The parent of retailer Famous Footwear is acquiring upscale shoe brand Stuart Weitzman for $105 million from Tapestry, whose luxury chains have been struggling.
St. Louis-based Caleres — whose portfolio includes not only Famous Footwear, but also Sam Edelman, Allen Edmonds, Naturalizer, Vionic, Ryka, Dr. Scholl's, Franco Sarto and LifeStride — has entered into a definitive agreement to pay cash to buy Stuart Weitzman from Tapestry, which is headquartered in New York. The deal, announced on Wednesday, is expected to close this summer.
Caleres operates nearly 1,000 stores, most of them Famous Footwear sites, as well as brick-and-mortar Sam Edelman and Naturalizer locations. It also sells its shoes at department stores, specialty retailers and online. Shoemaker Stuart Weitzman, founded in 1986, has 92 directly operated stores around the world, with 34 in North America. It also sells its footwear at stores like Nordstrom.
The transaction occurs in the wake of Tapestry's proposed $8.5 billion acquisition of Capri Holdings — parent of Jimmy Choo, Michael Kors and Versace — being blocked by regulators. Divesting Stuart Weitzman will allow Tapestry to zero in on its two other chains, Coach and Kate Spade, according to company officials. Handbag seller Coach has been soaring in a turnaround, while struggling Kate Spade's net sales dipped 10% in the second quarter. In turn, Caleres will expand its presence in the women's footwear sector with the addition of Stuart Weitzman, the company said.
Tapestry CEO Joanne Crevoiserat described the company as an iconic global footwear brand.
"Importantly, as diligent stewards of our portfolio and disciplined allocators of capital, this transaction ensures that all our brands are positioned for long-term success and that we maintain a sharp focus on our largest value creation opportunities," Crevoiserat said in a statement. "At Tapestry, this means harnessing our position of strength to sustain Coach’s leadership and momentum while reinvigorating Kate Spade to drive durable organic growth and shareholder value. At the same time, we are pleased that we found Stuart Weitzman a home in Caleres — an ideal owner to guide its next chapter of growth.”
Growing a portfolio
Tapestry is selling Stuart Weitzman for a fraction of what it paid for it. It acquired the shoemaker for about $530 million in 2015 from Sycamore Partners.
The addition of Stuart Weitzman brings a lot to the table for Caleres, according to its president and CEO Jay Schmidt.
The acquisition "advances our strategic agenda to grow our brand portfolio segment with more global and direct-to-consumer reach," he said in a statement.
“Stuart Weitzman will be a lead brand for Caleres, and with this combination the brand portfolio segment will generate nearly half of our total revenue and will continue to generate over half of our operating profit," Schmidt said.
In the quarter ended Dec. 28, Stuart Weitzman's net sales dropped 15%, to $69.7 million from $82.2 million, compared to the prior-year period. Overall for that span, Tapestry — including Stuart Weitzman, Coach and Kate Spade — posted net sales of $2.2 billion, up 5%.
Revised outlook
In January, Caleres updated its full-year 2024 outlook, anticipating that its consolidated net sales will be down 3% to 3.5%.
“We entered the holiday period encouraged by the broad positive momentum in our athletic business at Famous Footwear," Schmidt said at the time. "However, sales trends softened in mid-December and into January, and were below our expectations. Based on quarter-to-date trends, including the impact of weather-related closures at Famous Footwear, we now anticipate that full year sales and earnings will be below our most recent guidance.”
For the record
Morgan Stanley & Co. is serving as Tapestry’s financial adviser and Latham & Watkins as its legal adviser. BofA Securities is serving as Caleres’ financial adviser and Bryan Cave Leighton Paisner is its legal adviser.