James Mammarella

What are brands worth?
October 15, 2007

In home textiles these days, that’s an open question.

Looking at the history of some once-dominant brands raises even more questions.

Cannon, for instance. Founded in 1888, Cannon Mills was bought nearly 100 years later by Fieldcrest Mills for $250 million. In turn, Fieldcrest-Cannon was acquired in 1997 at a price tag of some $756 million by Pillowtex.

After Pillowtex’s bankruptcy in 2003, Cannon and its sister brands – Fieldcrest, Charisma, and Royal Velvet – were acquired for $128 million by a group dubbed Official Pillowtex, led by the Schottenstein liquidation business.

$231 million later, Official Pillowtex was picked up last month by Iconix Brand Group, where an executive specifically cited Cannon as recognized internationally and primed for global expansion.

Iconix said it expects Cannon and its three sisters to generate at least $35 million per year in licensing royalties in 2008, from wholesale and retail activity, against as little as $5 million in direct costs. Indeed, the brand management company said there exists $160 million in total guaranteed royalty streams embodied in Cannon et al.

One source of that royalty revenue, for example, would originate from shoppers at Target, where Fieldcrest is in a direct-to-retailer license. Target is using Fieldcrest in a two-tier pricing structure across its soft home departments.

Another current source of royalties is the Charisma license to WestPoint Home; this brand is carried by such retailers as Bloomingdale’s.

Royal Velvet and Cannon itself are licensed to the Chinese trading house and sourcing umbrella firm Li & Fung. RV has been a feature in the bath towel assortment at Kohl’s since spring 2005, while Cannon was taken up by specialty chain Anna’s Linens in March 2006 and this month launched in sub-brand form – Cannon Classic and Cannon Royal Family – at 181-door supercenter chain Meijer.

Here are some big unknowns: a) How long will Target run with Fieldcrest? b) What does the future hold for Cannon beyond its positions 250-store Anna’s Linens and 181-store Meijer? c) How successful will Li & Fung be at expanding Royal Velvet beyond bath towels at Kohl’s and in bed and bath at a few other retailers? d) What additional retailers will step up to order Charisma from WestPoint Home, a supplier that saw year-to-year sales fall nearly $100 million in the first half of 2007?

When off-price retailers like Big Lots and Ross Stores include home as among their strongest categories, month after month – while traditional department stores and the major discounters report continuing trouble in their home departments – it is fair to ask how much of a premium can be obtained by a brand like Cannon?

How much are brands worth?

The principals at Iconix Brand Group seem to have answered that question to their own satisfaction, for now.

Retailers – and consumers – will answer it more broadly.

Posted by James Mammarella on October 15, 2007 | Comments (0)