5 ms·

Does anyone know much about Authentic Brands? They own all these stagnant or struggling brands like Brooks Brothers, Barney's, Sports Illustrated, Lucky Brand,

by admn2 5y ago

Does anyone know much about Authentic Brands? They own all these stagnant or struggling brands like Brooks Brothers, Barney's, Sports Illustrated, Lucky Brand, Prince, etc., but I can't tell what they actually do with the IP or existing business?

mattlondon 5y ago
I think (don't know) that they license the brand name out to various people. So now you'll start to see "Reebok" branded stuff being made and sold by random stores that wouldn't usually sell "real" sports gear. So you'll see it being made and sold by the Walmart/Tescos of the world etc. People will vaguely recognise the brand for years/decades to come.
- admn2 5y ago
  I think this is definitely true for some of their other brands especially, they own the right to use all these celebs: Elvis, Marilyn Monroe, Shaq, etc. However, it does look like many of their other brands continue operating - Forever 21, Brooks Brothers, Aeropostal (maybe?), Lucky Brand
moolcool 5y ago
They own some brands which are still quite prominent as well, like Forever 21, Eddie Bauer, and Volcom
- lowkey_ 5y ago
  I'm unfamiliar with Volcom, but both Forever 21 and Eddie Bauer can be classified as stagnant or struggling along with the rest mentioned in the prior comment. (Additionally, both companies have also gone through bankruptcy proceedings).
gnicholas 5y ago
As part of the acquisition, the buyers (Authentic Brands and Simon Malls) agreed to continue operating Brooks Brothers stores across the country. Not sure what they've done in other cases. https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purchase-deal-with-retailer-sparc.html https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purch...
- CobaltFire 5y ago
  Interesting note here is that as of last year the US manufacturing of Brooks Brothers was closed. They had been the manufacturer of the top quality of Naval Dress Uniforms (optional), but now it’s only what’s left in stock due to uniform items not being authorized for wear unless they meet a bunch of requirements (Berry Amendment), of which made in the US is one.
deleted 5y ago
[deleted]
peytoncasper 5y ago
I think they do what other private equity groups do with medium sized tech businesses. These companies are usually profitable to some degree, but don’t really have a pathway to growth. This generally makes the unattractive to most investors. However, companies pick up these brands, remove redundancies by combining core aspects of different businesses, try to increase profit margin and just ride it out. Rinse and repeat and you build a portfolio. Once one dries up, you pick up another. A bit like combining good and bad loans together. As a package the good ones can support the bad ones to a degree.
- CPLX 5y ago
  That’s a highly charitable take on what private equity actually does with legacy businesses. In reality they feast on them like bloodsucking leaches. The usual playbook is to load the companies down with as much debt as they possibly can, and use the loan proceeds to pay themselves lucrative fees and dividends. Then they cut expenses to the core and demolish the quality of the product or service and see how long it takes people who aren’t paying attention to realize that the 100 year old brand with a reputation for quality doesn’t really exist any more. Once that’s done they leave the loan underwriters and current employees holding the bag and abscond to a vacation destination of their choice with the money and discuss their next target over Aperol spritzers.
  - tehjoker 5y ago
    Can you clarify something that I never understood about this process, are they literally using the loan money to pay themselves?
  - peytoncasper 5y ago
    I don't technically disagree with you, but I do think this is just a bit hyperbolic. If you just spent $2B on a company, you probably did it to make money at the end of the day. After all, business is rarely charitable. The company you just acquired likely has a declining and unhealthy cash flow and little to no cash reserves. You're unlikely to go and then infuse it with more of your capital. As a result, you're going to turn to outside capital to finance whatever plans you have. These plans are used as justification to creditors with which to take out these loans at whatever interest rate they deem appropriate. Additionally, you're likely going to reward yourself for any profits or turn around that does happen at the company. After all, you do have $2B tied up in this company. I agree, these companies are now more than likely walking corpses. As an employee, I probably wouldn't want to be stuck there as there is likely going to be little spent on employee retention and growth. However, it also does provide extended life to these brands that with a declining cash flow and no outside leadership change would likely meet the same fate and likely much quicker at that. As with everything, there is a spectrum. There are likely examples that did exactly what you just said. And there are also probably examples where the business turned around and went public again some day. The vast majority are going to sit in the middle, with no sinister plan and slowly fade away as the last customers stop giving them money. I think it's unfair to paint the companies being acquired as perfect companies. They have likely already lost customer confidence and as I mentioned in my first post can't find a path to growth. After all, that is why they are in this position to begin with. The morality of this process can certainly be debated, but I think it's fair to say that most people don't invest a lot of money into a business just to run it into the ground as quickly as possible. It does exist, no doubt, but running a firesale is far from the most profitable way earn money on your investment.
lotsofpulp 5y ago
They bet they can cut costs (and hence quality) faster than customers lose trust in the brand.
icegreentea2 5y ago
Lucky for you, they just filed for IPO, so you can read their prospectus! https://www.sec.gov/Archives/edgar/data/0001666054/000110465921089494/tm2114913-5_s1.htm#tPRSU https://www.sec.gov/Archives/edgar/data/0001666054/000110465... I think their strategy is right there on page one: ABG is responsible for brand identity and strategy, and marketing. ABG has approval rights over product design. Their partners (licensees) do everything else (including product design). Presumably for this strategy to work at all, people believe that ABG is sufficiently skilled at branding and marketing (as well as having the ability to synergize across brands... before you laugh, ABG owns the rights to likeness of Marilyn Monroe, Mohummad Ali, Shaq and Elvis) that people who like to be just "operators" will partner with them.
- admn2 5y ago
  Thank you!

