7.2 billion, the favorite trendy brand hoodies of the post-00s generation, are selling like hotcakes.

Another trendy brand has been sold.

Recently, the brand Champion, known for creating the world's first hoodie, has been acquired for approximately 1 billion US dollars (about 7.2 billion RMB). The buyer is the American brand management company Authentic Brands Group (ABG), which has previously acquired multiple trendy brand companies. The acquisition is expected to be completed on May 6th.

Champion, a brand with a century-long history, gained fame for its unique hoodie designs. However, as time passed, this once-sportswear giant seemed unable to escape the fate of being acquired. From leading industry sales to consecutive revenue declines, what has Champion experienced?

Firstly, the fierce market competition is an undeniable factor. With the rise of emerging domestic and international brands, Champion faced unprecedented challenges. The emergence of domestic trendy brands and the popularity of new sales channels such as live streaming e-commerce gradually eroded Champion's competitiveness in terms of cost-effectiveness and brand premium. Additionally, the sharp decline in stock prices and debt issues of its parent company, HanesBrands, undoubtedly accelerated the pace of Champion's sale.

The acquisition of Champion is not an isolated case. In the trendy brand market in recent years, "selling out" has become a common practice.

Many once-popular brands, such as Forever 21 and Barneys, have sought new owners. The acquisition of these brands often signifies a new transformation and rebirth.

In this era of trendy brand turnover, the acquisition of Champion may be the beginning of a new chapter...

01 7.2 billion RMB, the deal is done

Recently, the American brand management company Authentic Brands Group (ABG) has reached a preliminary agreement with the apparel group HanesBrands to acquire the trendy brand Champion for approximately 1 billion US dollars (about 7.2 billion RMB), and the acquisition is expected to be completed from May to June.

Upon hearing the news, netizens lamented, "Another 'tear of the times.'"

Champion was once a popular sportswear brand in China. Founded in 1919 by Simon Feinbloom and his father, the brand, like all sports enthusiasts who are obsessed with winning championships, attracted countless sports enthusiasts with its name. Champion's logo is a letter "CH," and its outstanding design gives the brand high recognition. The product line includes casual clothing, shoes, accessories, and outdoor equipment, holding a high position in the fashion and sports industries. The brand offers sportswear and casual clothing for men and women, as well as clothing for children and the elderly.

The parent company HanesBrands is a professional American underwear and sportswear production and sales group, with two main brands, Hanes and Champion, as well as other underwear brands such as Playtex, Wonderbra, Bonds, DIM, and Bali. It is the largest underwear manufacturer in the United States and the world's largest textile producer.

Last year, HanesBrands announced the listing of Champion for sale, with a starting price of 1.4 billion US dollars.

A loyal Champion fan said, "For a while, their hats and T-shirts were very popular, with a basic unit price of around 300 yuan, which is considered affordable. I have bought many of Champion's hats, T-shirts, and shoes in the summer. In fact, in the past year or two, you can see that their products have transitioned from a sporty style to a more fashionable style. For example, some of their bags resemble the style of luxury brands, such as the Louis Vuitton monogram or the saddlebag style of Dior." The consumer was not surprised by Champion's announcement of being acquired, saying, "In fact, in the past year or two, many trendy brands have not been doing well. After the initial hype, it's hard to find a direction for sustained growth, so being acquired is not surprising."

Champion was once extremely popular, and even contributed about one-third of the revenue to its parent company. However, why has Champion slipped from its position as the top trendy brand in recent years?

In the Chinese market, changes in the competitive landscape are undoubtedly one of the reasons.

When Champion became popular, "trendy brands" were still a fresh concept for Chinese consumers, so there was always a sense of "the foreign monk chants better sutras." Moreover, the concept of "trendy brands" itself has a bit of a foreign flavor, and the credibility is naturally higher when it is labeled as "American sportswear." However, in recent years, there have been more and more domestic trendy brands and original brands, and with the changes in unique sales channels such as live streaming e-commerce, foreign brands have appeared to be "out of place."

