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Eddie Bauer, Pacific Sunwear to Merge Under One New Company

Eddie Bauer and Pacific Sunwear have come together in a retail play set to save both brands from ongoing struggles.

Golden Gate Capital, the private equity firm that owns both entities, said Thursday that Eddie Bauer and PacSun will now come under one new operating company, called PSEB Group.

The outdoor brand and the California lifestyle chain will retain their separate brand identities, design, merchandising, e-commerce and retail operations, according to Golden Gate. The investment firm will add additional equity into PSEB to bolster its growth, and both brands are expected to benefit from “shared services and enhanced scale.” Existing Eddie Bauer and PacSun stores will operate as usual and consumers won’t experience any changes.

PSEB will have a retail footprint of more than 700 stores with roughly $1.5 billion in combined total sales this year, $400 million of which is expected to come from e-commerce.

“Eddie Bauer and PacSun are powerful brands with differentiated, loyal customer bases. By creating PSEB and investing additional equity, we will accelerate the growth trajectories for both businesses, while preserving the autonomy and discrete cultures of each brand,” Josh Olshansky, managing director at Golden Gate Capital, said. “Both brands have made great progress in the past 24 months and have generated strong performance. Bringing these two brands onto a shared platform will allow us to fuel this momentum and unlock their next stages of growth.”

Rumors started surfacing late last month about a possible merger of the retailers as Eddie Bauer struggled under upward of $425 million in debt from a loan and a revolving line of credit, and had started a search for a buyer last year. The company has been under Golden Gate’s wing since 2009. PacSun hadn’t been faring much better, having been salvaged from bankruptcy by Golden Gate in 2016 after facing mounting debt and dwindling consumer interest.

For now, it seems both brands are “performing well,” according to Golden Gate.

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“Eddie Bauer and PacSun grew same-store sales by 6.5% and 5 percent, respectively, in 2017, and year-to-date, same-store sales are up 6 percent at Eddie Bauer and are up 8 percent at PacSun.”

Eddie Bauer’s current CEO and president Mike Egeck will assume the role of CEO of PSEB, overseeing both brands, and from his perspective, the merger might mean good things.

“PacSun’s curation of youth culture and brands through the lens of the California lifestyle permeates its brand in the same way Eddie Bauer’s heritage of outdoor innovation underpins its nearly hundred-year history,” Egeck said. “We look forward to the competitive advantages that a unified shared services platform will provide us, while we continue to invest in the two brands’ consumer connections and distinct identities.”

The merger under PSEB is expected to be finalized in the third quarter of 2018, subject to certain closing conditions.