Atlanta-based children's clothing company Carter's is acquiring a Canadian retailer that is the most significant international licenser of its brands.
Carter's is paying $98 million for Toronto-based Bonnie Togs, $62 million in cash and the rest once certain earnings objectives are met over a four-year period.
Bonnie Togs operates 59 stores in Canada, including 22 branded with the Carter's/OshKosh B'gosh name. It has been Carter's principal licensee in Canada since 2007, and pays Carter's a percentage of sales for the right to develop and sell products using the Carter's brands. Last year, Carter's earned $9 million in royalty income from its international licenses.
Michael Casey, Carter's chairman and CEO, said in a statement the acquisition gives Carter's opportunities to more than double the number of Canadian stores, to 160, in the next five years. He called it "an important component of our long-term strategy to extend the reach of our Carter's and OshKosh B'gosh brands to consumers in international markets."
Brand recognition in Canada and elsewhere is high, said Steven Marotta, an equity analyst with CL King & Associates. In addition to pure retail store growth, the acquisition will allow Carter's to increase its wholesale presence in Canadian department stores.
There is room to expand in Canada, he said, and the acquisition of Bonnie Togs presents the opportunity for growth.
"They do what Carter's does already," he said. "There are no big hurdles here."
Marotta said Bonnie Togs sourced its own materials, something Carter's now uses an agent to do. The acquisition could provide Carter's the expertise to begin sourcing materials on its own, he said. That could help the company save money.
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