Brooks Brothers buyer explains unlikely bet on retail: 'I don't believe the world's going to end'

Authentic Brands Group & Simon Property Group CEOs team up to "save" several iconic retail brands.

As the retail industry contends with a trend of bankruptcies and store closures exacerbated by the coronavirus pandemic, two investors are taking an optimistic view of the embattled sector’s long-term outlook.

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Authentic Brands Group CEO Jamie Salter and Simon Property Group CEO David Simon have teamed up to buy several iconic retail brands. Recent acquisitions include Brooks Brothers, purchased out of bankruptcy for $325 million in a deal that closed last week, and Forever 21, another bankrupt chain, in February.

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The coronavirus pandemic forced the mass closure of physical retail operations for several weeks and worsened the “retail apocalypse,” a term coined to describe the rise of ecommerce operations such as Amazon at the expense of brick-and-mortar retail. Salter, whose company has made a habit of purchasing venerated brands in recent years, told the New York Times that he is confident in the industry’s future.

“Look, if the world ends, which I don’t think it’s going to, then there’s no doubt about it, I’m not so smart,” Salter told the newspaper. “But I don’t believe the world’s going to end.”

Salter’s Authentic Brands Group manages a retail portfolio with estimated annual revenues of $15 billion, with plans to reach $20 billion through further acquisitions. The company’s holdings include Sports Illustrated, Barneys New York and Lucky Brand Dungarees. Simon’s company, Simon Property Group, is the largest mall operator in the United States.

The deals are closed through a joint venture called Simon Properties Authentic Retail Concepts, according to the Times. Salter’s company gains favorable rent rates for its newly acquired brands, while Simon Property maintains tenants in its malls. The firms control roughly 1,500 physical stores across their brand portfolio.

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Rent costs crippled several retailers that saw business grind to a halt during the pandemic. Some companies declared bankruptcy amid mounting costs, while others sought to renegotiate the terms of their leases.

Salter has faced scrutiny over his business practices. Critics have accused Authentic Brands of exploiting the brand names of venerable companies for profit following their collapse. The company utilizes a licensing model, selling the right to use the brand names on new products or international ventures.

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“It’s not a long-term quality play,” one retail told the New York Times regarding the duo’s acquisition of Brooks Brothers. “It’s not about a love of the brand or the goods. It’s predatory and opportunistic."

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