The most obvious factor is cost-effectiveness. A former Champion enthusiast, Sha Sha, has now become a fan of domestic brands. She said, "In live streaming rooms, you can often buy a pair of summer pants for 88 or 99 yuan. For example, the parachute pants are very popular this year. I bought a non-branded domestically made pair for 88 yuan, and then I bought a trendy brand pair for nearly 700 yuan. Apart from the slightly see-through nature of the pants, there is little difference in comfort and overall style between the two. On the contrary, the 88 yuan pair makes my legs look longer."

Originally lacking in cost-effectiveness, American trendy brands now also lack competitiveness in brand premium. Combined, the natural result is a decline in sales.

On the other hand, Champion's sale is not only due to its own declining performance but also directly related to the sharp decline in stock prices and high debt levels of its parent company, HanesBrands, over the past two years. In May 2021, HanesBrands' stock price fluctuated around $20 per share, and now it has fallen to the level of $4-5 per share.

02 Who bought Champion?

Now that we know why Champion was sold, let's take a look at who bought it.

The company Authentic Brands Group, which acquired Champion, may be unfamiliar to many people, but if we refer to it in a different way, many will immediately recognize it as the parent company of Forever 21.

ABG was founded by Jamie Salter in 2010, and its main operating model is to acquire poorly performing brands at low prices, and then change the fate of the acquired brands from bankruptcy through a series of repositioning, packaging upgrades, collaboration authorizations, market and category expansion, and restructuring.

The brands acquired by ABG cover multiple fields such as fashion, media, entertainment, and celebrities, with global retail sales exceeding $29 billion, and retail networks covering 150 countries.

Since its establishment, ABG has acquired the American clothing brand Brooks Brothers, Forever 21, and the department store Barneys. In June of last year, ABG also completed the acquisition of the century-old rain boot brand Hunter.

It seems that Champion has been claimed by a quite powerful "patron."

However, after being acquired, Champion will have to go through a period of pain if it wants to improve, and potential layoffs may be one of the issues it faces.

As a brand management company, ABG tends to outsource the production, design, and logistics of its brands. However, HanesBrands handles most of these tasks internally. According to a report from HanesBrands, as of December 31, 2023, the company has 48,000 employees in 29 countries, with 88% located outside the United States, mainly in Central America, Asia, and the Caribbean. This means that if the self-operated business is turned into outsourcing after being acquired, Champion may face a certain scale of layoffs.

However, although facing the potential pain of layoffs, in the long run, ABG's brand incubation capability is recognized by the market. Most of the acquired brands still have a considerable degree of market value and recognition. As an old hand in brand management and operation, ABG is more adept at infrastructure transformation and systematic profit through participating in the packaging upgrade of a brand at a certain stage, compared to the long incubation of individual brands.

After the outbreak of the pandemic in 2020, many brands faced unprecedented challenges due to force majeure, which also brought great opportunities for ABG, which is good at "bottom fishing."

Just last year, ABG also signed a long-term agreement with the Chinese cross-border e-commerce platform Shein for its brand Forever 21. Shein is responsible for designing and producing clothing and accessories for Forever 21, and selling them exclusively on Shein's websites in the United States, Europe, and parts of Australia under the name Forever 21 x Shein, amplifying the brand's effectiveness.

Therefore, looking at the acquisition of Champion, although its performance is not good, its brand influence is still sufficient. Champion not only has high global visibility but also rapidly penetrates the global market through a wide range of direct stores and e-commerce channels, which is in line with ABG's acquisition style.

For Champion, the resources owned by ABG can also help it regain a competitive market position and further expand its sales channels. Therefore, even if it has to face the transitional pain, the fate of Champion after being acquired will also move towards an optimistic path.

03 Acquired Trendy Brands

In recent years, it has been common to see trendy brands being acquired.

