Changes Continue Among Brand Management Firms
Iconix Brands Group’s proposed sale to a private equity company, and Sequential Brands Group reportedly being on the verge of selling its stake in the Jessica Simpson brand back to the singer amid its own financial distress, are among the latest signs of change roiling the brand management business.
The moves would seem to signal a changing of the guard. Iconix, Sequential and Apex Global Brands (formerly Cherokee), which also was sold earlier this year to a private equity company, having struggled in recent years as a new crop of agencies – Authentic Brands Group, Marquis Brands, Bluestar Alliance, WHP Global and others – emerged with fresh private equity funding.
DTRs Replaced by Private Labels
Their arrival also marked a change in the brand management business model away from direct-to-retail (DTR) deals that were once its hallmark. Apex’s Cherokee brand was a Target apparel staple before Target switched its focus to its own private labels, which now number about 40. Similarly, Iconix’s Mossimo and Mudd brands were DTRs at Kohl’s before Kohl’s replaced them with its own and other brands.
Companies have taken on debt to build their brand stables, and in many cases have been hit by a perfect storm of forces that blew a hole in their plans. In addition to many major retailers’ move to raise their private label game, the global pandemic cut sharply into apparel sales — the core of most of those companies’ brands – and a winnowing of retailers, with about 30 filing for bankruptcy or liquidating during the past year.
“The customer wasn’t waking up and saying ‘I need to buy t-shirts and shorts for my child and I am going to get Cherokee at Target,” says Eric Beder, CEO and Senior Research Analyst at Small Cap Consumer Research. “After a while the retailers gained more confidence in themselves. And the problem is that if the licensors are just collecting a check and not providing any services, retailers don’t need that and ask ‘why am I licensing a label when I can have one of my own?”
Among recent developments:
- ABG is reportedly is preparing for an IPO, valuing the company at $10 billion and signaling the potential return of a new wave of brand management companies to the public markets. Marquis, ABG and WHP Global all are backed by private equity firms, which typically seek a return on their investment within 3-5 years.
“There is no reason we couldn’t be sitting here in another year or two and have 2-3 publicly traded IP companies again and they could be just as big as Iconix in its heyday,” says Beder.
- Sequential, which sold off the Heelys brand in late April, is reported to be seeking to sell its stake in Jessica Simpson as part of a bankruptcy filing. At its peak, the brand generated about $1 billion in annual sales. Meanwhile, Iconix also sold several stakes in joint ventures, including last year’s $62.5 million sale of Umbro China to HK Qiaodan Investment. And, in buying Apex, Galaxy Universal is said to be focusing on the 50 Peaks, Hi-Tec, Magnum and Interceptor footwear brands Apex acquired in 2016.
- Bluestar Alliance reached an agreement to buy Levi Strauss & Co.’s Dockers brand in a deal that would expand a portfolio that currently includes, among others, the Bebe, Tahari and Limited Too labels