Anytime a brand or company is put up for sale or finds itself in bankruptcy court, the first name that comes up as a potential acquirer is Jamie Salter.
Over the past decade, the chief executive officer of Authentic Brands Group has amassed a war chest of more than 30 brands, representing retail sales of nearly $14 billion. This year alone, he’s added Barneys New York, Forever 21 and Brooks Brothers to his stable.
Here, Salter outlines his plans for high-profile additions and where he sees the company going in the future.
WWD: You’ve had quite a busy year, how do you evaluate potential acquisitions and what do you look for when you’re making them?
Jamie Salter: All acquisitions are treated a little differently, but at ABG, we focus in two areas: one is in entertainment and the other is in lifestyle. We look at whether the brand is global and expandable, meaning can we take it into other places around the world in different categories.
WWD: Do you always look to involve Simon and Brookfield, the real estate firms you worked with on several deals this year?
J.S.: No, lately there’s been a lot of involvement with them with Forever 21, Lucky and Brooks Brothers. All three of those have a retail component and when something has a retail component, Brookfield and Simon control more than 50 percent of the A malls in the U.S., so it would be hard to have a strategic plan without them.
WWD: What types of properties do you look for in both entertainment and lifestyle? Do they need to include a retail component?
J.S.: Early on when we were doing the lifestyle deals, we didn’t want to have retail stores here in the U.S. But over a period of time, [we understood that] having retail stores in the U.S. and an e-commerce strategy is incredibly important to expanding our business on a global basis. If you look at the brands we have here with Simon and Brookfield, those are the best five brands in our portfolio and represent almost 40 percent of our business, and I can honestly say that if we didn’t have the retail component, it would be very hard to expand them as wide as we have on a global basis. Having that retail presence has also enabled us to grow our e-commerce business, which today, represents almost 20 percent of our total business.
WWD: What about entertainment — do you feel you need brick-and-mortar for those brands, too?
J.S.: Entertainment is different. It’s more on the movie and content side — a lot is event driven. When you look at the 6,000 licensed stores we have, they’re primarily on the lifestyle side.
WWD: How closely do those international lifestyle stores mirror the ones in the U.S.?
J.S.: They’re almost identical. We look at the U.S. to take the show on the road, but there are some partners that are leading the way like our Chinese, Korean and Latin American partners. We pick up some of the trends they’re doing and we follow them in the U.S. Our Spyder partner in South Korea is doing an incredible job. We have about 135 stores in South Korea for Spyder and they’re taking it all four seasons.
WWD: When you bought Barneys and then Brooks Brothers, you talked about the international potential for both brands. Can you share any plans you have for them?
J.S.: For Barneys, we’re about to announce a personal care, beauty and fragrance deal that we did out of South Korea. As you know, we have distribution in Japan today and we’ll be expanding into China, South Korea and the EMEA over the next 24 months. We’ll be opening stores here in the U.S. through a partnership with Saks and the first in New York and Greenwich will be opening in the first quarter of 2021. We would have liked to have had them open by now, but unfortunately with COVID-19, it set us back almost a year.
WWD: Do you still see Barneys as a high-fashion focus?
J.S.: Yes, 100 percent. We see it as 50 percent other brands, a marketplace that we’re building internationally, and 50 percent the Barneys brand that will trade in the luxury space.
WWD: And what about Brooks Brothers?
J.S.: Brooks Brothers is affordable luxury and we have 585 stores open now globally, primarily South Korea, China, Japan, U.S. and Mexico. We’re hoping Europe will open soon as the countries open up. Brooks Brothers has great product, [former owner Claudio Del Vecchio] and the team did a great job, with a focus on suiting. But that particular category, as we know, took a step back so we’ll be focusing a lot of our time and effort on the sportswear end of the business on the higher end. We just brought on Michael Bastian who is helping us in that area as he is now the creative director for Brooks Brothers.
WWD: Will you also be involved in the J.C. Penney deal?
J.S.: It’s not official yet, but we are getting closer to being involved with Brookfield and Simon. As you know, Shaq is the ambassador for big and tall for Penney’s and we’ll be expanding that relationship with them. And then there are several of our brands that make sense, but we respect the distribution of the other department stores we do business with currently [like] Macy’s and Dillard’s. And any brands we bring to J.C. Penney we’ll protect against other department stores. We’re pretty careful that way.
WWD: Not only are you a firm believer in brick-and-mortar, you also seem to be a firm believer in the department store when many others say it’s a model that’s broken.
J.S.: There’s no doubt the department store has to change. Macy’s has done a terrific job switching over to an e-commerce strategy where virtually 40 percent of their business is e-commerce. If we get involved with J.C. Penney, we’ll have a key focus on the e-commerce side, but I do think department stores will be around. They’re going to have to change their strategy and become more exclusive with certain brands and their product mix. Walmart got into the food business and I’m not sure why department stores haven’t gone into the essential side of the business. I think there’s an opportunity there because it gets consumers coming into the store more often, which is also good for mall owners.
WWD: It always seemed strange that the European store model like Harrods or Le Bon Marché includes an attached food court, but the U.S. retailers never followed that model.
J.S.: Correct. I always say we’re not that smart at ABG, but we’re good at moving around the world and figuring out what people are doing right. I have a lot of respect for the Middle East. One day I got home from Dubai and I said, “I don’t understand why we don’t partner with the mall owners.” Some people looked at me kind of funny, but I said, “All of our partners in the Middle East are mall owners so why couldn’t we do that same model in the U.S.?” So I picked up the phone and called David Simon and Sam Pollack and they were interested in talking. It took about a year, but when the right opportunity came along, here we are four years later and between Brookfield and Simon, particularly Simon, we have five different brands under the platform doing roughly $7.2 billion [Brooks Brothers, Barneys, Lucky, Nautica and Forever 21] and they’re extremely profitable with virtually no debt. And I owe that to David Simon because it was initially his idea on how to put it all together.