Although this time the buyer of Champion is not a domestic company, in the wave of trendy brand acquisitions in recent years, Chinese brands have also played an important role as buyers.

In 2019, Anta Sports, together with Tencent, Fangyuan Capital, and Anamered Investments, acquired Amer Sports, which is a classic case.

Amer Sports, as the parent company of two major outdoor brands, Salomon and Arc'teryx, has a very strong brand influence. At the time of Anta's acquisition of Amer Sports, it actually faced a lot of skepticism. This was mainly because at that time, Anta had not achieved results in operating overseas brands, and the price of Anta's acquisition of Amer Sports was as high as 4.6 billion euros, which many industry insiders believed to be an overvaluation of Amer Sports. Some even called it the "most expensive mistake" made by Anta.

However, in the eyes of Ding Shizhong, the CEO of Anta, the acquisition of Amer Sports was a bargain. He said, "Because the market was not good at the time, we bought it at a 43% premium. If the market was good, we wouldn't have been able to buy it at all."

After taking over Amer Sports, Anta made reforms in positioning and product channels. Since Amer Sports had a lot of brand resources at the time, its offline sales channels were also very scattered, giving consumers the wrong impression of unclear brand positioning. Anta first took over the scattered offline stores of Salomon, and then simultaneously phased out large distributors. The following year, the operating rights of outlet stores and online stores were also taken back. According to public data, before the acquisition, Amer Sports' direct sales channels accounted for 12%, and it has now increased to 33%, and the profitability of corresponding stores has also rapidly improved.

Today, Salomon's positioning is very clear, and there are even jokes like "Middle-aged men have three treasures: fishing, Moutai, and Salomon," which also proves that its positioning in the high-end outdoor market is very clear.

From 2020 to 2022, Amer Sports' revenue increased from $2.4 billion to $3.5 billion, with a compound annual growth rate of 20.4%, more than three times that before the acquisition; the gross profit margin also increased to 52.2%, 6.6 percentage points higher than in 2018.

In February of this year, Amer Sports successfully went public, and Anta's acquisition of it has changed from the "most expensive mistake" to the "most successful marriage."

In addition to acquiring Amer Sports, Anta has also obtained the operating rights of the Fila brand in mainland China, Hong Kong, and Macau, and acquired the operating rights in Singapore in 2017. In 2016, Anta invested 150 million to establish a joint venture with the well-known Japanese ski brand DESCENTE, acquiring exclusive operating, product design, and sales rights in China. In 2017, Anta's subsidiary Anko and the South Korean outdoor brand Kolon Sport jointly established a joint venture, granting Anta exclusive operating agency rights in China.

Anta is not the only company that frequently initiates acquisitions of foreign brands. The luxury goods group Fosun under the Revival Group acquired the high-end fashion house Lanvin in 2018 and completed the acquisition of the well-known Italian footwear brand Sergio Rossi in 2021. Xtep completed the acquisition of Palladium in 2019, a brand founded in France in 1947 that specializes in military boots and canvas shoes. The popular fashion designer Alexander Wang is backed by JH Partners.

In recent years, why have streetwear brands frequently "sold out"?

In fact, streetwear brands have always had a rather unique positioning in the fashion industry. They cannot be positioned based on brand power such as "cost-effectiveness" or "luxury goods," nor can they be easily categorized into styles like "sporty" or "commuter." Some very loyal consumers may consider "streetwear as an attitude," but to get more people to pay for this "attitude," a very localized operating model is needed.

It is not difficult to see that the companies acquiring these streetwear brands are themselves in line with their own brand positioning or are able to enrich their product lines. This allows the companies to quickly acquire a brand that has already been partially validated by the market, saving the cost of building from scratch, and also showcasing their international and diversified strategies.

Of course, not all streetwear brands thrive after being acquired. The acquisition of streetwear brands is like a two-way adventure.

As for the fate of Champion in the future, it is still unknown.