Acquisitions |
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| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions |
The Company accounts for business combinations in accordance with ASC Topic 805, Business Combinations. Consistent with ASC Topic 805, the Company accounts for each business combination by applying the acquisition method. Under the acquisition method, the Company records the identifiable assets acquired and liabilities assumed at their respective fair values on the acquisition date. There are various estimates and judgments related to the valuation of identifiable assets acquired and liabilities assumed. These estimates and judgments have the potential to materially impact the Company’s unaudited Consolidated Financial Statements. The acquisition method permits the Company a period of time after the acquisition date during which the Company may adjust the provisional amounts recognized in a business combination. This period of time is referred to as the “measurement period”. The measurement period provides an acquirer with a reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports in its consolidated financial statements provisional amounts for the items for which the accounting is incomplete. Accordingly, the Company is required to recognize adjustments to the provisional amounts in the reporting period in which the adjustments to the provisional amounts are determined. Thus, the Company would adjust its consolidated financial statements as needed as a result of the change to the provisional amounts calculated as if the accounting had been completed at the acquisition date. Acquisition-related costs are costs the Company incurs to affect a business combination. Those costs may include such items as finder’s fees, advisory, legal, accounting, valuation, and other professional or consulting fees, and general administrative costs. The Company accounts for such acquisition-related costs as expenses in the period in which the costs are incurred and the services are received. Bonobos Asset Acquisition On May 23, 2023, the Company completed the acquisition of the operating assets and liabilities of Bonobos, a menswear brand known for exceptional fit and an innovative retail model, for total cash consideration of approximately $28.3 million, which represents (i) the $25.0 million purchase price, plus (ii) $2.0 million of certain customary adjustments related to net working capital and $1.3 million of prepaid rent expense. The acquisition was funded with cash earnings from the Joint Venture/borrowings under the Revolving Credit Facility described in Note 9. The acquisition is intended to provide the following strategic and financial benefits: •The Company plans to unlock additional growth for the Bonobos brand by leveraging its strength in men’s to address underpenetrated categories, and its strength in marketing to drive greater awareness and customer acquisition •Bonobos expands the Company's brand portfolio, accelerating the Company’s sales growth and profitability •The Company expects to leverage its fully integrated omnichannel operating platform to drive financial efficiencies, operational synergies and additional economies of scale across Production & Sourcing, Logistics, Real Estate, Technology, and other areas of its existing and new businesses Bonobos License Agreement On May 23, 2023, the Company and WHP entered into a license agreement that provides the Company with an exclusive license in the United States to intellectual property related to the Bonobos brand, including intellectual property rights for the Bonobos brand that was separately acquired by WHP (the “Bonobos License Agreement”). The Bonobos License Agreement has an initial term of 10 years from its effective date, and automatically renews for successive renewal terms of 10 years unless (i) the Company provides notice of non-renewal at least 24 months prior to the end of the initial or applicable renewal term, or (ii) WHP exercises its right to not renew in the event of certain failures by the Company to pay the annual guaranteed minimum royalty. Except for such non-renewal rights, the Bonobos License Agreement is not terminable by either party. The Company will pay WHP a royalty on net sales of certain licensed goods and is committed to pay an annual guaranteed minimum royalty during the term of the Bonobos License Agreement (ranging from $6.5 million in the first contract year to $11.5 million in the tenth contract year and each contract year thereafter). The Company will pay royalties at a rate of (i) 3.25% of net sales arising from retail sales of certain licensed goods in the first through the fifth contract years (and 3.5% thereafter), and (ii) 8% of net sales arising from wholesale sales of such goods. Refer to Note 5 for further details regarding the Company’s equity method investment with WHP. Purchase Price Allocation The Bonobos acquisition was accounted for as a business combination in accordance with ASC Topic 805. Consistent with ASC Topic 805, Bonobos was consolidated into the Company's unaudited Consolidated Financial Statements starting on the closing date of the acquisition. The purchase price allocation as of the closing date of the acquisition was based on a preliminary valuation and is subject to change as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available. The purchase price consideration was allocated to assets acquired and liabilities assumed based on their respective fair values as follows:
The Company recorded an allocation of the purchase price to the tangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The fair value of inventories, which is made up of finished goods, was determined based on market assumptions for realizing a reasonable profit after selling costs. Goodwill is determined as the excess of the purchase price over the fair value of the net assets acquired. The Company recognized an immaterial amount of goodwill recognized related to the acquisition. During the twenty-six weeks ended July 29, 2023, the Company incurred $4.6 million of acquisition-related and integration costs in connection with the acquisition of Bonobos, which was included in selling, general and administrative expenses in the unaudited Consolidated Statements of Income and Comprehensive Income and are included in pro forma earnings. Pro Forma Financial Information (unaudited) The aggregate net sales and operating income of Bonobos was $40.9 million and $2.3 million for both the thirteen and twenty-six weeks ended July 29, 2023, respectively. The following financial information presents the Company's consolidated results as if the acquisition had occurred on January 30, 2022:
The Company did not have any nonrecurring pro forma adjustments directly attributable to the Bonobos acquisition included in the reported pro forma earnings and revenue. These pro forma results have been calculated after applying the Company's accounting policies. These pro forma results were based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 30, 2022 and are not necessarily indicative of the Company's consolidated results of operations in future periods. The pro forma results include adjustments related to purchase accounting.
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