Sequential Brands Group made the top $7 million bid for DVS at an auction Monday, though a new bidder has emerged and the court must still approve the sale to Sequential.
It’s a new company for this industry, so we put together a profile that includes information about its business model, annual revenues and philosophies.
To read more about what happened at the auction and details about the court hearing scheduled for this morning, click here.
Brands
Currently the group owns William Rast, founded by performer Justin Timberlake, and People’s Liberation brands.
Business Model
The Sequential Brands Group focuses on identifying and licensing its brands to the top retailers, wholesalers, and manufacturers worldwide.
It currently has one direct-to-retail license with JC Penney, which has an exclusive right to distribute William Rast branded apparel in a broad range of product categories through its stores in the U.S. and online.
Previously, the company used a more traditional wholesale model for William Rast.
History
Sequential Brand Group was formed in 2005 to design, market and provide branded apparel and accessories. In 2008, it implemented a retail strategy and opened retail stores to sell its own products.
In the second half of 2011, the company changed its business model. The company is now focused on licensing and brand management. Formerly named People’s Liberation, Inc., in March 2012, the company was renamed Sequential Brands Group, Inc.
It is currently transitioning from the wholesale distribution of branded apparel and accessories, liquidating existing inventory and closing remaining retail stores. The company plans to complete the transition from a wholesale and retail company to a licensing and brand management company by the second or third quarter of 2012, according to its annual report.
The company’s stock is traded over the counter under the symbol SQBG. The stock was priced Tuesday at 22 cents.
CEO
Colin Dyne, who became CEO in 2007, leads Sequential. He is a significant stockholder of the company. He also served on the board of directors of Talon International, owner of Talon zippers, until July 2010.
Dyne founded Tag-It, Inc., a subsidiary of Talon, in 1991. He served as Talon’s president from the beginning and as CEO from 1997 to 2005, according to Sequential’s annual report.
Financials
2011 net revenue: fell 65.4% to $6.9 million.
2011 net loss from continuing operations: widened to $6.3 million vs. a net loss of $1.4 million the previous year.
Revenue declined because of “the transition of our business model, soft economic conditions and slow consumer response to our newly designed American-made William Rast denim and expanded sportswear collection, we experienced a further decline in net revenue from our William Rast apparel line,” the company said in its annual report.
However, the company expects revenue gains in 2012 from its William Rast brand license agreements and “anticipates entering into additional license agreements for our brands in the future.
Sales of the People’s Liberation products were also weak in 2011.
At the end of 2010, the company liquidated People’s Liberation inventory produced exclusively for Charlotte Russe.
See Page 2 for details about Sequential’s operating model and why it thinks it mitigates risk
Operating Model
Sequential Brands believes its business model mitigates the typical risks associated with many consumer brands.
According to its website:
1. Revenue streams have contractual agreements, similar to real estate agreements that have leases.
2. The company has diversified and predictable revenue streams. “We have many different “tenants” that pay earned and minimum royalty revenue as a percentage of our licensee’s revenue across many consumer sectors.”
3. The company focuses low overhead on key brand building areas like marketing PR, IP, legal and licensing to create high EBITDA margins.
4. The company identifies the best licensee’s in their field so they don’t have to take on operating, inventory, product or high overhead risks.
5. Sequential Brand Group says they focus on an age demographic that “requires less marketing than our competitors…quite simply we believe that kids and teen brands have to re-invent their brand much more often than brands that appeal to more mature demos.”
6. They aim to grow organically with its own brands and through accretive acquisitions
