VF Adds Swank to Its Jeans Line - TheStreet

VF Adds Swank to Its Jeans Line

The clothing maker will pay $775 million for premium brand Seven for All Mankind.
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Updated from 3:16 p.m. EDT

VF Corp.

(VFC) - Get Report

, known for its mass-market brands like Lee and Wrangler, is getting trendy.

The clothing giant said Thursday that will buy high-end jeansmaker Seven for All Mankind for $775 million. The company also agreed to purchase Lucy Activewear, a maker of chic comfortable clothing such as yoga pants and tank tops, for $110 million.

The two brands will form the foundation of a new division dubbed VF Contemporary Brands, which is expected to generate annual revenue of over $350 million. VF had revenue of $6.22 billion last year.

"These brands extend our reach to important and growing consumer segments, broaden our presence in healthy and growing channels of distribution, provide us with additional vehicles to expand our direct-to-consumer business through owned retail stores and online sales and offer the potential for continued growth internationally," said Mackey McDonald, chief executive of VF, which also owns brands such as Vans, North Face and Nautica.

For VF, which has solidified its position in the mass channel, the purchases mark a big foray into the luxury market. The company only other upscale brand is John Varvatos.

"They are dominant in the mass and middle market and they're just beginning to make a serious dent in the upscale market," says Harry Bernard, partner with the San Francisco fashion-marketing and consulting firm Colton Bernard.

Bernard points out that VF has had minimal success in the luxury market in the past, but the acquisition of Seven may strengthen its position.

Based in Los Angeles, Seven for All Mankind sells jeans and other clothing in luxury retail stores and high-end boutiques, with prices like $365 for Emerald Rice straight leg jeans in light vintage blue and $172 for its Jackie pant in clean white.

The jeans, along with brands like

True Religion

(TRLG)

and

Innovo Group's

(INNO)

Joe's Jeans, have been hugely popular in recent years as trend-following consumers flock toward expensive denim.

Bob Shearer, VF's chief financial officer, said that Seven will not be combined with the company's other jeans brands.

"It's sold to different consumers and appeals to different consumers," he says. "It's a very different distribution."

Seven's current CEO, Mike Egeck, will continue to lead the business.

Seven currently has annual revenue of about $300 million. Lucy Activewear, based in Portland, Ore., has about $57 million in annual revenue.