Leonard Green sees stand-alone potential for Lucky Jeans

  • Buyout shop paying $225 million in corporate carve-out
  • Leonard Green to take aim at Lucky’s capital structure
  • Potential growth in e-commerce drew interest

Nolan, managing partner of the Los Angeles-based firm, told Buyouts Texas conference attendees on Dec. 10 that the company offers a steady play as a provider of denim clothing outside of the “higher risk” world of high fashion.

“We think that once it’s freed up from a larger corporate culture, and it gets the focus that the brand needs, it’ll be successful,” he said. “Once management has a direct incentive in the performance of the business and we capitalize the company properly, we think it can grow pretty significantly.”

Nolan said Lucky is also lagging in online sales, which has been a source of growth among the firm’s many other retail brands.

“We’re seeing across our portfolio…growth is not in terrestrial stores [but] e-commerce growth is double-digit, pretty strong…while across the portfolio, the overall unit growth in the stores is in the low-single digits to flat.”

While earnings among Leonard Green’s portfolio firms remain strong, growth remains elusive in the lackluster economy, he said.

“I think 2014 will be a challenge,” Nolan said. “The new healthcare costs are somehow going to be passed on to the consumer. So many people live paycheck to paycheck, so [even] slight hits to the pocketbook have a tremendous affect on conduct.”

His comments came the same day that Fifth & Pacific said selling Lucky Jeans will allow it to focus on its high-end Kate Spade brand, which makes designer handbags, jewelery, shoes and clothes.

Fifth & Pacific, which changed its name from Liz Claiborne Inc, said Leonard Green agreed to pay $140 million in cash at the time of the expected closing in the first quarter, plus a three-year seller note.

It’s the second recent deal between the two after Fifth & Pacific sold Juicy Couture to Leonard Green’s Authentic Brands unit in October for $195 million.