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Neiman Marcus files for bankruptcy

reuters.com

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Re: Neiman Marcus files for bankruptcy

#71

Post by karatestomp »

popup21 wrote: post #47
karatestomp wrote: post #35

Earlier quoted context omitted.

Conspicuous consumption. The price is the point. It’s a signaling thing. In the case of something like sneakers with a big brand logo on them, it’s likely someone “low” trying to signal to their peers that they’ve made it (whether they have or not). See: Fussell’s Class , or The Official Preppy Handbook for signaling rules specific to the upper-middle and upper classes (very expensive sneakers with swooshes: big no.…

> The Official Preppy Handbook LOL, classic WASP literature. I haven't thought of this book since the mid-80s! It's a hilarious read.

Some of it (and Class) is just plain good advice. Prefer nice clothes/things, but use the hell out of them and don’t be afraid to repair them. Don’t comment on how nice something someone bought is (this middle-class habit seems really weird after having it pointed out). Avoid “collectibles” and for god’s sake don’t think of them as an investment. That sort of thing.

Re: Neiman Marcus files for bankruptcy

#73

Post by gpresot »

onlyrealcuzzo wrote: post #13
contemporary343 wrote: post #7

Earlier quoted context omitted.

Same with J Crew.. real value creators these PE people are

PE does create value! They take over companies that are in a liquidity crisis. They bring buckets of cash with them that gets the company out of the liquidity crisis. Suddenly, the value of the company increases dramatically because creditors can't take advantage of it anymore. PE doesn't takeover companies they think can make it. Regular investors would do that. They take over companies that everyone knows are doome…

The PE funds you describe are only a portion of the many PE strategies. Some take over well managed family owned companies where the family wants out; other acquire parts of larger groups that are being sold off because the current owner needs cash to invest somewhere else; in many cases PE funds come in to provide the cash needed for massive international expansion etc etc. The vulture/turnaround funds you describe certainly exist, and give the acquired company some hope of survival (usually, at least initially, with massive cost cutting). The fact that all these are leveraged investments (some less than others) means that a negative turn in the economy can have a massive negative impact in the ability of the company to cover their debt obligation, hence the bankruptcy.

Re: Neiman Marcus files for bankruptcy

#75

Post by 1-6 »

b1gtuna wrote: post #26

I'm not glad these stores are doing bad, but I just never understood how a pair of sneakers can cost $700 - $900 when I can buy a decent laptop with that kind of money.

"I just never understood how a pair of sneakers can cost $700 - $900 when I can buy a decent laptop with that kind of money."

I just never understood how a laptop can cost $700 - $900.

Re: Neiman Marcus files for bankruptcy

#76

Post by jariel »

devchix wrote: post #36
johntiger1 wrote: post #5

Earlier quoted context omitted.

Wow, why don't people wise up to this PE trick? Seems like creditors would learn their lesson after so many examples...

Please explain? Why is there the association that private equity creates corporate debt?

One of the tactics of a PE company is to effectively buy a company by securitizing its future revenues in the form of debt which is called a 'leveraged buy out'.

Basically a fund will invest a small amount and convince a bank to give them the money for the rest of the acquisition, which will then be in the form of debt to the company, using the revenue stream and assets of the company as collateral.

The banks get a nice loan out there and the PE firm gets full ownership with a lot of leveraged help from the bank.

There are possibly a bunch of structural benefits such as tax optimization, ie interest payments are tax-deductible etc..

It's viewed negatively because it's generally a form of financial engineering re-arranging deck chairs, not really value-creating, although it is for investors.

A company with a lot of debt can be more exposed and more likely to fail in a downturn.

See: Leveraged Buy Out.

Re: Neiman Marcus files for bankruptcy

#77

Post by karatestomp »

b1gtuna wrote: post #70
karatestomp wrote: post #35

Earlier quoted context omitted.

Conspicuous consumption. The price is the point. It’s a signaling thing. In the case of something like sneakers with a big brand logo on them, it’s likely someone “low” trying to signal to their peers that they’ve made it (whether they have or not). See: Fussell’s Class , or The Official Preppy Handbook for signaling rules specific to the upper-middle and upper classes (very expensive sneakers with swooshes: big no.…

Haha I will try to find a copy. Anecdotally, the goods I saw were far from conspicuous. They all looked straight out of some music videos (heard of the "Ugly" shoes?).

As long as the intended audience recognizes them, they’re doing their job.

There is also a significant subculture or sneaker collectors who buy them like someone might a rare run of “collectible” action figures, where rareness is all that matters over the value of the item per se. Some crazy-seeming sneaker prices are just companies catering to that market. Of course there’s overlap and symbiosis with the signaling crowd, too.

Re: Neiman Marcus files for bankruptcy

#78

Post by jariel »

razster wrote: post #8
johntiger1 wrote: post #5

Earlier quoted context omitted.

Wow, why don't people wise up to this PE trick? Seems like creditors would learn their lesson after so many examples...

Because the creditors make money off it as well.

The creditors definitely won't make money.

They are other banks, and probably all the suppliers who give to NM on credit and who won't get paid.

Chapter 11 is by default bad news for creditors, it means they will get less than the agreed-to value of whatever.

Re: Neiman Marcus files for bankruptcy

#79

Post by devchix »

topkai22 wrote: post #50
devchix wrote: post #36

Earlier quoted context omitted.

Please explain? Why is there the association that private equity creates corporate debt?

Private equity companies exist to purchase existing companies from their current owners and then run them better/extract more value from them. The canonical example of this is purchasing a public company by acquiring all outstanding shares. This is often a fantastically expensive enterprise that requires that the new owners raise tons of money. The new owners do this by structuring a deal where the company will take…

Thanks for that. But why is the company now worse off than before? A company can be funded with equity or debt (different terms and obligations, I understand) but if a company converts 100% of its outstanding shares to debt, why does anything change? I assume this is what happens when a company takes itself private to escape the grind of quarterly earning, short-term growth, tyranny of Wall Street analysts, etc. If I could run a company better/extract more value from it, say, by decreasing expense, increasing revenue, and therefore profits, I'd write myself a big check quarterly and continue running the company. Something else extractive and zero-sum (I gain but the company loses) is going on and I don't know what that is.

Re: Neiman Marcus files for bankruptcy

#80

Post by ardy42 »

ghaff wrote: post #29
_bxg1 wrote: post #27

Earlier quoted context omitted.

Just my anecdotal impression; it's possible I'm biased by the extents of my bubble

You probably are. Go to Vegas and there are whole shopping malls where, to indulge in just a degree of hyperbole, I'd have to look hard to find something I could afford. Or at least would even consider affording.

> Go to Vegas and there are whole shopping malls where, to indulge in just a degree of hyperbole, I'd have to look hard to find something I could afford. Or at least would even consider affording.

IIRC, Americans don't really shop at those stores. Their costumers are mainly foreign nouveau rich people.

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