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Is Third Time The Charm For Troubled Wet Seal Brand?

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With Gordon Brothers winning the bankruptcy auction for the intellectual property of Wet Seal, the teen apparel retailer once again has the chance to avoid total dissolution. The restructuring and advisory firm’s $3 million bid topped a stalking horse offer from Canadian apparel retailer YM.

Enduring two bankruptcies in two years, with the last one leading the brand to shutter all 170+ of its stores, Wet Seal now has a third opportunity to thrive, albeit in a different environment.

Gordon Brothers was part of the consortium that helped Aéropostale avoid complete liquidation in September 2016, four months after the teen retailer filed for bankruptcy. But the firm has not yet revealed its plans for the Wet Seal brand. It’s possible the brand may continue as an e-Commerce-only brand with a limited selection, or its products may soon be sold via licensing partnerships with other retailers.

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Given how teen retail has suffered as mall-based retail traffic slows, Wet Seal products might benefit from a complete change of scenery going ahead.

“Despite the increasing challenges facing teen retailers, we at Gordon Brothers strongly believe in the long-term viability of the category,” said Ramez Toubassy, President of Brands at Gordon Brothers in a statement. “Our plan for Wet Seal is to rebuild and reposition the brand and develop a unique new business model to best position it for future success.”

Intellectual Property Remains Valuable

Although many retailers have declared bankruptcy over the past year, it’s apparent that third-party investors still value intellectual property — even after a brand tanks. Intellectual property often includes the brand’s trademarks, its e-Commerce site presence as well as customer data, and it gives companies a chance to gain creative control over a product without having to take along the brand’s entire supply chain, store operation and prior workforce.

Numerous entities have purchased the intellectual property of retailers that have folded over the past year during their bankruptcy auctions:

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