• Eddie Bauer and Pacific Sunwear are to become portfolio companies of Golden Gate Capital's new operating company, PSEB Group.
  • The PSEB Group will have a retail footprint of over 700 stores and is on track for about US$1.5bn in combined total sales in 2018.

San Francisco-based private equity firm Golden Gate Capital has established a new operating company that will be composed of teen sports and lifestyle retailer Pacific Sunwear and outdoor brand Eddie Bauer.

The PSEB Group will have a retail footprint of over 700 stores and is on track for about US$1.5bn in combined total sales in 2018, including $400m in e-commerce sales, says the firm which will also invest additional equity in PSEB to support its growth.

Both brands are performing well, as Eddie Bauer and PacSun grew same-store sales by 6.5% and 5%, respectively, in 2017, and year-to-date same-store sales are up 6% at Eddie Bauer and 8% at PacSun.

Meanwhile, the brands are to retain their separate identities and will continue to operate independent front ends, including design, merchandising, marketing, e-commerce and retail operations, while benefitting from shared services and enhanced scale. Eddie Bauer and PacSun stores will continue to operate as usual and customers will experience no changes.

"Eddie Bauer and PacSun are powerful brands with differentiated, loyal customer bases. By creating PSEB and investing additional equity, we will accelerate the growth trajectories for both businesses, while preserving the autonomy and discrete cultures of each brand," says Josh Olshansky, managing director at Golden Gate Capital. "Both brands have made great progress in the past 24 months and have generated strong performance. Bringing these two brands onto a shared platform will allow us to fuel this momentum and unlock their next stages of growth."

Eddie Bauer CEO Mike Egeck will serve as CEO of PSEB, with oversight of both the Eddie Bauer and PacSun brands.

"PacSun's curation of youth culture and brands through the lens of the California lifestyle permeates its brand in the same way Eddie Bauer's heritage of outdoor innovation underpins its nearly hundred-year history. And while customers and fans of Eddie Bauer and PacSun won't see any change in their store or online experience as a result of the creation of PSEB, they too will benefit as the brands are powered by a larger and stronger platform," he says. "We look forward to the competitive advantages that a unified shared services platform will provide us, while we continue to invest in the two brands' consumer connections and distinct identities."

The transaction is expected to close in the third quarter of 2018 and is subject to certain closing conditions.