Designer Brands Inc. (DBI) is further fortifying its footwear arsenal, with the DSW and Camuto Group parent acquiring the Keds brand from Wolverine Worldwide and expanding its exclusive wholesale licensing deal with the Hush Puppies brand.
The terms of the deal were not broken out individually by brand, but Wolverine Worldwide will generate more than $90 million in cash across the sale and the licensing agreement.
DSW was already the largest wholesaler of Keds, according to Designer Brands. Now that Keds is officially under DBI umbrella, it is the first owned brand within the kids’ footwear segment that it will sell wholesale to other retailers.
As part of the deal, Designer Brands will now sell all Keds’ products, including Pro-Keds, and operate the brand’s e-commerce business. This expands Designer Brands’ owned brands’ reach into casual and athleisure footwear in the direct-to-consumer and wholesale channels, supplementing the recent additions of Le Tigre and Topo Athletic—two brands that the company hopes can help fill the void left by Nike, which severed ties with DSW in 2021.
Bringing Keds into the Designer Brands’ owned brands portfolio will also potentially help the label expand beyond the classic Keds silhouette, DBI said. The company noted that the acquisition brings a large international distribution network into the Designer Brands ecosystem, enabling the firm to explore future opportunities to leverage this expertise and infrastructure across other brands in its owned brands portfolio.
“Our growing strength in owned brands is evident, given that just 12 months ago, the athleisure category was a massive white-space opportunity for us, and we now control high-quality brands across multiple price points,” said Doug Howe, incoming CEO and president of DSW. “Our acquisition of Keds, which has an important presence in the athleisure space, is particularly exciting as it is an iconic brand with broad appeal for our customers and their families that gives us the potential to explore new opportunities both online and internationally.”
In a statement announcing the acquisition, Designer Brands praised the Keds brand as “The Greatest Shoes Known” for its “legacy of being versatile, comfortable and fashionable.” The Camuto parent highlighted how classic Hollywood stars like Marilyn Monroe and Audrey Hepburn wore Keds, as well as the shoes’ role in the iconic 1987 film “Dirty Dancing.”
Designer Brands and Wolverine Worldwide are also finalizing the agreement for the former to become the exclusive licensee for the Hush Puppies brand in the U.S. and Canada.
This expands on the companies’ previous arrangement established in 2022, in which DSW was the exclusive in-store distributor of Hush Puppies in the U.S., while also serving as a physical return center for HushPuppies.com customers.
According to Designer Brands, the relationship “demonstrated the strong appeal the brand has with the DSW customer.”
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The updated licensee relationship will grant exclusivity of the Hush Puppies brand to Designer Brands across all channels in the U.S. and Canada, including potential wholesaling of the brand and management of the HushPuppies.com direct-to-consumer business. It is unclear how long the exclusive partnership will last.
“Today’s announcements serve as proof of both the incredible progress we have made on our strategy to double sales of our owned brands by 2026 as well as the ongoing benefits of our relationships with top national brands,” said Roger Rawlins, CEO at Designer Brands Inc. “I am incredibly excited to welcome the Keds brand into the Designer Brands’ family and to continue our journey with Hush Puppies. This next phase in our Hush Puppies relationship is yet another example of how we are continuing to build on our existing owned brand strategy. It will allow us to directly benefit from designing and sourcing product for the U.S. and Canadian markets.”
For Wolverine Worldwide, the Keds divestment offloads a brand that was a low-profit contributor, similar to how the company sold off Champion trademarks to licensee Hanesbrands last year for $90 million. Ironically, the Champion trademarks were held by Keds, with the sale ultimately ending a drawn-out legal battle between the longtime partners.
Wolverine has been upfront about saving costs over the past year, even launching a profit improvement office to identify areas throughout the company that can be more cost-efficient. Last year, Wolverine reorganized its former Michigan and Boston groups into active, lifestyle and work segments in an effort to streamline its operations.
Brendan Hoffman, president and CEO, Wolverine Worldwide, said during the ICR Conference in January that Keds generates less than $100 million in annual revenue alongside low profit margins.
And aside from the Keds sale, the Saucony and Merrell owner gets the benefit of generating more exposure for the Hush Puppies brand.
“Selling Keds and licensing the Hush Puppies brand for the United States and Canada is an important step as we continue to advance our strategy to simplify the portfolio and direct resources to our growth brands. We are confident this will place Wolverine on an accelerated path to improved profitability and long-term shareholder value creation,” said Hoffman in a statement. “We are particularly pleased to have reached this agreement with Designer Brands, a longtime retail partner of ours and a natural fit to guide the iconic Keds brand into its next phase.”
The Keds brand sale closed effective Feb. 4, and the Hush Puppies license is anticipated to be effective as of July 1.
The proceeds from the Keds sale and Hush Puppies license will be used to pay down debt and strengthen Wolverine Worldwide’s capital structure. The company also said that its evaluation of strategic alternatives for the Wolverine Leathers business is ongoing.
Wolverine will provide more information on the impact of these transactions in its upcoming fourth-quarter earnings call scheduled for Feb. 22.