Chicago-based Fruit of the Loom this month agreed to pay $100 million for Gitano, which subsequently filed for Chapter 11 bankruptcy reorganization protection and is expected to get back on its feet immediately if the buyout goes through.
Marketing synergies for the companies are high, industry observers say.
"It's a very smart move that allows Gitano to get back into Wal-Mart after getting kicked out for various management and merchandising mistakes, and Fruit of the Loom instantly gains a well-known sportswear line," said Sid Doolittle, a Chicago-based retail analyst with McMillan/Doolittle.
Wal-Mart Stores was Gitano's No. 1 outlet until the discounter canceled its orders in January due to Gitano's violation of U.S. customs laws.
Fruit of the Loom, No. 1 in value-price knitted underwear, has been striving to reposition itself as a marketer of broader apparel for the entire family. Gitano, based in New York, already occupies that positioning, with a full line of lower-price jeans, sportswear and accessories.
Fruit of the Loom spent $32.8 million in measured media last year in network and spot TV and print advertising via Leo Burnett USA, Chicago, and has been moderately successful in broadening its image in a new campaign that began last year.
"Gitano should jump-start our efforts to address female and youth markets," said Mark Steinkrauss, director of corporate relations for Fruit of the Loom.
Gitano's advertising has been erratic in the past year. It spent $2.6 million in TV and print ads via Mullen, Wenham, Mass.; a new campaign targeting mothers broke last fall.
Mr. Steinkrauss wouldn't comment on future ad plans for Gitano until the deal is completed, but "in all likelihood we'll continue to promote Gitano as a separate brand."