Bankruptcy and Love for It: Welcome to the Profitable World of Undead Brands

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

Take Forever 21, for example. Four years ago, the chain declared bankruptcy. In 2020, it was acquired after bankruptcy by an unusual team: America's largest mall operators and the firm Authentic Brands Group.

Today, it's more ready than ever to sell you the shortest shorts. Last week, under new ownership, Forever 21 expanded, possibly making it the largest retail deal of the year—a partnership with fast fashion giant Shein.

Over the past decade, this resurrection with varying degrees of success has been done with dozens of brands. Retailers like Juicy Couture, RadioShack, Aéropostale, and Pier 1 went bankrupt but not entirely out of business. Some still make millions off these names.

The hunt for resurrected brands is big business.

How It Works When a company goes under, it's often sold off in parts, including intellectual property: branding, design, customer data. Someone who buys it may try a kind of retail taxidermy—put new operations in a familiar shell, give it a fresh charge, and hopefully achieve more.

In simpler terms, this business model works because "not everyone knows the store is closed," says James Cook, director of retail research at commercial real estate company JLL. "People are constantly Googling that brand."

Right now, online home goods seller Overstock.com is trying to do the same thing with the intellectual property of bankrupt Bed Bath & Beyond, shedding its former Overstock identity and relaunching under the recently acquired Bed Bath & Beyond name. Shoppers of the Toys R Us brand tried to keep it alive in multiple versions.

Forever 21 and Barneys New York, bought by Authentic Brands Group after bankruptcy, released a joint collection this year. Craig Barritt/Getty Images for Forever 21 But no one profits from undead brands quite like Authentic Brands Group. It owns over 50 labels, some of which you might not even realize went bankrupt or came close: Nine West, Quiksilver, Juicy Couture, Nautica, Barneys, Brooks Brothers.

Everything's Cool and Nothing's Boring Authentic Brands Group decided it won't have anything to do with the expensive parts of retail: "We don't run stores, inventory, or supply chains," the company told potential investors. "We don't manufacture anything."

Instead, it buys the intellectual property of brands (ideally on the cheap) and sells licensing rights, collecting royalties.

For example, take a shirt from Brooks Brothers: someone paid Authentic Brands a fee to place that label on that shirt, for access to its design, and for managing the store under that brand. This is the reincarnation of Brooks Brothers, which went bankrupt in 2020 in the midst of the COVID-19 pandemic.

Authentic "is the sole owner of practically everything that makes a brand cool," says Alex Tersel, who helps companies make such deals as head of consulting firm Kearney.

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