- As Stein Mart winds down its physical business in bankruptcy, its intellectual property is going up for sale.
- The federal bankruptcy court overseeing Stein Mart's Chapter 11 case approved the hire of Hilco Streambank, which specializes in IP disposition, to handle the sale.
- Under the agreement, Hilco will be responsible for marketing Stein Mart's IP to potential buyers while receiving a percentage of the proceeds with a sale.
IP sales offer a retail brand the chance for life after brick and mortar. This year alone has seen the sale of decades-old brands, including Pier 1 and Modell's Sporting Goods stores, acquired after the physical retail business liquidated. A rise in bankruptcies starting in 2016 has put other major names on the market: Barneys, Nine West, Toys R Us, Bon-Ton, The Limited, Circuit City and plenty of others.
Hilco Streambank is among the specialists that works with retailers to sell IP, which can fetch tens or even hundreds of millions of dollars in bankruptcy auctions. To support that market, you need buyers. Over the past decade, firms like Authentic Brands, Marquee Brands and Sequential brands, which all focus on collecting nonphysical assets and licensing them out to physical operators, have been snapping up brand names and other IP assets like customer data.
Also in the market are e-commerce and digital marketing specialists, which take a defunct physical retailer and look to transform it into an online specialist. In that camp are players like Retail Ecommerce Ventures, which over the past year so has bought the Dressbarn, Pier 1 and Modell's brands IP.
Stein Mart filed for bankruptcy in August with dim hopes of a possible sale of the company as an intact physical retailer and a plan to liquidate if no buyer emerged. In its early court filings, officials with the company acknowledged the likelier outcome was liquidation given a continued tough retail market with an ongoing pandemic crisis.
The company suffered in multiple ways because of COVID-19. It started out the year with announced acquisition after years of lacklaster performance. But the market disruption ultimately killed the deal. CEO Hunt Hawkins said in court papers that, after Stein Mart's stores reopened, customers were returning and the company may have been able to survive with support from lenders, landlords and suppliers.
But then COVID-19 cases surged in states where Stein Mart operates a huge chunk of its footprint — namely California, Texas and Florida, which collectively accounted for nearly 40% of the stores Stein Mart had when it filed. All of that is to say there may well have been remaining value in Stein Mart's business, if at a smaller scale. But it lacked the resources to survive the current crisis.
Depending on who buys it and why, an IP sale could allow Stein Mart a second chance as an e-commerce specialist, or even a physical retailer, should the buyer decide to open new stores, as happened in the cases of Toys R Us, Charlotte Russe, Charming Charlie and others.