The decision by US speciality retailers The Children’s Place and Gap Inc to acquire Gymboree’s namesake, Crazy 8, and Janie and Jack brands has been dubbed a “defensive” move by one analyst, as the companies look to prevent another competitor from stepping in and attempting to rebuild the businesses.
Following a bankruptcy auction on Saturday (2 March), Gymboree announced the sale of the Gymboree and Crazy 8 brands to The Children’s Place and the sale of its Janie and Jack brand to Gap. Both acquisitions, which are priced at US$76m and $35m respectively, are subject to court approval.
The news comes less than two months after Gymboree Group filed for voluntary Chapter 11 bankruptcy protection for the second time.
In January, the company said it intends to use the proceeds to facilitate an orderly wind-down of all of its Gymboree and Crazy 8 store locations and operations while continuing to pursue a sale of its Janie and Jack business and a sale of the intellectual property and online platform for Gymboree.
Now, The Children’s Place will pay $76m for the intellectual property rights related to the Gymboree and Crazy 8 brands, including related copyrights, trademarks, internet domains, and customer data. The retailer also agreed to take over Gymboree’s contract with Singapore-based Zeavion Holding Pte. Ltd, which operates Gymboree’s Play & Music business.
Jane Elfers, president and CEO of The Children’s Place said the acquisition provides the retailer with the opportunity to revitalise the Gymboree brand across various channels.
“We have always had a great deal of respect for the loyal Gymboree customer. We heard her passionate response to Gymboree’s merchandise changes loudly and clearly and we are excited for the opportunity to fill the void in the marketplace for this unique product,” she added.
Meanwhile, Gap will pay $35m for the group’s Janie and Jack brand intellectual property rights, including its online business and leases to its stores, as well as other assets including customer data. In a separate transaction, Gap has also agreed to acquire the liquidation inventory of the Janie and Jack brand.
“We are excited about the potential opportunity to acquire Janie and Jack – a leader in children’s specialty retail. We believe this transaction will provide Gap Inc with the opportunity to expand our customer base in a desirable category with a loyal brand following,” the retailer said.
The announcement came a day after Gap said it will close 230 of its namesake brand stores and spin off the group’s Old Navy brand into an independent, publicly traded company. The split will see Old Navy become a standalone company while the group’s remaining Gap, Athleta, Banana Republic, Intermix and Hill City labels will operate under a yet-to-be-named business (NewCo).
Acquisitions represent defensive positioning
Susan Anderson, analyst at B Riley, notes the firm views the acquisitions as “likely defensive in nature”, as both The Children’s Place and Gap Inc look to prevent another competitor from stepping in and attempting to rebuild the Gymboree brands.
“We view the transactions as defensive, cutting off other potential competitors from reigniting Gymboree’s brands. While Gymboree has filed for bankruptcy twice in the past several years, we believe its brands still have equity with consumers and could potentially have been utilised as on online-only or wholesale brand. By acquiring the brand rights at auction, Gap and The Children’s Place are effectively blocking another competitor of repurposing the Gymboree brands in this manner. Additionally, we believe both The Children’s Place and Gap could benefit from these brands’ customer files.”
Acquiring all of the customer data for the Gymboree brands will be “extremely valuable” to both The Children’s Place and Gap as they seek to grow their online channels and loyalty programmes, Anderson adds.
“We view this announcement as a positive in The Children’s Place’s quest for Gymboree market share and further positions The Children’s Place well to capture that market share once Gymboree shuts its doors.”
In addition, she notes while the Gymboree brands suffered recent product missteps, each of the brands served a specific customer set and still may resonate with consumers, providing likely opportunity for The Children’s Place and Gap to selectively distribute Gymboree-type product in their stores or online.
“We believe this could take the form of a dedicated space in-store that features Gymboree-type product, similarly to a shop-in-shop format. Gymboree, for example, was previously known for bright, fun matching outfits; we could potentially see it getting its own section of The Children’s Place stores or on The Children’s Place’s website.”