Brooks Brothers are the oldest men’s clothier in the United States and are headquartered on Madison Avenue in Manhattan, New York City. Founded in 1818 as a family business, the privately-owned company is owned by the Italian billionaire Claudio Del Vecchio.
Brooks Brothers seek a buyer
The retailer, founded in 1818, boasts of having dressed 40 U.S. presidents and countless investment bankers. Early to the office-casual look, it became known for its crisp oxfords and jaunty sports jackets. But rent had become a burden, and the pandemic torpedoed a sale process that began in 2019.
“Over the past year, Brooks Brothers’ board, leadership team, and financial and legal advisors have been evaluating various strategic options to position the company for future success, including a potential sale of the business,” a spokesperson for the retailer said.
“During this strategic review, Covid-19 became immensely disruptive and took a toll on our business.”
The brand has attracted significant interest from potential acquirers, including brand-licensor Authentic Brands, but many have preferred to buy the brand with fewer stores.
In early April, it began to evaluate which of its roughly 250 North American stores to close. It has already decided to close about 51, a decision it attributes to the pandemic. Most of those closures have already begun, and the company has moved inventory from the targeted stores to distribution centers. The retailer is proceeding with plans to reopen the majority of stores it shut due to the pandemic.
It has more than 500 stores worldwide and employs 4,025 people.
“We are in the process of identifying the right owner, or owners, to lead our iconic Brooks Brothers brand into the future,” the spokesperson said.
“It is critical that any potential buyer aligns with our core values, culture, and ambitions. Further details on the sale process will be made available in the coming days.”
Brooks Brothers generated more than $991 million in sales last year, roughly 20% of which were online. It has wholesale agreements with retailers like Macy’s and Nordstrom and contracts to manufacture uniforms for NetJets, United Airlines, and others.
To support its operations in bankruptcy, Brooks Brothers has secured $75 million in debtor-in-possession financing from brand management firm WHP Global, which is backed by Oaktree Capital and BlackRock. That comes on top of a $20 million loan it secured from Gordon Brothers in May.
By Aug. 15, it will cease its manufacturing work at facilities in Massachusetts, North Carolina and New York, where it produces suits, ties and some shirts. Those facilities produce about 7% of the brand’s goods.
Brooks Brothers are the latest retailer to succumb to the pandemic. It follows Neiman Marcus, J.Crew, and J.C. Penney, which have all filed for bankruptcy court protection from creditors in the last few months.
But unlike many retail trailblazers, Brooks Brothers is not buckling from debt leftover from a private equity-led leveraged buyout that left its owner unable to invest in the storied brand.
Instead, it is owned by its CEO, Claudio Del Vecchio. Del Vecchio, son of the founder of Italian eyewear giant Luxottica, has focused on restoring the brand’s quality since acquiring it from British retailer Marks & Spencer in 2001.
Those efforts appeared to have borne fruit. One senior banker who spoke to CNBC said he still wears the brand’s basics under his more expensive suits. He requested anonymity because he did not want to talk publicly about his basic wear.
But leases from the expansion of its footprint have become costly. The retailer had roughly 160 retail stores in the U.S. when Del Vecchio acquired it two decades ago, about two-thirds of the 236 U.S. stores and outlets it currently claims.
And like every retailer, it has had to rethink its retail strategy as the coronavirus pandemic has forced its stores to close.
Meanwhile, competition from younger brands like Bonobos and Lululemon has cropped up, even as Brooks Brothers has expanded further into sportswear and brought in trendy designer Zak Posen to reach more modern customers.
And as the unemployment rate rises and those who do have jobs continue to work from home, it is increasingly difficult to get Americans to buy nicer clothes, let alone wear them.
Retail traffic declines have accelerated over the past two weeks, as Covid-19 cases surge nationwide, including hot spots in Florida and Texas.
Law firm Weil, Gotshal, & Manges is serving as Brooks Brother’s legal advisor and Ankura Consulting Group is its restructuring advisor. Investment bank PJ Solomon is its financial advisor.
B.Brothers file for bankruptcy protection.
The menswear company, which is more than 200 years old, sought court protection from creditors on Wednesday while it looks for a buyer.
The company dates back to 1818 and its clothes have been worn by dozens of US presidents, including John F Kennedy and Barack Obama.
The firm, which has suffered as more causal office attire has become the norm and online competition increased, had been exploring a sale before the pandemic struck. It said it expected to complete the process in the next few months.
“Industry headwinds were only intensified by the pandemic,” Mr Del Vecchio said. “Seeking protection to facilitate an efficient sale of the business is the best next step for the company to achieve its goals, over any other alternative.”
Brooks Brothers styles itself as a classic American brand. It claims credit for popularising “preppy” men’s staples in the US, including madras prints, seersucker suits, argyle socks and the ever-present button-down shirt.
In a court filing, the company stated that it had both assets and liabilities between $500m and $1bn.
In an interview with the New York Times last month discussing the three US factory closures, Mr Del Vecchio said the firm was taking steps to ensure its survival. It employed nearly 700 people at the plants in New York, Massachusetts and North Carolina.
In addition, the company had already said it would close 51 stores in the US.
“At this moment, all resources need to be maintained and saved to make sure we can come out on the other side of the crisis,” he said.
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