notable deal was its takeover of Reebok from German sporting goods giant, Adidas in 2021.
There have been many, many more since 2018 in line with Authentic’s aggressive expansion plan. But none quite like this.
Saunders believes this collaboration allows Aldo to minimise risks and provide a robust operating partner in Authentic.
While Aldo Group did not return our request for comment, we know from previous announcements, that Sperry is set to gain significant traction in the US market through this partnership with Authentic.
Aldo announced it would be adding 23 Sperry stores to the 430 other branded stores it already operates in North America.
Authentic’s rationale behind the deal, Saunders notes, is simply its desire to grow its brand portfolio. Sperry, with its classic heritage, presents an opportunity for growth through modernisation and increased awareness.
Under Authentic, there is the possibility we could see the return of Sperry as a prominent footwear brand, he suggests.
We are also likely to see divestments in 2024, particularly in the early part as businesses look to “spring clean” their portfolios and ensure they are moving forward with their most profitable brands.
The footwear company previously divested its brands Keds and Wolverine Leathers back in December 2022 in a move that it said will contribute to $65m in cost savings for 2025.
Chief financial officer and executive vice president, Mike Stornant described it as an ongoing effort to reshape its portfolio and target its most meaningful opportunities.
He said at the time: “We continue to streamline our organisation and become more efficient so that we can direct greater resources into our growth brands, pay down debt, and enhance long-term shareholder value.”
Saunders observes: “This [divestment] is part of a wider trend in the industry of companies looking to offload underperforming brands and parts of their business. Wolverine will also generate some cash from the deal which it can use to pay down debt and strengthen its balance sheet.”
Just like the Sperry brand, Keds and Wolverine Leathers were regarded as “low-profit contributors” which resulted in the move to let them go “to reduce complexity and prioritise growth brands to increase long-term shareholder value.”
Our signals coverage is powered by GlobalData’s Thematic Engine, which tags millions of data items across six alternative datasets — patents, jobs, deals, company filings, social media mentions and news — to themes, sectors and companies. These signals enhance our predictive capabilities, helping us to identify the most disruptive threats across each of the sectors we cover and the companies best placed to succeed.
