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Takeaway: FL - Lorna Jane may help fix womens/apparel issues at FL, but we're not overly excited

COMPANY HIGHLIGHTS

FL, LULU - Australia's Lorna Jane Attracts Some Big-Name Suitors

(http://online.wsj.com/articles/australias-lorna-jane-draws-some-big-name-bidders-1405008369)

  • "Lorna Jane, an Australian maker and seller of women's workout clothing that is up for sale, has attracted buyer interest from Foot Locker Inc. and private-equity firms, according to people familiar with the matter."
  • "Manhattan-based Foot Locker and private-equity firms Advent International and Bain Capital are among potential buyers submitting first-round bids for Lorna Jane, some of the people said. Lorna Jane hired investment bankers Credit Suisse  to sell itself, the people said."

Takeaway: FL has a lot of cash to play with and Lorna Jane could help reinvigorate two of FL's biggest issues womens and apparel. If a deal were to go through, it's likely that Lorna Jane would function as a stand alone banner - we can't justify $90 yoga pants on Foot Locker shelves. Adding the brand's 169 stores into the fold would account for 5% unit growth to a base that has been shrinking organically for the last 8 years, and 3 percentage points of growth to the top line. But, it's hard for us to get overly excited about a brand that did under $1mil per store in 2013 (150 Stores, $138mm in sales) when LULU is pumping out $5mil plus through its box. Yes, the brand has limited awareness in the US and the Yoga market shows no signs of slowing so there is some runway for growth, but not enough for us to get overly excited about this potential deal.

OTHER NEWS

 

EBAY, AMZN - ChannelAdvisor Reports June Comp Sales

 

Retail Callouts (7/11): FL, LULU - Chart1 7 11 2014

GPS - Gap Inc. Reports June Sales

(http://www.gapinc.com/content/gapinc/html/media/pressrelease/2014/med_pr_june_sales_14.html)

  • "Gap Inc.’s comparable sales for June 2014 were down 2 percent versus a 7 percent increase last year. Comparable sales by global brand for June 2014 were as follows:
    • Gap Global: negative 7 percent versus positive 5 percent last year
    • Banana Republic Global: negative 7 percent versus negative 1 percent last year
    • Old Navy Global: positive 7 percent versus positive 13 percent last year"