JSOnline: Allen Edmonds sold; headquarters to stay in Port Washington
After the Men’s Wearhouse “scare” that had many of us reacting like this, something much more ho-hum has happened.
Upscale men’s shoemaker Allen Edmonds Shoe Corp., which was sought by multiple suitors, will be sold to a Los Angeles-based private equity firm and keep its headquarters in Port Washington, the company said Monday.
The fact that a private equity firm is buying Allen Edmonds isn’t as eye-brow raising as some might think. Allen Edmonds was already owned by a private equity firm out of Minneapolis named Goldner Hawn Johnson Morrison. So one private equity firm sold Allen Edmonds to another private equity firm. And part of the deal is to keep the current CEO, Paul Grangaard, who used to be an executive with the previous firm before they purchased Allen Edmonds in 2006. Grangaard came on as AE CEO in 2008.
Got all that? So the guy who’s been running the show since 2008, used to work for the firm that bought Allen Edmonds in 2006, and now that another firm has purchased the company he’s still staying on board.
“It’s not only steady as she goes, it’s put the throttle down a little more.”
But are changes on the horizon for Allen Edmonds? Well, they did just launch the beginnings of a clothing line, and The Journal Sentinel points out that they changed their slogan from “The Great American Shoe Company” to “An American Original.”
Hm. Missed that.
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I don’t think there is anything to worry about. A new infusion of money will help them to expand the business. So long as the focus remains on quality they will be fine.
I’d have voted “maybe. too early to tell” if it had been an option. Im not confident one way or the other.
I’m sure they’ll be fine. This PEF has had experience in both the heritage clothing and footwear industries before (they used to own Filson and Ariat).
Hopefully nothing is changing but the bank account. The extra cash should be put to good use.
I don’t think this changes anything. The only thing that concerns me is what seems to be a growing number of shoes coming out of the Dominican Republic, and the fact that lots of the uppers already do. I believe they say it is due to an undertrained workforce stateside, but I wouldn’t think that would be a major issue to correct.
One of the Brentwood Associates partners mentioned that they’re interested in brands with “exceptional customer loyalty”. I don’t think they’ll do anything to jeopardize that. GHJM seems to be specialized in restructuring, while Brentwood has more experience with IPOs, so this is just another step in the middle-market corporate finance value chain.
While their shoes are made in-house (with the exception of a few Italian styles), a number of their accessories have traditionally been outsourced.
It’ll be curious to see what they do under new ownership. Will they outsource their clothing line or will they buy up smaller operations in order to keep them in-house? They’ll have tighter quality control if you go the latter route, but I’m not sure if the same business model that has worked well for shoes will also work well for other clothing. They’ve found a way to make prerium shoes in the US for a price that people are willing to pay. That’s no easy feat. Only time will tell.
Was they involved before or after Ariat moved manufacturing to Asia?
I actually think that a Men’s Wearhouse sale might have been better. I don’t see AE getting much growth from their mainstream line, so I expect this cash to be used to grow their down-market offerings. I’m sure that MW would have also focused on growing a lower cost product line, they would likely have more patience and gain some distribution synergy from their footprint.
Their clothing line is bland.
After reading their blog, Im not worried. They plan to continue the Made in America approach.
I’m not saying Ariat is on the same level, but as they are a footwear company it would be strange if no one brought up the fact that Brentwood owned them. Filson, on the other hand, is an all around excellent analogue to AE.
Yes, I agree that Filson is a great analogy.
A standalone PE shop is much less likely to make a rash decision based on poor performance elsewhere or an attempt to combine business streams. I think the key for them will be to maintain the stellar brand and American made rep, but expand elsewhere (clothing, downmarket, as you say). Good that Grangaard is staying.
Maybe some of that extra money can go into designing some new and updated lasts. P.S. I love my Walnut Strands.
I also don’t think them expanding into clothes is a cause for concern. I have a bunch of their socks, a couple belts, and a couple shirts and they are all very nice quality. Their shirts get downright affordable on clearance, and the fit is good if a little less trim than we generally like, but all the important measurements are good, so they really get dialed in for me with some tailoring.
I’d be worried if it was Men’s Warehouse, but these PEF’s know what their doing enough to let successful brands continue to be successful. I’m interested to see their clothing line but I think the shoes will be juuuusst fine.
A lot of times, these types of mergers/acquisitions happen to straighten out problems on the balance sheet in hopes of benefiting both entities. Perhaps AE has excess tax credits that it was unable to utilize due to lack of taxable income–thus, they merge with a private equity firm to restore equilibrium to their financial statements. Like you said, they were already owned by another private equity firm so odds are, it’s more of a financial move than an operational one.
Laughing at the comments in the article hating on PE firms. They were already owned by a PE firm. GHJM bought AE in 2006, it’s 2013, so that’s about 6 years that GHJM’s shareholders/ investors have been waiting for return. As long as Brentwood remains hands-off, and is just a bigger-tier investor, then AE is in good shape. If AE leadership gets to remain mostly in tact, then we’re looking at a straight up investment deal. I would not be surprised to see AE tack on some extra employees vs. lay anyone off. Expect AE to be sold in another 5-7 years when Brentwood’s investors come calling for returns.
I don’t own any pairs of AE, but have examined new and used pairs (thrift stores) in person and they are quite nice. If that doesn’t change, things can only improve.
Not an expert but just my two cents, shoes and clothing for that matter have seen an influx in production from that region because of DR-CAFTA (free trade agreement of Central America). Using this trade agreement allows the material to be duty free, thus lowering costs for the manufacture.
Allen Edmonds will continue to experiment with fashion forward styles to bring in younger clientele. This equity firm is betting that the AE brand will be able to:
1.)Significantly capitalize on a younger audience.
2.)Expand significantly with clothing and accessories.
None of these should hinder their stellar reputation with quality shoes. They’ll likely use this cash infusion to build hybrid stores that also stock clothing. Think Brooks Brothers with a MUCH better shoe selection.
oh no… I cant take to many Alden hits… I hope AE can remain 100% quality. I recently bought my first pair of Alden shoes and they are a step above AE’s in terms of cut and quality but, the cost is pure punishment compared to AE. I really like AE, i’m about 12 pairs deep at this point. I’m concerned about re-crafting under new management. time will tell i guess.