(Bloomberg) — Jamie Salter always had big ambitions. Though he started Authentic Brands Group Inc. with lesser-known consumer names, he spent much of the last decade vacuuming up ailing but widely recognized brands like Barneys New York, Sports Illustrated and Brooks Brothers. Now, he’ll do so in the public eye.
Authentic filed paperwork for an initial public offering this week, and the company’s aiming high. “There is $13 trillion of branded commerce in our sights,” Salter wrote to prospective investors in a regulatory filing.
That’s the retail value he envisions for potential merchandise in Authentic’s brand portfolio — not the licensing fees that now make up the bulk of revenues. It’s a measure of Salter’s confidence in growing global affluence, brand extensions and acquisitions.
“The opportunity set for our brands spans the global consumer economy — fashion, footwear, media, film, music, events, outdoor, luxury, beauty, home…from Marilyn Monroe NFTs to Sports Illustrated digital events, the scope and scale of our opportunity is truly open-ended,” he wrote in the prospectus.
Authentic’s filing lists only a placeholder amount of $100 million, but Bloomberg has reported that the IPO could value the company around $10 billion. Net income grew fourfold to $225 million last year from $56 million in 2016, while revenue jumped to $489 million from $165 million.
The once low-profile New York firm that’s amassed licensing rights to celebrity names like Shaquille O’Neal and Elvis Presley stepped firmly into the spotlight in 2020 by acquiring the Forever 21, Lucky Brand and Brooks Brothers brands out of bankruptcy. Moreover, Authentic has used a new model, teaming up with mall operators to save retailers. Sparc Group, a joint venture with Simon Property Group, runs the retail operations, allowing Salter to keep his focus on his growing roster of brands.
“We don’t manage stores, inventory, or supply chains. We don’t manufacture anything,” Salter said in the prospectus. “We are a licensing business and are purely focused on brand identity and marketing.”
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But Authentic’s chief executive officer weighs in on management and merchandising decisions, often in conjunction with the head of Simon, the largest U.S. mall operator.
Salter has capitalized on the retail apocalypse, snapping up and revitalizing beaten up brands, but the future of retail remains uncertain, especially in the wake of a global pandemic that accelerated shifts on consumer tastes, spending and shopping.
Among the risk factors cited in the prospectus are “rapidly evolving trends and competition” in areas where Authentic operates and the notoriously fickle taste of consumers. The company hasn’t been immune to the effects of Covid-19 either and warns there could still be ramifications in trying to contain the virus.
What’s more, Authentic has to manage the rapid growth that’s taken the company from a startup buying small, niche brands to an owner of household names in little more than a decade.
Now, Salter says he won’t look at deals under $1 billion. That’s a long way from his start in 2010, when he bought mixed-martial arts brand Tapout and Marilyn Monroe for a combined $30.5 million. His strategy took a turn in 2016 when he teamed up with the two largest U.S. mall landlords to buy Aeropostale out of bankruptcy.
Expanded Focus
Authentic has recently expanded its focus to include healthier names, with its purchase this year of Eddie Bauer with Sparc and of a group of names from PVH Corp. that include Izod and Van Heusen.
Authentic’s model gives it more control over its brands and the ability to connect consumers among them, said Hayes Roth, founder of brand advisory firm HA Roth Consulting. “They’re definitely working on the surround-sound experience,” he said.
Authentic declined to comment, but Salter has spoken previously about plans for collaborations and the key role of stores in promoting its licenses. In March, the company rolled out a “Forever 21 x Juicy Couture” collection and says it aims to move into new categories such as children’s, home, electronics and beverages. Authentic is also working on a loyalty program which would encompass all of its brands and a monthly subscription, according to the prospectus.
Although no one knows how consumer behavior will change post-pandemic, “they’ve got enough in the portfolio and seemingly are intelligent enough about how to build a loyal audience,” Roth said. “They’ll be a company well worth watching.”
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