by admn2 5y ago

mattlondon 5y ago

I think (don't know) that they license the brand name out to various people. So now you'll start to see "Reebok" branded stuff being made and sold by random stores that wouldn't usually sell "real" sports gear. So you'll see it being made and sold by the Walmart/Tescos of the world etc. People will vaguely recognise the brand for years/decades to come.

admn2 5y ago
I think this is definitely true for some of their other brands especially, they own the right to use all these celebs: Elvis, Marilyn Monroe, Shaq, etc. However, it does look like many of their other brands continue operating - Forever 21, Brooks Brothers, Aeropostal (maybe?), Lucky Brand

moolcool 5y ago

They own some brands which are still quite prominent as well, like Forever 21, Eddie Bauer, and Volcom

lowkey_ 5y ago
I'm unfamiliar with Volcom, but both Forever 21 and Eddie Bauer can be classified as stagnant or struggling along with the rest mentioned in the prior comment. (Additionally, both companies have also gone through bankruptcy proceedings).

gnicholas 5y ago

As part of the acquisition, the buyers (Authentic Brands and Simon Malls) agreed to continue operating Brooks Brothers stores across the country. Not sure what they've done in other cases. https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purchase-deal-with-retailer-sparc.html https://www.cnbc.com/2020/08/12/brooks-brothers-enters-purch...

CobaltFire 5y ago
Interesting note here is that as of last year the US manufacturing of Brooks Brothers was closed. They had been the manufacturer of the top quality of Naval Dress Uniforms (optional), but now it’s only what’s left in stock due to uniform items not being authorized for wear unless they meet a bunch of requirements (Berry Amendment), of which made in the US is one.

deleted 5y ago

[deleted]

peytoncasper 5y ago

I think they do what other private equity groups do with medium sized tech businesses. These companies are usually profitable to some degree, but don’t really have a pathway to growth. This generally makes the unattractive to most investors. However, companies pick up these brands, remove redundancies by combining core aspects of different businesses, try to increase profit margin and just ride it out. Rinse and repeat and you build a portfolio. Once one dries up, you pick up another. A bit like combining good and bad loans together. As a package the good ones can support the bad ones to a degree.

CPLX 5y ago
That’s a highly charitable take on what private equity actually does with legacy businesses. In reality they feast on them like bloodsucking leaches. The usual playbook is to load the companies down with as much debt as they possibly can, and use the loan proceeds to pay themselves lucrative fees and dividends. Then they cut expenses to the core and demolish the quality of the product or service and see how long it takes people who aren’t paying attention to realize that the 100 year old brand with a reputation for quality doesn’t really exist any more. Once that’s done they leave the loan underwriters and current employees holding the bag and abscond to a vacation destination of their choice with the money and discuss their next target over Aperol spritzers.
- tehjoker 5y ago
  Can you clarify something that I never understood about this process, are they literally using the loan money to pay themselves?
- peytoncasper 5y ago
  I don't technically disagree with you, but I do think this is just a bit hyperbolic. If you just spent $2B on a company, you probably did it to make money at the end of the day. After all, business is rarely charitable. The company you just acquired likely has a declining and unhealthy cash flow and little to no cash reserves. You're unlikely to go and then infuse it with more of your capital. As a result, you're going to turn to outside capital to finance whatever plans you have. These plans are used as justification to creditors with which to take out these loans at whatever interest rate they deem appropriate. Additionally, you're likely going to reward yourself for any profits or turn around that does happen at the company. After all, you do have $2B tied up in this company. I agree, these companies are now more than likely walking corpses. As an employee, I probably wouldn't want to be stuck there as there is likely going to be little spent on employee retention and growth. However, it also does provide extended life to these brands that with a declining cash flow and no outside leadership change would likely meet the same fate and likely much quicker at that. As with everything, there is a spectrum. There are likely examples that did exactly what you just said. And there are also probably examples where the business turned around and went public again some day. The vast majority are going to sit in the middle, with no sinister plan and slowly fade away as the last customers stop giving them money. I think it's unfair to paint the companies being acquired as perfect companies. They have likely already lost customer confidence and as I mentioned in my first post can't find a path to growth. After all, that is why they are in this position to begin with. The morality of this process can certainly be debated, but I think it's fair to say that most people don't invest a lot of money into a business just to run it into the ground as quickly as possible. It does exist, no doubt, but running a firesale is far from the most profitable way earn money on your investment.

lotsofpulp 5y ago

They bet they can cut costs (and hence quality) faster than customers lose trust in the brand.

icegreentea2 5y ago

Lucky for you, they just filed for IPO, so you can read their prospectus! https://www.sec.gov/Archives/edgar/data/0001666054/000110465921089494/tm2114913-5_s1.htm#tPRSU https://www.sec.gov/Archives/edgar/data/0001666054/000110465... I think their strategy is right there on page one: ABG is responsible for brand identity and strategy, and marketing. ABG has approval rights over product design. Their partners (licensees) do everything else (including product design). Presumably for this strategy to work at all, people believe that ABG is sufficiently skilled at branding and marketing (as well as having the ability to synergize across brands... before you laugh, ABG owns the rights to likeness of Marilyn Monroe, Mohummad Ali, Shaq and Elvis) that people who like to be just "operators" will partner with them.

admn2 5y ago
Thank you!