Wolverine divests Keds brand to retailer DSW’s parent company

Wolverine divests Keds brand to retailer DSW’s parent company

ROCKFORD — Not even a multi-year sponsorship deal with pop megastar Taylor Swift could right the ship for Keds, a flagging lifestyle footwear brand that Wolverine World Wide Inc. has owned for the last decade. 

The Rockford-based marketer and licenser of footwear and apparel announced today that it has sold the underperforming but iconic Keds brand to Columbus, Ohio-based Designer Brands Inc. (NYSE: DBI), the parent company of retailer DSW, in a deal that closed Feb. 4.

Wolverine (NYSE: WWW) also said that it planned to license its legacy Hush Puppies brand to Designer Brands in the United States and Canada, effective July 1, 2023. The move comes as Wolverine said in January that it was pursuing “the best go-forward options” for its portfolio of lifestyle brands, which included Hush Puppies, Keds and Sperry.

“Selling Keds and licensing the Hush Puppies brand for the United States and Canada is an important step as we continue to advance our strategy to simplify the portfolio and direct resources to our growth brands,” Wolverine President and CEO Brendan Hoffman said in a statement. “We are confident this will place Wolverine on an accelerated path to improved profitability and long-term shareholder value creation.” 

In the deal, Designer Brands agreed to purchase the Keds business for $83.6 million, subject to post-closing adjustments in the asset purchase agreement, which the company plans to detail in full as part of its upcoming 10-K filing on the 2022 fiscal year. 

The law firms of Honigman LLP and Warner, Norcross + Judd LLP advised Wolverine on the deal. Solomon Partners, a New York City-based investment banking firm, and the Cleveland, Ohio-based law firm of Thompson Hine LLP advised Designer Brands.

Wolverine expects to net more than $90 million in cash with the sale and licensing agreement. The company will use the proceeds “to pay down debt and strengthen our capital structure,” according to Hoffman. 

As well, Wolverine World Wide said that it continues to search for a buyer for the Wolverine Leathers business. The company said in December that it was pursuing a sale of the business as part of a portfolio streamlining and cost cutting measure. 

The Keds brand, which dates back to 1916, first came into the mix for Wolverine World Wide as part of the blockbuster $1.23 billion deal in 2012 for Collective Brands Inc., which also included the Sperry Top-Sider, Saucony and Stride Rite brands. At the time, the acquisition positioned Wolverine World Wide as a top-three footwear company. 

Even as the ink was drying on the Collective Brands deal, Wolverine began seeking opportunities to bolster Keds, which then-CEO Blake Krueger called a “better brand than a business,” as MiBiz reported at the time. The efforts included a multi-year sponsorship deal with Taylor Swift, who made product endorsements for the brand as part of her “1989” album tour in 2014. 

Hoffman told brokerage analysts in November that Keds and the other lifestyle brands were delivering positive cash flow for Wolverine World Wide, but were “not achieving their potential.”

For the third quarter of 2022, sales of the lifestyle brand group were down 6.9 percent year-over-year, according to Wolverine’s most recent earnings report. The company will report fourth quarter and full-year earnings on Feb. 22, but said in a presentation at the ICR Conference in January that it expected to report full-year revenues of nearly $2.69 billion, growth of about 11 percent. 

The sale also came after Wolverine sold the trademarks for the Champion sneaker marketed by its Keds LLC subsidiary to Winston-Salem, N.C.-based HanesBrands Inc. to settle an ongoing and bitter dispute between the two businesses, as MiBiz previously reported. HanesBrands paid Wolverine $90 million in cash for the trademark rights to Champion in the U.S. and Canada, while Wolverine retained a perpetual license to use the Champion trademark on certain footwear, namely the iconic Keds brand Champion sneaker that has been marketed and sold for more than a century. 

For DSW, the acquisition serves as part of a move to bolster its “owned brands” strategy, according to a statement. Recently, DSW has served as the largest wholesale client for the Keds brand. The company now plans to tap into the brand’s “large international distribution network” to serve as a “growth engine” for Keds.

“Our acquisition of Keds, which has an important presence in the athleisure space, is particularly exciting as it is an iconic brand with broad appeal for our customers and their families that gives us the potential to explore new opportunities both online and internationally,” Designer Brands incoming CEO and President Doug Howe said in a statement. 

The Hush Puppies licensing agreement also will position Designer Brands as the “exclusive licensee” for the brand in the U.S. and Canada, furthering a 2022 arrangement under which DSW became the exclusive in-store distributor of Hush Puppies in the United States and served as a physical return center for the brand’s e-commerce customers.

Under the new agreement, which the companies are still finalizing, Designer Brands will have an exclusive license to the Hush Puppies brand and potentially take over the brand’s wholesale and direct-to-consumer e-commerce business. 

While Hush Puppies had underperformed in recent years, the brand has a history of boom-and-bust cycles. The brand’s rise from near obscurity to fashion icon in the mid 1990s was even chronicled by author Malcolm Gladwell in his 2000 book, “The Tipping Point: How Little Things Can Make a Big Difference.”

Gladwell used the brand as an example of his tipping point concept, explaining how Wolverine’s annual sales went from about 30,000 pairs of Hush Puppies in 1994 to well into the millions of units by 1996 based on their growing popularity with hipsters in the New York club scene. 

Gladwell wrote: “Those first few kids, whoever they were, weren’t deliberately trying to promote Hush Puppies. They were wearing them precisely because no one else would wear them. Then the fad spread to two designers, who used the shoes to peddle something else — high fashion. The shoes were an incidental touch. No one was trying to make Hush Puppies a trend. Yet, somehow, that’s exactly what happened. The shoes passed a certain point in popularity and they tipped.”