McDonald said that the Nautica brand provides “terrific opportunity longer term in women’s sportswear,” but that the first priority will be a focus on reinvigorating the men’s sportswear business. Chu will focus on that.
McDonald stated emphatically during the call, “We’re not planning to take it down in distribution....[t]he primary reason for the acquisition is so we can better penetrate the department store channel of distribution. We think there’s still plenty of opportunity in that channel of distribution, particularly for good strong product at good value. That’s where we felt the growth will come. We feel we can stabilize the sportswear business with that combination. It’s what we do with all our brands at VF.”
VF’s Shearer told Wall Street that the company also sees growth opportunities in the Nautica men’s and women’s jeans businesses, “particularly the women’s side, which [is] unevolved.” The cfo noted that Earl jeans has additional growth opportunities through the expansion of new product lines and categories.
Sanders said during the conference call, “The Nautica brand generates approximately $2 billion in sales at retail worldwide, including all Nautica branded products licensed by the company. This transaction today also validates the commitment of both management and our board to maximize value for our shareholders.
Nautica had income of $20.7 million on sales of $693.7 million in fiscal 2003. Net royalty income came to $9.3 million, up 18.7 percent from the prior year.
Sanders pointed out that Nautica will benefit from VF’s strong supply chain and infrastructure support, as well as its international presence.
Barington Group said Monday it has discontinued and withdrawn its proxy solicitation in light of Nautica's announcement Monday that it has signed a definitive merger agreement to be acquired by VF Corp. As reported, Barington, which holds 3.1 percent of Nautica’s stock, had asked shareholders to replace directors John Varvatos and Charles Scherer (managing partner at Hughes, Hubbard & Reed, Nautica’s law firm) with former Revlon executive William Fox and Barington chairman James Mitarotonda. Barington previously said Nautica “has shown poor operating performance” and its board “lacks representation from a sufficient number of independent and experienced directors.” Nautica was expected to hold its annual shareholder’s meeting today, but that will be delayed due to the VF deal.