Retailer American Eagle Outfitters has sold its loss-making children’s business 77kids to Ezra Dabah, the former CEO of The Children’s Place, for an undisclosed amount.
Under the deal, Dabah has acquired the brand’s store assets, the online business, inventory, and a temporary licence to use the 77kids name until January 15, 2013.
The former Children’s Place chief executive has paid American Eagle Outfitters an amount equal to 65% of the cost of the acquired inventory and assumed certain liabilities associated with the brand, according to a company SEC filing.
As a result of the agreement, the company now expects to incur an after-tax loss of $35 million on the exit of the 77kids business, compared to earlier guidance of $35-50 million.
Losses will include $19 million of asset impairments, inventory write-downs and severance, $6 million of support payments to Dabah and $10 million of operational costs.
American Eagle Outfitters revealed in May it was looking to sell part or all of the 77kids brand, after announcing plans to exit the business.
Earlier this month, the teen apparel retailer raised its second quarter earnings guidance after achieving stronger than expected sales during the period.
The company now expects earnings per share to be between $0.19 and $0.21, compared to previous guidance of $0.13.
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