Bankrupt and loving it: Welcome to the lucrative world of undead brands

Can there be life after death? For many retailers, the answer is yes.

Take Forever 21. Four years ago, the chain filed for bankruptcy. In 2020, it was bought out of bankruptcy by an unusual team: America's largest mall operators and a firm called Authentic Brands Group.

Today, it is as ready as ever to sell you the shortest shorts. Last week, under the new owners, Forever 21 expanded what could be the largest retail deal of the year, a partnership with fast-fashion giant Shein.

This resuscitation has played out, to varying success, with dozens of brands over the past decade. Retailers like Juicy Couture, RadioShack, Aéropostale and Pier 1 went under, but not all the way under. Someone still makes money — millions of dollars — off these names.

The hunt for revivable brands is big business.

How it works

When a company goes under, it's often sold for its parts, including its intellectual property: the branding, the designs, the customer data. Someone who buys this can attempt a sort of retail taxidermy: stuff new operations inside that familiar shell, give it a new charge and hopefully do better.

In simplest terms, the business model works because "not everybody knows the store is closed," says James Cook, director of retail research at the commercial real estate firm JLL. "People are Googling that brand all the time."

Right now, online home-goods retailer Overstock.com is trying this with the intellectual property of bankrupt Bed Bath & Beyond, shedding its old Overstock self and relaunching under the newly purchased Bed Bath & Beyond name. Buyers of the Toys R Us brand have tried to keep it alive through several iterations.

But nobody makes money on undead brands quite like Authentic Brands Group. It owns more than 50 labels, some of which you may not realize went bankrupt or came close to it: Nine West, Quiksilver, Juicy Couture, Nautica, Barneys, Brooks Brothers.

All the cool with none of the boring

Authentic Brands Group decided it would have nothing to do with the expensive parts of retail: "We don't manage stores, inventory, or supply chains," the company has told its prospective investors. "We don't manufacture anything."

Instead it buys intellectual property of brands — ideally on the cheap — and sells licensing rights, earning royalties.

For example, take a shirt from a Brooks Brothers store: Someone paid Authentic Brands a fee to put that label on that shirt, to have access to its design, to run the store under the brand. This is the reincarnation of Brooks Brothers, which went bankrupt in 2020 at the height of the COVID-19 pandemic.

Authentic is "the sole owner of basically everything that makes a brand cool," says Alex Terseleer, who helps companies strike these kinds of deals as a principal at the management consulting firm Kearney.

In addition to fashion labels, the company also controls global branding for famous people, including Elvis Presley, Marilyn Monroe, David Beckham and Shaquille O'Neal. It even owns the intellectual property of Sports Illustrated.

Niche, risky and, sometimes, very profitable

Stripping out all the retail overhead to focus just on buying and reviving brands can be very lucrative. Just over a decade old, Authentic Brands Group disclosed 2020 revenues close to $490 million. Nearly half of that was profits.

"It's a very innovative way to look at retail," Terseleer says. "It's a very risky business model."

Another firm, Retail Ecommerce Ventures, had bought the intellectual property of RadioShack, Pier 1 and Dressbarn. This year, it was reported to be weighing its own bankruptcy and later sold off RadioShack.

Authentic Brands, meanwhile, plans to become a publicly traded company. It filed the initial paperwork in 2021 but later received a multibillion-dollar private-equity infusion and postponed the timeline. In June, another investment deal valued Authentic at over $20 billion.

Determining which brands can be saved

Authentic did not answer NPR's questions. But founder and CEO Jamie Salter often talks about distinguishing good retailers from good brands, which can survive the business missteps of a previous owner.

For example, he told Bloomberg Television in 2020 that he'd passed on buying Charlotte Russe, a decent store but not a "real brand," as he put it.

"Can that brand sit in other retail stores? Can that brand expand into other categories? And more importantly, can that brand expand globally?" Salter said. "There's lots of retailers that have that, but there's lots of retailers that don't have that."

It's a constant series of leaps of faith, says Terseleer. That's a big reason why this peculiar business of retail-brand taxidermy remains niche and nascent. The brand is dead — long live the brand.