WWD: Forever 21 has been faced with a host of challenges with stores that are too big and merchandising missteps. What are your plans to revitalize the brand?
J.S.: We bought Forever 21 on Feb. 15, the world shut down on March 15. Forever 21 will be the most profitable asset in our portfolio from a retail standpoint this year. We truly believe they had too many vendors, they had 1,800 vendors when we took over the company and I think realistically, they should have 150 so we can control the business bigger, faster and better. Daniel [Kulle], who came from H&M is the president and he’s a tough, tough, tough boss, very laser focused on the supply chain and the merchandise side, so early stages, it’s pretty good.
WWD: Will brick-and-mortar take a bigger role as you grow your brands?
J.S.: Realistically, there’s room for roughly 300 to 400 stores in America per brand and if you’re within that mark, you can service most of America. Now, J.C. Penney is a little bit different. It has 661 stores left and that’s why I say you have to diversify beyond apparel and accessories to more categories that become more essential to consumers so they need to go to the mall on a daily or weekly basis. But on the specialty retail side, you need 300 to 400 doors to a brand if you want to have a proper e-commerce and global strategy.
WWD: You have such a diverse portfolio, how do you manage it?
J.S.: We have 30-plus brands in the portfolio that are incredibly important, but it’s the people behind us and how we’re wired. We have 150 people and they work with the other 27,000 people at SPARC and the other companies we’re partners with. It’s best in class. We have 1,000 partners globally and if you do deal with Dolce & Gabbana on Marilyn Monroe, we don’t have to tell Dolce & Gabbana how to run their business: they’re professionals, they’re really good at it and as long as we give them the assets and the rule book, they do an unbelievable job. Picking the right partners has been really important to us.
WWD: Do you see the current economic climate as fertile ground for more acquisitions, and how much more can you absorb?
J.S.: We can definitely absorb more and the model is very stable at ABG. We have a tremendous amount of cash flow coming in on a monthly basis, we have more than $1 billion on our balance sheet today, either drawn or undrawn, that is available. So we’re able to take on deals that are fairly sizable. We don’t wish ill will on anyone and we’re hoping that the market improves, but if there are some situations, we’ll definitely take advantage of those situations. We’re a valued buyer as a rule and if the right brand comes up, and we believe there’s value there, we’re in a position to take advantage of that today.
WWD: Would you look at overseas acquisitions, or do you always look at the U.S. first?
J.S.: Overseas is actually very important to us — 40 percent of our business today is coming from outside the U.S. so brands that are overseas can be more important to us than a U.S.-centric brand, but in all cases, they have to be global and be able to travel. We break the company today into four key areas: Latin America, USA/Canada, UEA and Asia-Pacific. We used to say we had a domestic business and an international business, but we don’t say that anymore: now there are four different pillars. Asia is really going well. Latin America is doing well. The Middle East is still doing well, but you go back four years and the margins were insane and now they’re normal. The world is becoming more round, and even though there are still Third-World countries out there, there are so many others that are coming on: India, Brazil, Latin America, Mexico are becoming powerhouses. Countries are figuring out how to do a lot of business in their own countries and if we figure out how to build out our international team, we’ll be able to continue to grow the business. We may be a little more flat in the U.S., but I believe the other regions will grow substantially.
WWD: Are there any categories you’d like to expand?
J.S.: Yes, we have a lot of kids’ business today and we need to spend more time in that area, particularly on the character side which would bring our entertainment into play.
WWD: How big do you think the group can be?
J.S.: I’ve said to the market that we’d like the company to be $25 billion in annual retail sales on a global basis within the next three to five years. I feel very confident that we will get there. We’re sitting just shy of $14 billion today and I think it’s going to take roughly another five or six acquisitions to get there. But if we don’t get there, that’s not really the goalpost for me. The goalpost for me is that we build a really great company that is profitable and everyone is having a good time every day. We have fun at ABG and maybe that’s because we’re private and not public. This business is just over 10 years old and it’s important that people come to work and they’re happy.
WWD: Would you ever go public?
J.S.: I don’t know. I’ve been public before and maybe one day we will be public again. Maybe, maybe not. We’re partners with some of the best private equity firms in the world: Blackrock, Leonard Green, General Atlantic with minority partners GIC and Simon Properties. We’ve got a good stable of partners and I’m not sure I’d want to change that.
WWD: Looking into your crystal ball, when do you think things will turn around?
J.S.: You can’t project how the world’s going to go on a global basis. November was just a great month, it wasn’t powered by Black Friday or Cyber Monday. It was a whole month of great business. The whole calendar is shifting and I believe you have to have sustainability because you’re not sure when the revenue is coming. I think revenue will normalize in 2021 and in 2022 we’ll be back to normal growth rates across the U.S. in most sectors. I do believe people are going to continue to wear clothes and put on shoes and buy things. Brands are going to be incredibly important. People want to get out of the house and go shopping and go to the mall. I’m a firm believer that next year will be good and 2022 will be an absolute blowout year for the good companies that made it through. I spoke to my friends at Live Nation, they do 30,000 events a year, and they had very low cancellation of tickets which tells you people are eager to get back to what they were doing before all this came down.