NEW YORK — Liz Claiborne’s $34.4 million acquisition of climbing and yoga gear manufacturer Prana last week marks the start of what could be a significant growth area for the apparel giant.
“We’ve been looking at the active space for a long time and no one should assume that this is the only active company on our horizon,” said Paul Charron, chairman and chief executive officer of Liz Claiborne Inc. “As long as we are buying smaller companies like Prana, that doesn’t preclude us from looking at other brands in the category. We just wouldn’t look at brands exactly like Prana.”
Claiborne now owns 42 brands and its purchase of the $30 million Vista, Calif.-based Prana marries two companies with vastly different operating structures. Charron said he found Prana particularly attractive for its authenticity as a young and growing active brand. He said he also felt a strong cultural fit with Prana’s management team, which Charron said will stay on board.
“There are a lot of different takes on active, and I really believe Prana is a wonderful, well-positioned company,” he said. “They are very focused on yoga and climbing — inner peace and outer peace.”
Charron said that he plans to help Prana grow by launching several new categories of product, and that Claiborne’s aid can help it to become a lifestyle brand.
“The first thing we will do is get inside their operations to learn about each other and how we can collaborate to best benefit both sides,” he said.
Claiborne in recent years has bought small, niche brands and expanded them into new categories, including Juicy Couture, Sigrid Olsen, Lucky Brand and C&C California. As part of its multibrand strategy, Claiborne usually leaves management in place and allows the brand to develop on its own with the heft of its financial backing, management experience and manufacturing channels.
For Prana, being owned by a publicly traded conglomerate is a steep departure from the way it has operated since its founding in 1992. The company likes to retain an air of mystery about its business. Prana doesn’t advertise much and its growth has come largely through word of mouth and advertisements in niche publications such as Rock and Ice and Breathe magazines, and through prominent yoga teachers who wear and promote the brand. The brand is sold in about 1,600 units, primarily outdoor specialty stores and boutiques, including Eastern Mountain Sports and REI, as well as climbing stores and yoga boutiques.
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Analysts praised the deal, which closed last Thursday.
“We view the impact of Prana as a cushion to declines in the department store channel and core Liz brand,” analyst Margaret Mager of Goldman Sachs wrote in a research report.
Other big apparel companies have also been building up their holdings in this area. VF Corp. owns The North Face and has been rapidly expanding the outdoor portion of its business with acquisitions such as Vans, Kipling and Reef, while Columbia Sportswear has bought smaller brands in recent years such as Sorel and Mountain Hardware.
While Prana began as a performance brand with a focus on clothing and climbing, in recent years the company has been adding more lifestyle items, including products made of materials such as cotton velour, braided wool, hemp and denim. Its lifestyle products wholesale for about $16 to $60, while performance pieces range from $25 to $60.
Beaver Theodosakis, who was in the culinary business before he co-founded Prana 13 years ago, said in an interview that he has learned many lessons along the way, and is ready for a partner.
“We are in a spot now where we could use a big brother — or a big sister in this case — to help us grow to the next level,” he said. Prana had hired the Sage Group, a Los Angeles-based investment firm, to help it find a partner, and said the company had a handful of suitors before it decided on Claiborne.
“We didn’t even put Liz on the short list,” Theodosakis noted. “It wasn’t the highest bidder, and there were definitely more lucrative deals. But we felt they were the right partners. They are leaving our culture completely intact. There are no suits coming into the building.”
He said Prana has a five-year plan and that Liz will help it achieve those goals. Theodosakis doesn’t expect too much change in terms of the distribution and said Prana will likely add more categories.
“We are talking about brand extensions that go beyond soft goods, such as energy foods and audiotapes,” he said. “Also, Liz could help us build up our accessories business and expand more overseas.
“We are very protective of our distribution,” he said. “Going into department stores is not part of our plans right now. We want customers to discover the brand in their own way.”
The outdoor industry has a number of small, niche brands. Theodosakis said many customers are “sensitive” in that they want authentic brands that can’t be found everywhere, and are true to their roots in performance.
“We spoke at length about that with Liz and helped them understand the sensitivity,” he said. “It was important that we get that point across.”
A spokesman for REI, the outdoor chain based in Sumber, Wash., which has 81 stores, said Prana has been one of its key vendors.
“Our company has been very open to small companies coming in that are innovative, and that was the case with Prana,” said Mike Foley, an REI spokesman. “Prana has grown to be one of our most important partners.”
Foley said he doesn’t anticipate the brand will change much under Claiborne. “In our view this is not negative at all. Prana has created popular and desirable apparel, and they have had huge success. The fact that they will have more resources to grow that, we see that as positive.”
Theodosakis also noted that Liz has adopted Prana’s natural power initiative, an issue of deep personal importance to him. As part of this deal, Claiborne will use renewable wind power at its New Jersey headquarters in place of electrical consumption.