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Neiman Marcus files for bankruptcy

reuters.com

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Re: Neiman Marcus files for bankruptcy

#101

Post by whatok »

black_puppydog wrote: post #94
whatok wrote: post #63

Earlier quoted context omitted.

Private equity firms raise funds (usually have a 10yr investment horizon) and use these funds to serve as the equity tranche for a buyout that the remainder is financed with debt. Banks (or other investment firms sometimes nowadays) will provide financing for these buyouts and that financing is later refinanced with syndicated financing through loans or bonds. There are a decent amount of banks that were in the middl…

in other words, yes, it is created "out of nothing" (when handing out the loans) and once the "unexpected bad things" happen it becomes "real" (as in it is on the books and will now have to be accounted for properly)?

I'm not a fan of private equity but I'm also not a fan of rants directed my way when I'm answering a question someone asked. Please take this somewhere else.

Re: Neiman Marcus files for bankruptcy

#102

Post by bdcravens »

karatestomp wrote: post #35
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.

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.…

My understanding is that the parent comment isn't talking about Nikes, but brands like Burberry.

Re: Neiman Marcus files for bankruptcy

#103

Post by alephnan »

bdcravens wrote: post #99
alephnan wrote: post #91

Interesting how the Barney's bankruptcy did not receive any commentary from the HackerNews. As a software engineer with a degree in fashion design as well, I believe both luxury retail stores are equally notorious

Probably due to size?

As in market cap? It's 3x more, but Barney's is more legendary in fashion circles. Could also because there is more brand dilution at Neiman Marcus

Re: Neiman Marcus files for bankruptcy

#104

Post by colechristensen »

Loughla wrote: post #69
colechristensen wrote: post #53

Earlier quoted context omitted.

I went in a Neiman Marcus a few months ago and was struck by how much they seemed to be selling "luxury". Like luxury apartments or Las Vegas facades, it all seemed like shoddy but shiny. I was asking people who their target consumer is and there really wasn't an answer. I didn't recognize any but a few of the brands and most of them seemed like they'd been invented for a thirty second scene in a TV show.

>I went in a Neiman Marcus [. . .] I was asking people who their target consumer is [. . .] This strikes me as hilarious for some reason. I'm not trying to be difficult, but did you honestly think anyone working on the salesfloor of the store to know what their target consumer was? That is a corporate strategy. In the store, their target is whoever comes in the door. They don't set style, they don't buy trends or fas…

Heh, yes that would be hilarious, I am not so bold... or at least rude to poor salespeople. I mean I asked a few of my friends.

Re: Neiman Marcus files for bankruptcy

#105

Post by Reedx »

devchix wrote: post #44
Merrill wrote: post #11

“It’s Collapsing Violently”: Coronavirus Is Creating a Fast Fashion Nightmare https://www.gq.com/story/coronavirus-fast-fashion-dana-thoma...

The idea of "fast fashion" is noxious! All those faddish things worn for a season then to take up space in landfills. I don't think I've found affordable clothes made to last anymore (a good quality wool sweater, maybe?) I can't remember when was the last time I was at the mall, or what was the last thing I really really like to buy to wear.

Indeed, fast fashion is one of the most wasteful and polluting industries. It's weird how it gets a pass on that.

As for clothing and shoes that last, Patagonia is pretty good.

Re: Neiman Marcus files for bankruptcy

#107

Post by ttul »

qppo wrote: post #38
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...

People with other options don't take private equity buyouts. Some captains go down with their ships, others get on the first lifeboat.

Or you take a partial life boat that makes you very comfortable and then if the firm collapses, oh well.

Re: Neiman Marcus files for bankruptcy

#108

Post by colechristensen »

gen220 wrote: post #93
_bxg1 wrote: post #59

Earlier quoted context omitted.

Exactly. People 20-30 years ago ate that stuff up; these days I think most people see it as garish and tacky. Wealth signaling absolutely still happens, but today the facades it tends to orbit around involve words like "minimal", "natural", "open", "honest". Organic groceries, modernist houses, meditation retreats to exotic places, environmentally-friendly vehicles, freedom from clutter and complication. These, sadly…

I grew up in the south bay, around the early-googler generation of nouveau-wealth. I assumed the kind of wealth signalling typical then was normal. In my experience, fancy clothes were very abnormal and got you the wrong kind of looks. People liked to live in very nice houses on expensive land, but flaunting your wealth beyond that (and maybe your fast car) was generally looked down upon. Porsches were seen as a mid-…

Bay area people value signal, if anything, more, but just in different ways. Not to distill it too much, but generally through social media posts about experiences, social issue positions, and "genuine"-ness.

Re: Neiman Marcus files for bankruptcy

#109

Post by topkai22 »

devchix wrote: post #79
topkai22 wrote: post #50

Earlier quoted context omitted.

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…

Becuase the risk of investment is now structured differently with leverage. Let's pretend we live in world where companies are always worth 10x earnings + assets. Our pretend company $100M makes $5M in earnings and has $50M in assets (cash, real estate, etc..)

To take the company private, the lenders require an interest of 10% and 10% principal

Some PE company (or the CEO, whatever) thinks they can make this work, so they come up with $10M of principal, take the lenders money and buy the company. The first thing they do is sell as many of those underlying assets as they can to pay down the debt. You now have a company that has $5M a year in earnings before debt, $10M in assets (the principal, serviving as the required reserve for the lenders), and $50M in debt, with a debt service of ~$5M a year (so really 0 earnings).

If the the PE company does a great job managign the company and the economy is good, so they double earnings to $10M, then the company is now worth $50M ($10M in income x 10 + assets - debt) and the PE company made a 5x return already (FYI- I know I'm abusing my financial math, fake numbers, but its illustrative).

Now lets assume they were wrong and a global pandemic breaks out, and the companies start losign money to the tune of $1M a year. If the company had stayed publicly owned, they might have to cut their dividend and burn through reserves, maybe sell off some assets, but other than that all their employees and the majority of their assets are probably fine. The company's market cap is a lot less, but shareholders don't go to zero eithier.

The world where the company went private in an LBO? That $10M cushion runs out in less than 2 years. They are bankrupt. They might get a few more chances to restructure debt and such, but eventually the lenders give up and liquidate the company a la Toys R Us. The employees get fired and local landlords lose tenants. Pension funds disappear. It's not fun.

Re: Neiman Marcus files for bankruptcy

#110

Post by alephnan »

devchix wrote: post #44
Merrill wrote: post #11

“It’s Collapsing Violently”: Coronavirus Is Creating a Fast Fashion Nightmare https://www.gq.com/story/coronavirus-fast-fashion-dana-thoma...

The idea of "fast fashion" is noxious! All those faddish things worn for a season then to take up space in landfills. I don't think I've found affordable clothes made to last anymore (a good quality wool sweater, maybe?) I can't remember when was the last time I was at the mall, or what was the last thing I really really like to buy to wear.

I don't think quality clothing has ever been cheap. Fabrics like wool and silk are still not cheap and definitely can't be found at a fast fashion store.

Another key difference between fast fashion and expensive clothing is simplification of pattern-making.

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