Transaction Background

In December 2014, Anchorage acquired Brand Collective from the then ASX-listed Pacific Brands. Prior to the acquisition, Brand Collective was a non-core asset that struggled to perform under Pacific Brands' ownership.

Following this, in March 2015, Anchorage expanded its portfolio by purchasing Shoes & Sox from its founders. As the primary customer for Brand Collective's licensed brand, Clarks shoes, this acquisition complemented Anchorage's strategy, enhancing Brand Collective's market presence and strengthening its position in the footwear value chain.

Business Overview

Brand Collective is a prominent footwear and apparel brand house in Australia, featuring a diverse collection of both owned and licensed brands. In addition to its established brands, Brand Collective owns Shoes & Sox, the leading independent children's footwear retailer in Australia. The company employs over 1,200 staff and distributes its products through various major department stores, approximately 90 branded retail outlets, around 40 Shoes & Sox concession stands in Myer, and through its proprietary online platforms.

Industry Overview

The footwear and apparel industry in Australia showcases a robust landscape, characterized by a mix of domestic and international players. In recent years, consumer preferences have shifted towards omnichannel retailing, compelling brands to adapt their strategies to reach customers effectively across multiple platforms.

Furthermore, the growing trend towards online shopping has accelerated in the wake of COVID-19, leading to increased competition among brands to establish a strong online presence. Retailers are now investing significantly in digital infrastructure to meet the evolving expectations of consumers.

As sustainability continues to shape consumer choices, brands in the industry are increasingly focusing on eco-friendly materials and practices. This shift not only influences product offerings but also impacts brand reputation and customer loyalty.

Overall, the Australian footwear and apparel market is positioned for growth, particularly as brands that can innovate and embrace technology are likely to thrive in the changing retail environment.

Rationale Behind the Deal

The acquisition of Brand Collective provided Anchorage with a strategic opportunity to leverage its brand portfolio and market presence. By focusing on revitalization and implementing an omni-channel retail approach, Anchorage aimed to unlock the intrinsic value of Brand Collective's iconic brands.

Furthermore, the integration of Shoes & Sox not only filled a critical gap in Brand Collective’s offering but also created synergies that enhanced the overall business model, allowing for better customer engagement and streamlined operations.

Information About the Investor

Anchorage is a privately held investment firm known for its strategic acquisitions and focus on operational improvements within its portfolio companies. With a track record of successful transformations, Anchorage employs a proactive approach to identifying underperforming assets with potential for growth.

The firm’s expertise in revitalizing retail businesses has been demonstrated through its initiatives at Brand Collective, where it substantially improved financial performance and market position through systemic enhancements and a relentless focus on execution.

View of Dealert

Dealert views the acquisition of Brand Collective as a highly strategic investment, particularly given the effective turnaround strategy implemented by Anchorage. The transition from a loss-making unit to a profitable entity demonstrates sound management practices and effective market positioning.

Moreover, the pivot towards omni-channel retailing proves timely, aligning with current consumer trends and ensuring sustainability in revenue streams, which is crucial for long-term growth. Anchorage’s emphasis on enhancing online sales from less than 5% to 25% of total revenue further reflects its commitment to adaptation in a challenging retail environment.

The integration of Shoes & Sox as a bolt-on acquisition also stands out as a savvy move, aligning with consumer demands for specialized offerings and solidifying Brand Collective's competitive edge in the children's footwear segment.

Overall, Dealert believes that the combined strategy of operational improvement, digital transformation, and portfolio diversification positions Brand Collective favorably for future growth, making it a commendable investment in the competitive landscape of the Australian apparel and footwear industry.

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