Retail

Barneys' savior Authentic Brands is sitting on about $1 billion in cash and on the hunt to buy more troubled retailers

Key Points
  • Authentic Brands and the nation's biggest mall owner Simon Property Group have formed a joint-venture called Sparc.
  • Jamie Salter may not be a household name, but he's one of the industry's best chances of saving long-loved brands from joining Woolworth and Blockbuster as once-great also-rans.
  • "I'm in the first inning," Salter said. "We have over $1 billion in dry powder." 
Jamie Salter, chairman and chief executive of Authentic Brands Group LLC.
Norm Betts | Bloomberg | Getty Images

He helped save Barney's from liquidation last year and plucked retailers Brooks Brothers and denim apparel maker Lucky Brand out of bankruptcy this month — just warmups for Jamie Salter.

"I'm in the first inning," said Salter, the 57-year-old chief executive officer of the apparel licensing firm Authentic Brands Group. 

Salter may not be a household name, but he may be one of the industry's best chances of saving long-loved brands from joining Woolworth and Blockbuster as once-great also-rans. Plenty of retailers were already teetering on the edge of solvency before the coronavirus pandemic hit, accelerating the 44 retail bankruptcies and more than 6,000 store closures already announced this year. 

That creates opportunity for a company like Authentic Brands Group, which was generating $15 billion in annual retail revenue before Covid-19 emerged from Wuhan, China, eight months ago. He said he recently received a fresh capital infusion of $600 million from backers BlackRock, General Atlantic and Leonard Green & Partners for more deals. So Salter is now sitting on plenty of cash and is on the hunt for deals. 

"We have over $1 billion in dry powder ... and I didn't leverage the company up," he said in an interview Friday.

Authentic Brands and the nation's biggest mall owner Simon Property Group have formed a joint-venture called Sparc, which is paying $140.1 million for Lucky Brand, salvaging its stores and website. And Sparc's bid of $325 million to acquire Brooks Brothers from bankruptcy and save at least 125 stores was just approved and is expected to close later this month. 

"People are asking me, 'Jamie. Mall-based retail? I don't get it,'" Salter said. "What I am going to say to you is, we need bricks and mortar. Retail really needs it." 

For an industry that was already struggling to compete with Amazon, the coronavirus pandemic has now pushed dozens of retailers over the edge with permanent store closures mounting by the thousands. And the turmoil is not expected to slow down any time soon.

Salter, however, isn't looking to buy just anything. He said he's looking for crippled businesses with good real estate and international recognition. 

"The brands that don't have stores are harder to market and expand globally," he added. "You need a footprint and a supply chain. Those are two critical parts to running a business." 

Authentic Brands has a history of saving hobbled retailers. The brands under its umbrella include Barneys New York, Forever 21, Aeropostale, Nautica and Nine West — many of the stores in a typical suburban shopping mall. It did its first deal with Simon in 2016 when it bought Aeropostale out of bankruptcy for $243.3 million. A few years later, it paid $81 million, along with Simon Property and Brookfield, for the teen retailer Forever 21. 

"The mall is still important to building brand value on a global basis," Salter said. 

Sparc came to fruition after the Aeropostale deal, Sparc CEO Marc Miller said. 

"We see ourselves becoming the world's leading brand operator," said Miller, who was chief executive officer at Aeropostale. 

"At a time when retail is under incredible pressure, we have the opportunity to leverage a fixed cost base," he said, explaining that Sparc is able to spread expenses across its multiple brands. "There are scale advantages ... sourcing power. You gain those kinds of economics." 

And where Simon Property brings expertise in retail real estate and negotiating leases, Authentic Brands Group brings its extensive background in licensing, merchandising and marketing, he said. 

Shoppers should expect some changes coming to their beloved brands that are acquired by Sparc. Miller and Salter have plans to mix things up at Lucky and Brooks Brothers by expanding the latter into selling men's grooming products. 

"You want to diversity, diversify, diversify," Salter said. "That is why category expansion is so important when you are buying these brands." 

VIDEO4:1004:10
Simon Property Group continues its shopping spree, looks to do more deals