Australian fashion retailer Universal Store has acquired Byron Bay brand Thrills for $50 million. The acquisition is on a debt free/cash free basis, representing 6.8x FY22 underlying EBIT.
It will consist of $17.5 million in cash, $17.5 million in UNI shares and a notional amount of $15 million in deferred variable consideration (DVC).
Universal Store CEO and MD Alice Barbery said the acquisition is a strategic move for the major fashion retailer.
“In Thrills, Brooke, Tabitha and Ryan have built an iconic youth fashion brand and have a proven capability to deliver products our customers love,” Barbery said.
“Thrills is currently the highest selling third party brand in our Universal Store business and has been a consistent and growing part of our product offer for over eight years.
“We are excited by the opportunities a closer partnership can deliver in both product and brand development, as well as further expansion of Thrills direct-to-consumer channel.”
Also known as Cheap Thrills Clothing or CTC, the indie label already has a long relationship with Universal Store, spanning around nine years. It also harnesses relationships with other third-party retail accounts in Australia, New Zealand and the USA.
Sales to Universal Store represent around c.26% of CTC’s business, while the sale of CTC’s products represents c.9% of Universal Store FY22 sales. CTC sales to Universal Store has grown by c.51% since FY20.
After its founding in 2011 in Byron Bay, CTC opened its first flagship in 2014. Today, the business sells a range of vintage-inspired youth fashion apparel with a broad customer appeal.
It currently has a portfolio of eight stores, with two more expected to open in November 2022, along with an emerging online channel.
Its growing ‘Direct To Customer’ (DTC) channel, and its online channel, contribute c.9% and c.12% of FY22 sales respectively.
While CTC's FY22 sales were $34.6m (of which ~79% is wholesale), with an underlying EBIT of $7.3 million in FY22, the grossed up “retail value” of total product sales was approximately $60m.
The indie brand also own a wholesale channel in the US, equalling c.2% of sales. These channels collectively contribute ~21% of CTC’s FY22 sales.
Through the acquisition, CTC expects each of these channels to grow as Universal Store brings new ranges and brands to market.
Universal Store and CTC say they see a capacity to extend the brand into adjacent channels, including its current collaboration with Hard Yakka to enter ‘work wear’ category.
As well as the label’s main brand range ‘Thrills’, it also owns various emerging brands at different stages of development. CTC’s emerging brands are currently <10% of sales.
Through its overall product range, CTC has a sales mix of ~47%/53% split between men’s and women's products.
CTC also has commitments in sustainability having introduced hemp, ramie, linen and organic cotton fabrications in 2017.
The founders will continue to play key leadership roles in the business and will become shareholders in Universal Store.
The acquisition is expected to be complete in Q4 2022.