Catalyst Brands and Phoenix Retail are testing a new retail consortium business model based on the premise that they can cobble together a portfolio of weak, even failing retail brands and prove that the whole is greater than the sum of its parts. Both ventures are backed by Simon Property Group and Brookfield Partners. Together, they’ve effectively given a lifeline to retailers that would otherwise be forced to close many doors in their mall properties. So, in giving these brands a lifeline, they also provided a lifeline to their core real estate businesses. However, GlobalData retail analyst Neil Saunders sees a fatal flaw in the real estate and retail consortium business model: “Without reinvention, the property companies are just keeping dying stores open and it will do very little to boost foot traffic in their malls.”
Many others on the Catalyst executive team have moved over from JCP, leaving one to question: Where are new ideas are going to come from and whether they can turn around an even larger group of underwater brands than just JCP alone. Rearranging the chairs on the Titanic comes immediately to mind.
Catalyst Origin Story
Catalyst Brands grew out of a partnership between Simon Property Group and Brookfield Partners when they and partner Authentic Brands started to acquire retailers under a joint venture called the SPARC Group. SPARC Group’s first acquisition was Aéropostale in 2017. It subsequently added Brooks Brothers, Eddie Bauer, Forever 21, Lucky Brand and Nautica. Scott Stuart, CEO of Chicago-based Turnaround Management Association, said in the early days of the SPARC Group, “One of the avenues they’ve chosen to pursue is doing equity participation and, in some cases, acquisition of retailers in an effort to both shore them up and maintain the integrity of their retail spaces beyond the anchor stores.”
Simon and Brookfield also acquired JCPenney in 2020 for $1.75 billion and Marc Rosen became JCP CEO in 2021. Rosen has an impressive track record in retail, having served 14 years with Walmart, rising to global ecommerce vice president before joining Levi Strauss as President of the Americas. Under Rosen’s watch at JCP, he lost LVMH’s Sephora shop-in-shops beauty partnership that moved over to Kohl’s. Earlier this year Simon and Brookfield spun off the SPARC Group and combined it with JCPenney to form Catalyst, placing Rosen in the top leadership position. Apparently, they have confidence in Rosen to lead Catalyst forward, though he had little to show for his accomplishments at JCP which now has about 650 stores. Catalyst launched with $9 billion in revenue, 1,800 stores and 60,000 employees, which places it among the National Retail Federation’s top 100 national retailers.
Rosen is joined at Catalyst by Forbes CMO Hall of Famer Marisa Thalberg, with a stellar history of marketing excellence at Lowe’s, Taco Bell and Estée Lauder, as executive vice president, chief customer and marketing officer. Natalie Apprendi-Levy oversees Catalyst’s Lifestyle Group as the brand CEO of Aéropostale, Lucky Brand and Nautica. Levy held senior positions with Aéropostale, Children’s Place, Ann Taylor and Lord & Taylor. Ken Ohashi, who was also with Aéropostale before joining Authentic Brands, is brand CEO for Brooks Brothers and Eddie Bauer. On the surface, it could be a good team for the job. They clearly have enough past failures to learn from.
Catalyzing Change
Rosen now has the challenge of turning around JCP and managing the rest of Catalyst’s six-brand portfolio. “The world ‘catalyst’ reflects our drive to accelerate innovation and energy and amplify the impact of this powerhouse portfolio,” Rosen said in a statement. “Our relations with more than 60 million customers and the deep data we have create a compelling customer value proposition across our brands. We can design a more personalized shopping experience, offer unified loyalty and credit card programs and ultimately, cross-sell more effectively.”
Many others on the Catalyst executive team have moved over from JCP, leaving one to question: Where are new ideas going to come from and whether they can turn around an even larger group of underwater brands than just JCP alone. Rearranging the chairs on the Titanic comes immediately to mind.
Ready to Cast Off Forever 21?
Less than three months after Catalyst’s founding, it made its first decisive move to lay off 5 percent or about 250 corporate headquarters staff. More will surely follow this year as redundancies are identified and efficiencies uncovered. The future of Forever 21 under Catalyst is uncertain as the company announced it is exploring “strategic options.” The brand, which at its peak numbered 500 stores, was originally bought out of bankruptcy for $81 million by Simon, Brookfield and Authentic Brands in 2020. Subsequently, Authentic’s CEO Jamie Slater said the acquisition was “probably the biggest mistake I made.” In addition, it’s closing around 200 Forever 21 stores, the brand’s California headquarters and laying off nearly 700 employees.
