Alloy to Spin Off Catalog/Retail Division May 31, 2005 8:58 PM
, By Mark Del Franco
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New York-based Alloy is going ahead with plans to spin off the catalog/retail portion of its business. The spin-off company will consist of the Delia’s, Alloy, and CCS apparel, sports gear, and accessories brands; a fourth catalog brand, extreme-sports gear merchant Dan’s Competition, is being sold to XP Innovation, owned and operated by Dustin Wilson, William Cartwright, and Steve Kalsch, current management team members of Dan’s Comp.
The spin-off, in which Alloy shareholders will receive 100% of the common shares, is expected to be completed by the fourth quarter. The sale of Dan’s Competition is expected to close next week.
Alloy’s other division, which provides media and marketing services targeting teens and young adults, will continue to operate under the name Alloy Media + Marketing. The name for the spin-off has not yet been determined. Matt Diamond will remain CEO of Alloy; Rob Bernard, the CEO of Alloy’s Retail and Direct Consumer division, will be CEO of the new company.
“The merchandise business will be positioned as a stand-alone merchandise business with e-commerce, direct mail, and retail operations,” Diamond told MULTICHANNEL MERCHANT via e-mail.
For the 12 months ended Jan. 31, Alloy’s net merchandise revenue increased 17% to $218.2 million, compared with $187.0 million last year. Revenue in Alloy’s sponsorship business was flat at $184.3 million, compared with $185.0 million last year. But the overall net loss ballooned to $92.0 million from $77.2 million in 2003, due to a series of one-time costs, including restructuring and asset-based write-downs, legal costs, stock-based compensation. And net income for the company ballooned to a $92.0 million net loss, from a net loss of $77.2 million in 2003.
Total revenue for the fiscal quarter ended April 30 was $87.7 million, with a loss from continuing operations of $4.7 million.
“The investment in our merchandise assets have created the most substantial direct marketer to the youth market,” Diamond said via e-mail. “With these investments and the strength of the [CCS, Delia's, and Alloy] brands we can leverage our direct marketing success to the much larger retail market. Had we not made these investments we would not be in this position. Over time we will be able to assess the return on our merchandise investments and believe the best way to capitalize on the merchandise opportunity is through the announced spin.”
