Teen apparel cataloger/retailer Delia’s has put itself up for sale. According to published reports, the company, which has a market value of about $60 million, has been soliciting interest from buyers.
Why is Delia’s looking to sell? “Essentially, they have no choice,” says Stuart Rose, managing director for investment bank Tully & Holland. “Delia’s has $14 million cash on hand, and last year lost $11 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) and is trading below book value.”
Delia’s, which has been struggling to keep pace in a depressed economy, hasn’t been profitable in recent years and “was just about breakeven” in 2006, Rose says. The merchant also hasn’t made any improvements in operating efficiency to costs under control, he adds.
It doesn’t help that the teen market is crowded with competitors such as Aeropostale, Forever 21, Hot Topic, Tween Brands, Abercrombie & Fitch, American eagle, Hollister, Nordstrom, Pacific Sunwear, and Target. And it’s a tough target audience: Teenagers travel in packs, they’re fickle and demanding, Rose says.
Bottom line, “Delia’s isn’t the fashion leader,” Rose says. “Something has to be done to right the ship and monetize the remaining value of Delia’s, because continuing on this path leads nowhere.”
Delia’s had been acquired by teen apparel and sporting gear cataloger Alloy in 2003. It still operates the Alloy brand, but in 2008 it sold its extreme-sports gear merchant CCS to retail chain Foot Locker.