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Here’s Why Caleres’ $255 Million Allen Edmonds Buy Is Getting the Thumbs-Up From Experts

After a tepid year for the mergers and acquisitions space, a move by Caleres to snap up men’s leather footwear brand Allen Edmonds on Tuesday is reinvigorating excitement among market watchers.

Susquehanna Financial LLLP analyst Sam Poser said he expects Caleres’ $255 million purchase to reap significant benefits for the firm, particularly as it seeks to expand its presence in the men’s footwear space.

The Allen Edmonds brand will provide a solid base for Caleres’ men’s business — [the brand] was founded in 1922 and has developed a loyal following since then,” Poser wrote in a note. “The growth opportunities should come from expanding the Allen Edmonds casual footwear offerings and expanding distribution beyond the U.S.

Poser said that while the majority of Allen Edmonds’ total revenues  — which industry experts estimate land between $160 million to $170 million — come from dress shoes, the brand has started to evolve its casual footwear business over the past 20 years.

The nearly 100-year-old brand joins Caleres’ roster of men’s footwear labels, which includes Vince, Dr. Scholl’s and George Brown Bilt.

In addition to adding a new revenue stream for the acquisition-focused brand management firm, Caleres CEO, president and chairman Diane Sullivan confirmed that the brand is set to become the foundation of the firm’s growing men’s business.

Fundamentally and primarily, Caleres has been a company that’s a wholesale portfolio of women’s brands — [men’s] wasn’t really a strategic focus for us,” Sullivan said. “We really saw that there was an opportunity not to cannibalize our women’s portfolio but to look for new growth and a new revenue stream against a totally different segment of consumers. We were looking for a great brand that has scale and size and that could be a cornerstone for a company, and Allen Edmonds just fit the bill.”

Sullivan said the firm spent several months meeting with the Allen Edmonds team before finalizing its decision to snap up the label.

They have amazingly high brand equity and a loyal customer base — over 70 percent of their consumers said they would recommend the brand, which we thought was unheard of,” Sullivan said. “And 48 percent of their retail consumers were new to their brand, which means they’re also growing.”

It also works in Caleres’ favor that Allen Edmonds is changing hands at a time when its core business appears to be in tip-top shape, according to CL King & Associates analyst Steve Marotta.

The brand has been well cared for and is not considered a fixer-upper or turnaround situation,” Marotta wrote last week. “The acquisition dramatically increases Caleres’ exposure to the men’s footwear market, augmenting much smaller operations George Brown Bilt, Vince and Dr. Scholl’s.”

Allen Edmonds’ footwear is handmade in Port Washington, Wis. The brand also added accessories and apparel to its offerings in 2013 and has 70 stores in the U.S. President and CEO Paul Grangaard has been at the helm for about nine years.

Sullivan said there are no plans to lay off any of the firm’s staff or key executives.

Caleres purchases Allen Edmond’s from private equity firm Brentwood Associates.

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