The owner of clothing brands such as Joe Boxer, Mossimo and Ocean Pacific added a hefty dose of hip Tuesday, saying it bought Rocawear, the hot urban line co-founded by superstar rapper Jay-Z, for $205 million.
The purchase pushes Iconix Brand Group Inc. into the expanding urban clothing market in which Jay-Z and other rappers are having considerable success.
"This man understands his market and his customer as well as any sophisticated brand expert out there," said Eli Portnoy, a brand strategist in Los Angeles. "He's been able to maintain the link to the roughness and hard edge of the urban world, but also present a persona that's accepted in more mainstream circles."
Urban apparel businesses often are driven by the personalities who back the brands, such as Sean "Diddy" Combs, 50 Cent and Eminem.
"Once the urban youth see an icon they look up to, particularly with apparel, it draws them into it," said Kelvin Anderson Jr., manager of VIP Records in Long Beach, a hip-hop landmark where Snoop Dogg made one of his early videos on the roof.
The apparel lines meld with the music world as the rappers who pitch them wear the clothes in videos, at awards shows and in concert.
One Jay-Z song, for example, starts with the New York rapper ticking off his personal inventory: "My gear is right, check/My bucket is low, check/My Rocawear is fittin' incredible."
It's a smart deal for Iconix, analysts say, given Jay-Z's uncommon combination of street cred and business savvy. Shawn Carter, Jay-Z's real name, is chief executive of Def Jam Records and Roc-A-Fella Records. And his relationship with Beyonce Knowles, who also has her own clothing line, hasn't hurt, Portnoy said.
"The question is does the acquiring company maintain the uniqueness and the brand identity of Rocawear, or will they weaken it, dilute it and or undermine it with expansion plans that may not be appropriate for the brand?" Portnoy said. "That's the risk."
Iconix bought the Rocawear trademark from Roc Apparel Group to diversify Iconix's portfolio, not to change the brand, Iconix CEO Neil Cole said. Rocawear's sales have steadily expanded and should hit $750 million this year, he said.
"Similar to surf and skate, the urban lifestyle is not going away," Cole said. "And we believe it will be a strong driver of the business for many years to come."
The New York firm will pay an additional $35 million in stock if the brand surpasses performance thresholds over the next three to five years.
Iconix also recently purchased Op, which has shuttered its Irvine office. The new owner expects to name a new apparel licensee for the surf wear maker within 60 days, Cole said.
Op's swimwear business already is licensed to Warnaco Swimwear Inc. in Commerce, and ACI International in Los Angeles is the footwear licensee.
Jay-Z will be in charge of all of Rocawear's product development, marketing and licensing, and his senior management team will stay on board, the company said. Jay-Z's partners, Alex Bize and Norton Cher, will become the licensees for the core business.
The rapper and Iconix also will launch a joint venture to buy and develop more brands, starting with a luxury line called Shawn Carter Collection with suits, watches and fragrances. It will debut next year. Cole expects it will sell in high-end stores such as Saks and Neiman Marcus.
VIP Records' Anderson thinks adding more upscale items -- a recent strategy of urban wear business -- makes sense.
Iconix also announced Tuesday that fourth-quarter per-share profit doubled to 18 cents, compared with the year-earlier period, in line with expectations. For the year, earnings per share rose 57% to 72 cents.
Graduate student Jessica Dahlberg of Los Angeles said she now saw the Rocawear brand everywhere even though she was more into the preppy "J. Crew-Nordstrom thing."
"They're all over Santa Monica, the swap meets and that kind of stuff," she said. "They've started to counterfeit it now."
Staff writer Geoff Boucher contributed to this report.