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Recycling is in fashion. That applies to brands as well as clothes. Many famous-but-faded names have an afterlife, long after the collapse of the original business. That explains what has become a lively trade in intellectual property.
On Monday, Chinese-founded Shein made its first purchase of a British brand when it bought the IP and trademarks of teen fast-fashion business Missguided. The seller, Mike Ashley’s Frasers, had originally bought the assets out of administration for £20mn last year.
The famous Topshop brand — bought by online retailer Asos for £330mn in 2021 — might also be about to change hands. Asos did not comment on reports it is set to raise funds by selling the brand to US-based Authentic Brands Group. Along with US household names such as Brooks Brothers, the licensing expert owns UK logos like Ted Baker and Hunter Boots.
Why do companies buy legacy brands? It might be tempting to make a quick buck by plastering a well-known name over myriad items, though that would cheapen it. Less controversially, the turmoil in the retail sector has thrown up bargains.
Buyers may have spotted an opportunity to reposition a name that has been mismanaged. Also, buying a business out of administration offers opportunities to cut overheads while integrating any operations.
FTSE 100-listed Next illustrates a variation on this theme. Its flurry of acquisitions of brands including Cath Kidston and Made.com is a logical extension of providing its online services to third party labels.
Frasers has plenty of form buying up legacy brands. Given that, its sale of Missguided might seem odd. Yet it could bolster the investment case for the shares which trade on a price/earnings ratio of 11 times, according to Shore Capital’s Eleonora Dani.
There could be more to this, as Frasers could collaborate with Shein. A deal might allow Shein customers to use Frasers’ stores for returns, and open Ashley’s business up to a gaggle of new customers.
