Yankee Candle Hopes Deal Illuminates a Wider Audience

Jul 27, 2006 1:19 AM  By

Bruce Besanko, chief financial officer for South Deerfield, MA-based Yankee Candle Co., thinks that its $22 million cash acquisition of Petaluma, CA-based Illuminations can help broaden his company’s appeal. Yankee Candle announced the deal on July 26. The transaction is expected to close by next week.

Both Yankee Candle and Illuminations sell scented candles and related home decor items to resellers as well as to consumers via stores, catalogs, and the Internet. But Besanko says the Illuminations audience differs from that of Yankee Candle. “It’s a younger, typically more fashion-forward customer than a typical Yankee Candle customer, which is somewhat older,” he explains.

Along with the direct business, Yankee Candle acquired 15 Illuminations stores in California, Arizona, and Washington. Illuminations’ remaining 20-25 stores will be phased out over time.

Illuminations will maintain its brand and will continue to operate out of California. “It’s a very strong brand,” says Besanko. “We’ve had great respect for that brand since it was founded. It’s been under great leadership, and it’s a terrific brand. That’s the principle reason we wanted to acquire it.”

But while Yankee Candle is currently a buyer, it may soon become a seller. The company has hired Lehman Bros. to help it explore strategic alternatives, including a potential sale of the company.

A press release says the candle company’s profits have been squeezed by disappointing wholesale sales of its scented candles, higher spending on promotions, and increased freight and wax costs. Net income for the second quarter fell 43%, to $4.8 million for the three months ended July 1. Sales did increase 7%, however, to $116.3 million, as an 18% rise in retail sales offset a 3% decline in wholesale sales.