‘Big-Name Designer’ Among the Changes Expected for Brooks Brothers
Expect a well-known designer and a restructuring team to make their appearance at Brooks Brothers within the next few months.
Those are just two of the changes that will be instituted quickly by its new owner, Jamie Salter, the founder and chief executive officer of Authentic Brands Group, who finalized the deal to purchase the 202-year-old retailer for $325 million on Friday through his Sparc Group partnership with Simon Property Group.
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“This is a home run — a grand slam,” Salter told WWD shortly after the acquisition was finalized. “It is definitely one of the best deals we’ve done in the last 10 years.”
Salter said one of his partners at BlackRock, which last summer, through its Long Term Private Capital arm, invested $875 million into ABG, was the first one to tell him he should buy Brooks Brothers. “He travels all over the world and told me, ‘This brand is for real. It has a huge heritage and I love it.’ So I did the research and found that every data point says this brand is so undervalued and the opportunities are massive.
“I’m not saying this is the next Ralph Lauren, but there’s incredible heritage, it has been well-maintained and has great brand integrity. Claudio [Del Vecchio, who has owned the business for the past 20 years] has done a great job, but there’s so much low-hanging fruit.”
Salter said that while there is a “ton of work to do, this is brand that has been built over 200 years. It has so much respect on a global basis and ticked all the boxes for us: it’s global, is in a lot of categories and has an incredible retail footprint.”
Salter said he has committed to keeping 125 of the company’s approximately 250 stores open, and probably more. “I’m going to keep as many stores as I can, probably around 200,” he said. There are 75 stores in Simon developments and another 10 in Brookfield Property Partners’ centers. In the past, he has also partnered with Brookfield on deals as well.
Salter said he has already spoken to Del Vecchio, who personally owns the building that houses the Brooks Brothers flagship on 44th Street and Madison Ave., about the fate of that site. “If he gives me a good deal on the rent, I’ll keep it,” Salter said.
Almost immediately, Salter will install a restructuring team that he will draw from his “bullpen of crisis managers” at ABG and Sparc. “The restructuring team will be going in right away, that’s where we’ll start,” he said. “They’ll get rid of all the fat — and I don’t just mean employees. I mean Xerox machines and other contracts you don’t really need. People don’t understand when I say Xerox machines, but if you have 10 and nobody uses them, you don’t need 10.”
But Salter said the quality and the pricing of the merchandise will remain the same. “We never take anything downmarket,” he said. “That’s not what we do. But there will be a lot more leisurewear and activewear. We won’t forget the tailored piece but there won’t be a huge emphasis in that area.”
Despite its reputation as a purveyor of mainly suits and sport coats, sportswear actually accounts for more than half of Brooks Brothers’ sales. “That’s true, but it needs to be 80 percent,” he said. “And although they sell a lot of sportswear, they never put emphasis on it.”
Salter is also in the final throes of hiring a “big-name” men’s designer to join the company and oversee its merchandising going forward. “I’ve spoken to three different designers with strong sportswear backgrounds that we like and would be very powerful,” he said.
Although he declined to mention names, some possible options are Todd Snyder and Michael Bastian, both of whom have the right pedigree for the job. And international players such as Nigo, the Japanese designer who created A Bathing Ape, may also be involved in some way, sources said. Brooks Brothers has a long-standing and successful business in Japan.
Salter would say only: “We’ll be hiring someone soon — inside of this year for sure. It’s going to be fast.”
Ditto for a new ceo. Salter said he expects to tap into the executive team at Sparc and ABG for that position. “We have 50,000 employees and there are some special people inside Sparc and ABG with great skill sets.”
He pointed to Marc Miller, ceo of Sparc, who joined the company after it acquired Aéropostale. “He’s a phenomenal ceo and a great operator,” Salter said. And he believes Brooks Brothers needs someone like Miller to take over the helm of that business.
Salter said he plans on retaining Brooks’ existing joint ventures in China, Japan and Mexico, and will most likely switch to a different partner in Korea. He also expects to line up licensees in a number of categories where he sees opportunity including shoes, grooming, socks, underwear, small leather goods and home products.
“And we’ll be in the wholesale business with sportswear, tailored, shirts and outerwear,” he said. Brooks Brothers has wholesaled in the past, but it represents only a small percentage of its overall business, or around $50 million of its close to $1 billion in annual sales.
What won’t be retained will be the company’s three American factories that Del Vecchio said he would close this summer. ABG also owns Hart Schaffner Marx and Hickey Freeman which operate factories in Chicago and Rochester, N.Y., that produce their merchandise. “We’re in the middle of negotiating a deal with them,” he said. “Making made-to-measure clothing in the U.S. will be a key component going forward and we’ll make it in those factories. And one of my friends may buy the shirt factory.”
Brooks Brothers had owned a tailored clothing plant in Haverhill, Mass., a tie factory in Long Island City, N.Y., and a shirt factory in Garland, N.C.
“We do plan on still making things in the U.S.,” he said.
He also complimented the team running the Brooks Brothers business in Europe and expects to retain that team, headed by Luca Gastaldi. But ABG has a large operation in France and some of the back-office functions will be merged, he said. And ABG’s international sourcing capabilities are also expected to benefit the company.
“With our sourcing, we can bring prices down 10 to 15 percent without missing a beat,” he said.
Overall, Salter believes the future is bright for Brooks Brothers — it just needs to blow off a little of the dust and update its image and online capabilities. “I need young, vibrant people who understand e-commerce,” he said, adding that he believes e-commerce alone can be a $1 billion business within the next 24 to 36 months. “Now, it does a couple hundred million,” he said.
Earlier this week, Salter’s ABG completed its acquisition of Lucky Brand Dungarees for $140 million, bringing the value of ABG’s portfolio to $13 billion. He founded the company a decade ago and has since built a stable of well-known fashion brands including Barneys New York, Forever 21, Juicy Couture, Nautica, Aéropostale, Volcom, Spyder, Prince, Neil Lane and myriad other labels.
Although it started out as a brand management firm, over the past four years, Salter has begun putting more emphasis on purchasing brands and retaining the retail stores and e-commerce operations rather than acting as purely a licensing agent. It now has some 5,500 freestanding stores and shops-in-shop around the world and its retail, wholesale and e-commerce operations account for a little more than $4 billion in sales.
Brooks Brothers had filed Chapter 11 in July with $75 million in debtor-in-possession financing in place from ABG’s competitor WHP Global. But Salter quickly raised the stakes by offering $80 million in DIP financing, becoming the stalking horse.
In addition to BlackRock, other investors in ABG include Leonard Green & Partners, General Atlantic, Lion Capital and the two big mall developers, Simon and Brookfield.
Salter’s meteoric rise in the fashion and retail business is impressive. The 57-year-old Toronto native started his career in sports marketing and was the cofounder of Ride snowboards in the early Nineties. After that company went public, he and Fanatics’ founder and executive chairman Michael Rubin created Global Sports Inc., which eventually became GSI Commerce. Once he exited that business, Salter turned his attention to licensing, cofounding Hilco Consumer Capital. He formed ABG in 2010.
