Authentic Brands IPO Bringing New Vision to Wall Street
Authentic Brands Group grew up on the outskirts of fashion, snatching up companies that had seemingly had their heyday — from Juicy Couture to Jones New York to Barneys New York — and giving them second lives through licensing deals.
Fashion purists were inclined to see a play for the past, a coordinated effort to squeeze the last few dollars out of once burgeoning names.
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But Jamie Salter, chief executive officer, was actually making a play for the future when he founded ABG in 2010 with the backing of private equity firm Leonard Green & Partners. Over the years, other prominent investors joined in, including ?General Atlantic, BlackRock Inc. and Lion Capital as well as mall giant Simon Property Group Inc. Now, Salter is taking the vision to Wall Street with an initial public offering that sources said could raise $500 million and value the sprawling company at $10 billion.
A close reading of the company’s registration statement for the IPO, revealed last week by regulators, shows just how Salter is thinking bigger still — much bigger.
Even by the standards of typically pie-in-the-sky rhetoric of pitches of IPOs, Salter’s scope is staggering.
Where Farfetch chief José Neves talks about an ambitious goal of becoming “an operating system” of the $300 billion luxury industry, ABG identifies a total retail market opportunity of $13 trillion. That includes the company’s current areas of focus (apparel, footwear and accessories and media), categories where it’s starting to build (luggage, food and beverage and children’s) and then future opportunities (alcoholic beverages, consumer electronics and mobile payments).
Salter, 58, can think so broadly because he’s already managed to get so big, posting licensing revenues and commissions of $489 million last year, reaping staggering net profits of $225 million. All together, ABG’s portfolios of more than 30 acquired brands generated retail sales of $10 billion through more than 700 partners globally last year — during the pandemic.
While established fashion companies spent the last decade migrating toward the future with a more digital approach and putting the squeeze to brands like Aéropostale and Nautica (both of which ABG scooped up), Salter and Co. started building from the ground up.
“ABG deconstructs and reconstructs the traditional model, owning only the brands, creating a decentralized network of best-in-class partners to execute the rest of the value chain,” Salter said in a letter to potential shareholders included with the regulatory filing. “We are brand owners, curators and guardians. We don’t manage stores, inventory, or supply chains. We don’t manufacture anything. We are a licensing business and are purely focused on brand identity and marketing.”
Before ABG, Salter was CEO of Hilco Consumer Capital Corp. as well as president of GSI Commerce. He had seen how the business worked.
“I came to realize that most brands were structured for a different era — before the speed of digital and the complexity of global; antiquated, and ultimately difficult to retool as the market and the consumer evolves,” he said. “Being best-in-class in every competency at every step of the value chain is an impossible task for most teams, but that’s what defines success in the traditional model. Insource all activities, capital needs, and risk. A vast number of great brands are structured like this.”
In his pitch to Leonard Green, Salter said “the brand industry” was “broken” and “over-retailed, burdened by legacy cost and inefficiency, and not equipped to win in the ongoing digital transformation.”
That pitch succeeded and so has ABG.
Now, as Salter begins to pitch again to a new set of investors on Wall Street, here are key takeaways from the IPO filing that illustrate just how the company is making something new with old brands.
Seeing Brands Differently
Brands are usually built with a certain maniacal focus, they apparently are rebuilt with an open mind.
“Most people look at Juicy and recall the luxury tracksuit, whereas we look at Juicy and see the original athleisure brand that has vast untapped consumer mindshare and potential for global growth,” ABG said.
“Most people look at [Sports illustrated] and think about the iconic magazine. What they don’t see is the brand’s huge potential to grow horizontally: digital, sports gaming, event ticketing and world-class immersive events.”
Digital Drives
The backbone of ABG is a massive digital infrastructure. ABG brands have a total of more than 250 million followers on social channels, where they create four billion annual impressions.
“Our expansive digital reach enables remarkably powerful data capabilities and allows us to do things that I wouldn’t have previously thought possible, like building our own multibrand digital marketplace and subscription platforms,” Salter said. “The relevance of our brands extends everywhere and anywhere — e-commerce, digital content, through world-class experiences and a vast network of distribution points across 136 countries. You can’t swipe Instagram or drive down the street without experiencing ABG.”
This creates what the company described as a “flywheel” where the company uses its digitally gleaned consumer insights to sharpen its marketing and evaluate potential brand acquisitions. Every deal then brings in more customers, sharper insights and so on.
Ready to Deal
ABG has an unusual scope in that it can chase both Forever 21 and Barneys New York — at the same time — and win both.
That comes with practice, deep pockets and a plan.
“Prior to completing any acquisitions, our management team employs a deliberate approach of establishing a licensee base and distribution network for the acquisition target, thereby significantly reducing the execution risk associated with the onboarding of our brands,” the company said. “By leveraging ABG’s scaled distribution platform and network of licensees, we are able to efficiently drive growth post-acquisition.”
Forward Momentum
Salter not only has big dreams, but a roadmap for ABG to make them come true. The company’s plans for its digital ecosystem encompasses a number of initiatives, including:
? Marketplace: ABG formed an initial partnership with RevCascade to use its dropship technology to help licenses sell products from other ABG-owned brands.
? Digital ventures: The company has equity and revenue share partnerships with software and technology companies that target parts of the customer journey and are helping to “scale the software or technology across our portfolio of brands.”
ABG is also planning on launching a loyalty membership program across all its brands that would give “customers discounts and perks for a monthly subscription.” And the firm is going to centralize its branded credit card program under one co-branded card.
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