Dive Brief:
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Catalyst Brands, the operating company for a slew of retailers including J.C. Penney, Aéropostale, Brooks Brothers, Eddie Bauer, Nautica and Lucky Brand, has laid off 5% of its corporate workforce or about 250 people.
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“Catalyst Brands is in the early stages of our integration,” a spokesperson said by email. “After careful review of the entire organization, across all brands, we have identified areas where we can streamline our structure.”
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Catalyst is a joint venture of Sparc Group and J.C. Penney, which formed last month via an all-equity transaction; shareholders are brand firm Authentic Brands Group, fast-fashion company Shein and mall REITs Simon Property Group and Brookfield Corporation.
Dive Insight:
In its first month or so, Catalyst Brands has downsized in a number of ways. In addition to the layoffs confirmed on Thursday, the company previously announced that it sold Reebok’s U.S. operations and is exploring strategic options for Forever 21’s operations.
Forever 21 may have trouble finding a buyer. Five years ago, Simon and Brookfield teamed up with Authentic to buy the fast-fashion retailer out of bankruptcy for $81 million. About a year ago, however, Authentic CEO Jamie Salter expressed buyer’s remorse, calling the acquisition “probably the biggest mistake I made.”
At that time, Salter still conveyed confidence in Reebok, saying that it had reached $5 billion in sales within a year, ahead of schedule. About a year later, in early January, Catalyst sold Reebok Design Group and its U.S. operations to Galaxy Universal for an undisclosed amount. Galaxy, a marketing, design, sales, sourcing and manufacturing firm specializing in the athletic, health and outdoor categories, owns And1, Gaiam and Tony Hawk, and licenses the Justice and London Fog brands.
Earlier this month, Simon Property Group CFO Brian McDade told analysts that Catalyst Brands is poised to realize “significant savings and synergies” but could also have restructuring costs. This fiscal year the company expects to generate positive EBITDA and “roughly break even” in terms of cash flow, he said.
Former J.C. Penney CEO Marc Rosen is Catalyst’s chief executive officer. In its most recent quarter, the department store’s net sales fell 8% to $1.4 billion and EBITDA plunged nearly 64% to $66 million, though losses narrowed. Despite its struggles, J.C. Penney is unlikely to close many stores because two of its owners are also two of its biggest landlords, which would prefer to keep its anchor stores running.
