Alloy Buys Retailer Delia's to Reach Teens

Marketing conglomerate Alloy will buy retailer Delia's Corp. for $50 million.

Adding Delia's $138 million business extends Alloy's reach to teen girls via Delia's 64 retail stores and its online and catalog operations. (Alloy already sells apparel and accessories to girls online.) It also gives promo shops 360 Youth and AMP, both owned by Alloy, another venue for teen-targeted promos.

Delia's has been struggling, posting losses for the last three years. Sales fell 36% to $138 million in fiscal 2002 from $215 million in 2000 as the retailer sold off or shut down non-core business and its core-business sales stayed flat. Promotion pricing and weak second-half sales hurt Delia's profit margins last year, per Delia's SEC filings. Brick and mortar stores account for 51% of Delia's sales, with online and catalog sales at 49%.

Still, Delia's will boost Alloy's revenues to $300 million. Alloy also gets Delia's 14.6 million-name database, bringing its database to 20 million-plus. The merger "will create the premier teen multi-channel merchandise business," says Alloy CEO Matthew Diamond in a statement. It rounds out Alloy's direct marketing, retail and product licensing targeting teens, he adds.

Alloy already has begun management changes at troubled Delia's, hiring former J. Crew COO Walter Killough, Jr. to head up Delia's retail. Alloy seeks other senior retail execs, and will pursue other investment options for the merchandise business, including possible merger, sale, or a full or partial public spin-off.

The deal is expected to close in the third quarter via Alloy subsidiary Dodger Acquisition Corp. Stockholders with about 35% of Delia's outstanding shares have agreed to support the purchase; both boards of directors already approved the deal. Both companies are based in New York City.

Since late 2002 Delia's has been restructuring its management team and reorienting its product offering to regain brand positioning and stabilize its balance sheet. The company was nearly delisted from NASDAQ in May when its bid price on common stock fell below one dollar, NASDAQ's minimum requirement.