Aritzia’s latest foray into men’s wear—with a $63 million purchase of Reigning Champ—comes after the brand’s most difficult year and marks the next chapter for the influencer-favorite Canadian apparel brand.
“The past year has been the most challenging in Aritzia’s history. With that said, we’ve had some exceptional results, including seeing a strong start to fiscal 2022,” Aritzia founder, CEO and chairman Brian Hill said over email.
“In particular, our e-commerce platform’s been hitting new highs on a weekly basis and our U.S. business has been growing at a rate we’ve never experienced before—and our brand is becoming more well known. We wanted to capitalize on that momentum, and this kind of success for Aritzia makes acquisitions like Reigning Champ a possibility.”
The deal is Aritzia’s first acquisition in more than 37 years.
“We’re excited to welcome Reigning Champ. Rooted in classic, timeless athletic wear, their brand has been carefully curated for just short of fifteen years,” added Hill, in a prepared release.
“Building on Aritzia’s strong start to fiscal 2022, this acquisition meaningfully accelerates our product expansion into men’s.”
Aritzia, whose trendy styles have captured the attention of celebrities like Meghan Markle and Kendall Jenner, reported e-commerce revenue growth of 81% compared to fourth quarter last year during its earnings report last month.
Net revenue for the Vancouver-based brand dipped 2.9% to $267.5 million from fourth quarter last year, yet sales productivity of reopened boutiques performed on average at 79.6% of last year’s levels despite pandemic-related restrictions.
Aritzia has more than 100 boutiques in North America, with 30 boutiques in the U.S. and has identified 100 possible future store locations in the U.S. Details are still being finalized, and there are plans to open stores in Florida, Arizona, Tennessee, Nevada and Virginia.
One analyst said the apparel brand’s acquisition fills a whitespace category nicely.
“Since the brands do not play in overlapping spaces, this acquisition is not about strengthening the Aritzia brand but rather about accelerating the growth of Reigning Champ,” said Chad Lusk, senior director of Alvarez & Marsal Consumer and Retail Group, a global consultancy specializing in business transformation.
“By leveraging its infrastructure and supply chain expertise, Aritzia should be able to expand Reigning Champ’s reach, consumer exposure and, ultimately, its margins.”
Another analyst commended Aritzia’s diversification strategy.
“Diversifying one’s target consumers and broadening brand portfolios have become critical to apparel brands growth strategies. Aritzia’s most recent acquisition builds on this momentum,” said Nora Kleinewillinghoefer, principal in the consumer practice of Kearney, a global strategy and management consulting firm.
Throughout the pandemic, Aritzia saw opportunities for product expansion as the business shifted online—these new categories included swimwear and intimates, Hill said.
“Then we saw that our infrastructure and our e-commerce platform specifically were able to support new initiatives and men’s became top of mind,” Hill said.
The executive lauded the men’s athletic wear brand for its curation and creating high quality products.
“The more we spoke with their leadership team, the more we saw their enthusiasm, commitment, discipline and focus running the business,” Hill said. “Personally, I’ve been a big admirer of the brand for years. It’s sold in the most influential digital and retail locations throughout world and can also be found in closets in my home.”
The Reigning Champ purchase means Aritzia will acquire 75% of the brand based on the total value of about $63 million. The remaining balance of 25% equity interest will be converted into shares in up to three installments over a two-year period from 2024 to 2026.
“As an innovative design house offering exceptional experiences through its online and retail platforms, Aritzia’s well-established track record as a successful direct-to-consumer business is one that we’ve long admired,” said Craig Atkinson, co-founder and chief executive officer of Reigning Champ.
The partnership will help take the men’s wear brand to the next level, leveraging Aritzia’s “world-class infrastructure and expertise,” Atkinson noted.
“We look forward to working with the incredibly talented Aritzia team to capitalize on the limitless opportunities ahead,” the executive said.
In addition to Atkinson, Reigning Champ’s senior leadership team will include Co-Founder and Vice President of Manufacturing Chris Nordee and Chief Financial Officer Paul Heathcote. The team will work in partnership with Aritzia for a transition period of five years to enable both businesses to maintain their unique brands and leverage strengths.
According to the release, Reigning Champ is expected to deliver about $25 million in revenue and $5 million in adjusted earnings before interest, taxes, depreciation and amortization in calendar year 2021. The purchase is expected to be final this month.
Founded in 2007, the Vancouver-based Reigning Champ is focused on classic, timeless styles. The brand has store locations in Vancouver and Toronto. It recently closed its Los Angeles location, calling it a “temporary goodbye” on its website.