VF Corp., which has already collected Southern California companies that make skate shoes, surf sandals and snow parkas, is set to toss premium denim into its bulging closet of brands.
The company said Thursday that it would buy Los Angeles-based jeans maker 7 for All Mankind from founder Peter Koral and a private equity firm for $775 million. Koral, the company's chairman and president, started the business in 2000. Bear Stearns Cos. bought a 50% stake two years ago.
The move will help 7 accelerate its growth plans, which include expanding internationally, opening stores and developing more products, such as handbags and shoes, Chief Executive Mike Egeck said.
"This acquisition means we're going to have both the financial and physical backing to do that," he said.
The jeans maker -- which will open its first store on Robertson Boulevard in L.A. this fall -- intends to have 100 stores within the next five years, said Eric Wiesman, president and chief operating officer of VF Corp.
"They're right on the cusp, we think, of their next growth spurt," Wiesman said. "We think when we get our international people talking to their international people, that could be a big opportunity."
VF also announced Thursday that it was buying Lucy Activewear Inc., a Portland, Ore.-based business that makes yoga clothes and other casual apparel, for $110 million.
Whenever VF Corp. buys a company, its goal is to operate the business more cost effectively by taking advantage of VF's larger network of resources, and then funnel the savings back into the acquisition to accelerate its growth, Wiesman said.
The Greensboro, N.C., apparel company owns a slew of well-known brands, including Wrangler, Lee and Nautica. Its California labels include Vans, Reef, Northface and Eagle Creek.
"Those brands, since we've acquired them, have dramatic growth at a much faster rate than before we acquired them and their margins have improved," Wiesman said. "That's our plan for 7 for All Mankind and that's our plan for Lucy."
Collecting 7, a leader in an industry niche that's based in L.A. County, is a smart move for VF Corp., said Marshal Cohen, chief industry analyst for NPD Group.
Although high-end denim sales have softened over the last year, it's the smaller companies that are getting hurt, along with businesses that initially sold other products but tried to jump on the premium denim bandwagon as it picked up speed, he said. As those companies pull back, a major player such as 7 -- which sells jeans priced from $150 to $365 -- will be at an even greater advantage, he said.
About 90% of 7's revenue comes from denim sales. The company will launch a line of sportswear in the fall.
Wiesman rejected the idea of a slowdown in premium denim and said 7 had been racking up strong results, including sales of about $300 million in 2006.