Specialty Fashion Group has bought 28-year-old discount apparel and footwear chain Rivers Australia, for the sum of $5 million.
Rivers Australia revenue for the 2013-14 financial year is estimated to be approximately $180 million, with its EBITDA at 5% of its revenue. The brand has 160 stores nationally, and has an online division with $6 million in sales.
SFG, which operates women’s clothing chains Millers, Katies, City Chic, Crossroads and Autograph, reported that the purchase price was at a discount to the book value of assets acquired.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
The buyout follows the recent sexual harassment case against Rivers Australia founder Philip Goodman, which was reportedly settled out of court in September.
SFG chief executive Gary Perlstein told SmartCompany it has identified approximately $10 million per year in savings for the brand, and will invest $4 million into it until financial year 2015 to influence growth.
Perlstein says Rivers Australia is a “logical” fit for the SFG portfolio.
He says the brand will enable the group to build on its position in the “mature value space”, and the company will focus on growing the Rivers store footprint to 220, focusing on South Australia and Western Australia.
He expected to quickly recoup the investment, but says the buying price is “not the making or breaking of Rivers’ success”.
Perlstein says recent years have seen the brand focus on “promotional nature”, with extensive advertising regarding discounted product. He says they will now harness the “Rivers DNA” and focus on the qualities of “comfort, quality and good value” in promoting the brand.
Perlstein says the ability for the brand to shake off the negative press regarding the Goodman sexual harassment case is in the “eyes and minds of those observing” but believes the strong company values of SFG and the iconic history of Rivers Australia will smooth this transition.
Retail Doctor Group director Brian Walker told SmartCompany that “something had to save Rivers”.
He says the price of $5 million “does seem small”, but thinks that the brand has gone “downhill at a rapid rate” in recent years.
Walker says it was “once a well-positioned brand”, but has lately become more focused on a clearance outlet structure, which had shifted its core audience.
He says the low- to-mid market apparel space is now well serviced by stores such as Kmart and Big W, so Rivers has found it tough to compete. Walker adds that its catalogue-sales approach is no longer effective, and the product offer needs improvement.
However, Walker thinks the acquisition could be good for SFG, due to the economics of the sale and the potential for greater reach. He thinks SFG could build combined clearance centres in some locations for a collection of its brands.
RetailOasis director Nerida Jenkins thinks the acquisition is “fantastic” for SFG, offering a “huge opportunity to be leveraged”.
Jenkins says the acquisition will help SFG find a stronger footing in the menswear market, which is currently underserviced compared to womenswear.
Jenkins agreed with Walker that the sales price seemed low, but says it could reflect Rivers’ low profits and possible struggles under a rising debt.
She also notes the move reflects a shift in the way local retail groups are building “fortresses” of retail brands, such as when Cotton On recently purchased Supre, putting them in a stronger position to compete against the influx of international brands.
Perlstein says the acquisition does create a stronghold for SGF, but he was not overly concerned about international brands coming to Australia, as to date they had not focused on the mature value market.