The owner of Barneys New York, Forever 21, Nautica and Eddie Bauer has taken steps to go public.
After eyeing the public markets since 2015, CEO Jamie Salter’s Authentic Brands Group is set to join fellow fashion-related players like Poshmark, Mytheresa.com, Dr. Martens, ThredUp, along with autonomous trucking startup TuSimple and medical scrubs startup Figs, in launching an initial public offering for $100 million, the placeholder sum commonly seen in these filings.
Renaissance Capital, an IPO-focused investment bank, estimates that ABG could raise $1.5 billion, dovetailing with the firm’s hoped-for $10 billion valuation, though Salter sees $25 billion in the years ahead. ABG plans to trade on the New York Stock Exchange under the symbol “AUTH.”
In its IPO prospectus filed Tuesday with the Securities and Exchange Commission, the New York-based brand management firm said it plans to continue acquiring “powerful and enduring brands that we believe are strong candidates for the ABG platform and which would benefit from our capabilities,” adding to a 30-plus fashion, lifestyle and entertainment portfolio of owned and licensed labels spanning Juicy Couture, Marilyn Monroe, Sports Illustrated, Shaquille O’Neal, and Muhammad Ali.
ABG, which also owns non-controlling stakes in Forever 21, Aéropostale, Lucky Brand, Brooks Brothers and JCPenney, drives roughly $10 billion in net sales each year. “There is a broad range of potential opportunities within lifestyle, entertainment and new verticals that represent compelling candidates for the ABG model,” it said, hinting at the potential for new deals to build on its 19 acquisitions over the past five years.
Though it cut its teeth in fashion and entertainment, ABG said it could expand into electronics, children’s products, home, food and beverage, and hospitality, though it’ll continue exploring “international” opportunities and deals in its core categories.
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ABG offered some insight into how it considers its next moves.
“We typically have a core licensee partner agreement signed before we execute an acquisition, significantly de-risking the successful execution of the intended strategy and providing upfront visibility into the future revenue, profit and growth potential of acquired brands,” ABG said. “In addition, as traditional distribution models continue to experience rapid change in the evolving consumer landscape, we expect to have numerous high quality acquisition opportunities over the next several years, which we expect would increase our earnings and the scale of our business.”
Announced last month, ABG’s deal to acquire PVH’s Heritage Brands, including Izod, Van Heusen, Arrow and Geoffrey Beene, is set to close in Q3. Assuming ABG goes public, however, it’ll have the firepower to throw stock options into future deals in lieu of its all-cash track record.
Shareholders including asset manager BlackRock, private equity firms General Atlantic and Leonard Green & Partners, and private equity firm Lion Capital and mall operator Simon Property Group, would continue to own an equity stake in ABG if its IPO comes to fruition. Salter, who started the company in 2010, would also remain an equity holder.
Along with Simon, ABG is part owner of Sparc Group, a related joint venture and multi-brand operator of Nautica, Forever 21, Aéropostale, Lucky Brand and Brooks Brothers as part of its role as the brand management firm’s largest licensee. Simon is also Sparc’s largest landlord.
ABG says it “deconstructs and reconstructs the traditional model, owning only the brands, creating a decentralized network of best-in-class partners to executive the rest of the value chain.” It reaches over 250 million followers via 4 billion annual social media impressions, leveraging over 2,200 creators, curators and connectors to build a multi-brand digital marketplace and subscription platforms.
ABG’s capital-efficient “asset-light” model includes more than 700 global retail, wholesale and licensee partners and 17,000 trademarks generates strong margins. Brand ownership gives the company approval rights over marketing strategies, product development and use of data while licensing partners are responsible for capital, manufacturing, inventory, distribution and markdown risks.
ABG says it gets revenue from guaranteed minimum royalties (GMR), additional royalties beyond GMRs and royalties from commercial usage. In 2020, 83 percent of revenue was attributable to GMR payments, and as of March 31, future contracted minimums exceeded $2.6 billion, with over $400 million payable to ABG in 2021 and in 2022, documents showed.
Between 2015 and the first quarter of 2021, ABG achieved median organic growth of 7.6 percent. For the three months ended March 31, 2021, net income totaled $278.1 million on revenues of $160.1 million, compared with net income of $211 million on net revenue of $488.9 million last year.
Revenue between 2016 and 2020 grew from $165 million to $489 million, at a compound annual growth rate (CAGR) of 31 percent, with net income rising from $45 million to $211 million, for a 47 percent CAGR.
Last year, ABG’s lifestyle portfolio represented 82 percent of total revenue, and for the three-month period ended March 31, 2021, about 85 percent. The entertainment division represented 18 percent of revenue in 2020, and was 15 percent for the first quarter of 2021. Sparc’s revenue in 2020 represented 7 percent of ABG’s total revenue, and 11 percent of ABG’s total in the first quarter. Its two other large licensees are Global Brands Grou and Camuto, representing 14 percent and 4 percent of total revenues, respectively, for 2020 and 9 percent and 4 percent, respectively, for the quarter ended March 31.
ABG said net proceeds from the IPO will help repay some of its $3.59 billion in debt.