Phoenix Aims to Rise from the Ashes
Simon’s and Brookfield are busy in the consortium business. Its fingerprints are also all over Phoenix Retail. Together, they collaborated with WHP Global and Centennial Real Estate to found Phoenix in June 2024 after the four consortium partners acquired Express out of bankruptcy for $174 million and combined it with Bonobos. You following this?
WHP Global first invested in Express in December 2022 by acquiring a 7.4 percent share. WHP and Express then acquired Bonobos for $75 million in May 2023 from Walmart, where it never lived up to its promise after Walmart paid $310 million for the brand in 2017. This move came even as Express’ financial woes were mounting, leading to Express filing for Chapter 11 bankruptcy in April 2024 and subsequent rebirth as Phoenix Retail.
“Phoenix will serve as a financially revitalized DTC platform and set the stage for long-term growth from the Express and Bonobos brands,” WHP said in a statement. “Phoenix will focus on strengthening the core operations of Express and Bonobos, ensuring the continuity of over 450 physical stores, ecommerce operations and the preservation of nearly 7,000 jobs across the country.”
Independently, WHP Global, led by CEO and founder Yehuda Shmidman and backed by private equity firms Solus, Ares Management and Oaktree Capital Management, owns a portfolio of other retailers, generating over $7 billion in global sales. It also operates a turnkey DTC digital ecommerce platform called WHP+ and a sourcing agency based in Asia under WHP Solutions.
What’s Going on Here?
Originally, Express CEO Tim Baxter came over to WHP to manage the brand. Among the more mercurial management moves, he left in September 2023 but not before mapping an “EXPRESSway Forward strategy,” that outlined ways to “reinvigorate and rebuild” the brand, including licensing in non-core categories and international expansion.
The plan also included acquiring multiple brands in partnership with WHP and operating them on the Express platform, the first of which was Bonobos. Bonobos’ founder Andy Dunn joined Phoenix as a strategic advisor in December 2023. Phoenix now operates 450 Express stores and Bonobos remains primarily a digitally direct brand, though it operates around 50 brick-and-mortar Guideshops.
After operating under interim CEO Kevin Meme, splitting his time with his duties at Oaktree Capital Management, Phoenix just named Greg Scott as CEO. Scott was the former CEO of New York & Co that has since rebranded as RTW Retailwinds. No headwinds here, it remains a troubled fashion brand.
The Power of the Losers’ Whole
It’s hard to assess the viability of the Phoenix venture, even though WHP has a lot of confidence in it. Bonobos still has respect in some fashion circles but Express has lost most of its punch, having failed to keep up with changing fashion trends. In a statement before Express’ 2024 bankruptcy and subsequent purchase by Simon, Brookfield and WHP, the company blamed its failings on macroeconomic forces, including reduced store foot traffic and competition from fast-fashion and discount fashion retailers.
“Over the past several years, the debtors have faced a challenging commercial environment brought on by both broader economic and retail-specific market pressures. Major players across industries are experiencing the challenges associated with elevated interest rates and decreased consumer expenditure. Given the expenses associated with a substantial brick-and-mortar presence, and the issues affecting the retail industry as a whole, a significant number of the debtors’ stores are operating at sub-optimal performance levels.”
Loser Brands in Loser Malls
Can the real estate and retail consortium model work? That, my friends, is the big question. On the face of it, Catalyst has more legacy brands in its arsenal, specifically Brooks Brothers and Eddie Bauer, but along with their cohorts, Aéropostale, Forever 21, Lucky Brand and Nautica, they have seen better days. Then there’s the question of JCP hanging over its head. JCP has tried to turn itself around for years under different management strategies. Does it have the right stuff to do it now? Likewise, Phoenix, has a lot riding on revitalizing its flagship Express brand.
Both Catalyst and Phoenix seem to be intent on running as long-term, ongoing businesses, unlike more typical venture-capital short-term strategies aimed to extract the maximum capital out of failing businesses.
So, I asked my go-to expert on M&A, Richard Kestenbaum of TriangleCapital, to shed some light on the thinking behind the Catalyst and Phoenix ventures. He was as clueless as I am. “I wish I could say it’s a great idea, but if it is, it’s totally lost on me. It sounds so much like a dumb idea that’s only putting off the inevitable. I don’t think it’s a model for anything except hanging onto times past.”
He likens it to how a faltering brand will stuff its pipeline with enough product to make sales look good for a while until the bottom falls out. “This is the real estate version of that: you’re stuffing the real estate with tenants, who in the long run, don’t make sense in the space or in their existing configuration.”
It’s hard enough for any company, even with the most expert and qualified management, to revive one faltering brand, let alone seven under Catalyst and two for Phoenix. Time will tell, but both Catalyst and Phoenix have major hurdles to surmount and even with deep-pocketed backers, they may not have the wherewithal or time to do it.
