Step into the world of undead brands

Transcript

MARY LOUISE KELLY, HOST:

Who wants to buy a bankrupt retail chain? Think back to stores like Juicy Couture or Pier 1. They went under, but turns out, not all the way under. Someone today makes money on these names. NPR's Alina Selyukh takes us into the shadows of retail.

ALINA SELYUKH, BYLINE: Can there be life after death of a brand? Picture yourself in an abandoned mall.

(SOUNDBITE OF MONTAGE)

UNIDENTIFIED REPORTER #1: American Apparel filed for bankruptcy.

UNIDENTIFIED REPORTER #2: Sharper Image.

UNIDENTIFIED REPORTER #3: Aeropostale.

UNIDENTIFIED REPORTER #4: Wet Seal.

UNIDENTIFIED REPORTER #5: Nautica.

KELLY: Forever 21 has become the latest store to remind us that nothing is really forever.

SELYUKH: Except the lights flicker on in this grim mall and you realize these stores aren't that dead. Someone brought them back to life. Take Forever 21 - it actually got bought out of bankruptcy by an unusual team. On it, were America's biggest mall operators and this company called Authentic Brands Group. Authentic Brands owns dozens of labels, some of which you may not even realize had gone bankrupt - Nine West, Quiksilver, Juicy Couture, Brooks Brothers.

JAMES COOK: They're very niche.

SELYUKH: James Cook is the director of retail research at real estate firm JLL, and he says there are only a few companies like this. And very broadly, the business of undead brands centers on this fairly simple premise.

COOK: Not everybody knows the store is closed. People are googling that brand all the time. It still has, like, a name recognition.

SELYUKH: When a company goes under, it's often sold for parts. And someone can buy its intellectual property - that's the branding, designs, customer data. If you own this, you can try to do, sort of, retail taxidermy - stuff new operations inside this familiar shell, give it a new charge and hopefully do better. But nobody makes money on undead brands quite like Authentic Brands Group.

ALEX TERSELEER: It's a very interesting business model.

SELYUKH: Alex Terseleer helps companies strike these kind of deals as a principal at the consulting firm, Kearney.

TERSELEER: It's definitely very innovative way to look at retail.

SELYUKH: What Authentic decided is that it would have nothing to do with the expensive parts of retail. It does not run stores or warehouses. It doesn't actually make anything. Instead, it owns the label, the branding and sells licensing rights.

TERSELEER: You know, manufacturer - the actual company that will produce the good - will pay you some kind of royalty fee to use the design, the brand.

SELYUKH: And so if you go, say, into a Brooks Brothers and buy a shirt, someone paid Authentic Brands to put that label on that shirt, to run the store under the brand. And Authentic is like the puppet master with hundreds of strings, making sure the quality is right, the marketing is good, the brand stays relevant and worth it for everyone.

TERSELEER: The sole owner of basically everything that makes a brand cool.

SELYUKH: Authentic does this for fashion labels but also famous people. It controls global branding for Elvis Presley, Marilyn Monroe, David Beckham and Shaquille O'Neal. This approach - stripping out all the retail overhead and just focusing on buying and recharging brands - it can be really profitable. Authentic did not answer NPR's questions, but three years ago, the company said its revenues were close to half a billion dollars. Nearly half of that was profits. Here's the downside.

TERSELEER: My take is that it's more risky than a normal business.

SELYUKH: For example, another firm that had bought the intellectual property of RadioShack, Pier 1 and Dressbarn was recently reported to be weighing its own bankruptcy. That's why Terseleer describes this as a business built on leaps of faith. And so far, Authentic Brands seems to be landing on a few gold mines. But is it the savior or a grim reaper of struggling brands? Terseleer says...

TERSELEER: I think they would probably describe themselves as custodians in a way because they are bringing a new business model in order to either revive or keep alive brands that might have been completely gone otherwise.

SELYUKH: Collectors of retail antiques with maybe a touch of taxidermy. Alina Selyukh, NPR News. Transcript provided by NPR, Copyright NPR.