Private-Equity Firm Hilco Revives Retail Casualties
Bombay Co., Sharper Image Brands to Live Again Via Licensing
NEW YORK (AdAge.com) -- While retailers reel in the face of sluggish consumer spending and bankruptcies pile up, private-equity firms are emerging as the beneficiaries.
"Our mandate here is to acquire iconic consumer product names that are underperforming or undervalued," said John Collins, chief marketing officer of Hilco Consumer Capital, which has been involved in the acquisitions of Sharper Image and Bombay Co., and who counts Caribbean Joe, Ellen Tracy and Tommy Armour as part of the company's growing brand stable. "Things really started cooking last fall, and over the last six months there's been an increase in the amount of opportunities for us. ... I've got meetings every day."
Formula for revival
Hilco, a 2-year-old division of private-equity firm Hilco Trading, snaps up well-known brands, spiffs them up, often retooling the target market or merchandise categories, and returns them to store shelves via a variety of licensing strategies. Each has been systematically torn down and rebuilt, said Mr. Collins, noting that the division is interested in a wide variety of categories from food and beverage to health, beauty and retail. "We have a whole team out there looking to acquire and gain access to what we see as brands where we can make a difference."
That clearly illustrates the growing appetite among private-equity firms, said Patricia Edwards, a retail analyst at Wentworth, Hauser & Violich. Ms. Edwards noted that even retail giants JCPenney and Macy's have been the subject of buyout rumors in recent weeks. "These are pretty good franchises at fire-sale prices," she said. "There is an opportunity, if you have a very long-term viewpoint, to pick up some strong, well-recognized names and turn them around. But it's not something that's going to happen in a very short time period. And the stock market is nothing if not impatient."
Mr. Collins said the company moves quickly once an acquisition is made, often immediately tapping a creative agency without an extensive search or presentation process. But the amount of time a brand is removed from the market varies. Tommy Armour left the marketplace for less than six months before The Sports Authority agreed to be its exclusive retailer. Bombay Co., for which Mr. Collins is working to secure an exclusive retailer to handle, will likely end up being off the market for 12 to 18 months.
Sharper Image back in view
Work on Sharper Image began just 60 days ago, but retailers will see the results in the coming weeks, Mr. Collins said. Lead agency Kirshenbaum Bond & Partners, New York, helped to develop the new concept Sharper Living, which could be translated into Sharper Home, Sharper Men and Sharper Health & Beauty. In the case of The Sharper Image, it's unlikely that one retailer will emerge as an exclusive partner, Mr. Collins said. Instead, he expects a number of manufacturers could eventually hold licenses to distribute the products.
Still, acquiring a bankrupt retailer isn't without challenges. In the case of Sharper Image, Hilco has taken pains to communicate with customers broadsided by the retailer's implosion. Sharperimage.com carries the message "Sorry to keep you in the dark. But, there's something big coming. Soon." The company has also been providing information to customers with gift-card claims and warranty issues.
"We worked immediately to communicate with the customers, as soon as we acquired the company," said Sarah Neff, manager-marketing communications at Hilco. "[We wanted] to make sure people weren't left wondering what was going on."
"Hypothetically, one of those customers could be my customer one day, and we'd like them to be," added Mr. Collins.