Lessons in Bankruptcy and Recovery from PJ Solomon, Go-to Financial Advisor for Retailers

David Shiffman and Cathy Leonhardt share their insights on the state of retail

Cathy Leonhardt and David Shiffman
Cathy Leonhardt and David Shiffman are co-heads of investment bank PJ Solomon's global retail practice.
PJ Solomon

Key insights:

Veteran retail investment bankers David Shiffman and Cathy Leonhardt, co-heads of financial advisory firm PJ Solomon’s global retail practice, have had their fingers on the pulse of what is happening in retail for more than two decades.

Prior to joining the investment bank, Shiffman spent time at Miller Buckfire & Co. and Goldman Sachs as head of retail investment banking, while Leonhardt was a vice president at Morgan Stanley for seven years. Between the two, they’ve advised a who’s who of retail, including Timberland parent VF, Calvin Klein parent PVH and TJ Maxx parent TJX.

During the pandemic, Shiffman and Leonhardt have been more in demand than ever, as a growing number of retailers navigate the myriad challenges of store closures and recessionary conditions.

Most recently, PJ Solomon is serving as the financial advisor to Brooks Brothers, which filed for Chapter 11 bankruptcy last week. As part of that process, Shiffman and Leonhardt are aiding the clothier’s efforts in securing a buyer in what is reportedly likely to be a competitive auction process.

Brooks Brothers, of course, is not alone either in its travails or its future potential under new ownership, joining many other brands in Chapter 11 seeking a sale. In that vein, Shiffman and Leonhardt shared their insights with Adweek on the current state of retail.

Buyers are lining up to invest in iconic brands

Right now, there is a significant pool of interested buyers worldwide who are eager to bid on retail assets, a bit of a silver lining in an otherwise bleak landscape.

It helps that, since the initial coronavirus panic back in March, companies now broadly have a better grasp of what it will take to emerge on the other side of this pandemic, bankruptcy or not. In particular, U.S. businesses with overseas operations are leaning on what they have learned in responding to the pandemic in places such as China to map out a blueprint for how they do business in the U.S., Shiffman said.

If businesses are forced to shut down again due to a spike in Covid-19 cases in certain regions, both Shiffman and Leonhardt said that retailers are better informed this time and understand the “playbook.” As a result, brands are testing group openings of stores in different markets based on the level of outbreak.

Retailers nimbly adapted to slashed ad budgets

As it pertains to marketing, when Covid hit, the most difficult challenge for retailers was figuring out which expenses to cut to survive, Leonhardt said. Advertising budgets were frequently one of the areas sacrificed.

Retailers with agile marketing departments and digital outreach, however, were able to take advantage of lower customer acquisition costs. Brands such as Serena & Lily and Vuori, for example, were able to generate more impressions even as they relied on lower cost paid advertising, Leonhardt said. She cited direct marketing via email and partnering with social media influencers as ways brands were able to reach their customers.

With more people at home and glued to their screens, it meant that in addition to a lower cost, digital was also more likely to quickly pay the retailer back with an uptick in sales, Leonhardt said.

“When you are cash-strapped, the only marketing dollars you spend are where you can get a return,” she said.

Marketing is something the investment bank itself has zeroed in on by hiring a new four-person marketing team last year and producing more videos and newsletters in 2020, along with a digital campaign on social media platforms such as LinkedIn.

Brands tapped the markets for much-need cash

In tandem, brands faced the unprecedented challenge of shutting down their stores, Shiffman noted, and had to first ensure they had the capital to survive.

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