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The definition of luxury has changed. It's now more about value, utility, and stability. Luxury means owning property in a high-end location, a MacBook Pro, fast optical networks, clean drinking water, and a reliable car.
do you really think that people buying Saint Laurent jeans last year are now worried about "fast optical networks, clean drinking water, and a reliable car"?
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I had never put my finger on this before but you're right. Also it's a total crap shoot on manufacturing quality.
> Walk through Neiman Marcus, Nordstrom, Macy's, H&M, and they start to blend together. But are any of these luxury brands? Nordstrom might be upper-tier retail but it’s hardly luxury.
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There's also been a huge trend reversal on "conspicuous consumption". Even the wealthy now do their wealth-signaling through minimalism, instead of flash and excess. Self-proclaimed "luxury brands" have a dwindling market.
Do the numbers reflect this? I'm just looking at the stock prices of a few luxury companies like LVMH and and Kering and it seems they were are at all time highs prior to COVID.
https://www.mckinsey.com/~/media/mckinsey/industries/retail/...
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> 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. If you can. If you can't and your cash flow either stays flat or declines, you now have more debt to service. The more debt you have, the less leeway you have to execute on your plan. That's assuming you don't scre…
Right, and in that case I've made a bad decision and now I "own" a company that is not doing well and have more debt to service. The company declares bankruptcy, gets restructured or folds. How does that help me? That is to say, if it ends this way frequently, or fair odds ending this way, why do PEs keep structuring leveraged buy-outs? (This thread makes it sound like it's frequent enough that one person can say, De…
All debt deals have covenants and covenant protection is at an all-time low right now; investors have decided that it is worth giving up this protection for whatever the potential investment happens to be. Covenants on the amount of leverage a company can take on are common but there's no universal formula for calculating leverage. It is not atypical to have multi-page definitions of how a company calculates EBITDA. Some firms are known for being very aggressive with this and are also very aggressive with issuing dividends shortly upon the close of a transaction. Aggressive dividend policies help PE derisk transactions substantially. The more money you are able to take out of the company (and sometimes able to issue debt to do so), the more you derisk your initial investment.
I could go on for days about whether any of this is good or bad, blah blah but as far as your observation that this seems to happen with all PE deals, PE is a multi-trillion dollar industry. Just think about how the world would look if that happened with all PE-backed companies.
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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.
In fairness, conspicuous consumption is one of the primary draws of Vegas. Probably not a very representative example.
I think even without Covid, its harder to tell what is luxury in apparel. There have been a couple articles on this. There used to be a clear difference between the look of clothes at different retailers but not as much anymore. Walk through Neiman Marcus, Nordstrom, Macy's, H&M, and they start to blend together. Doesnt mean no difference but maybe not enough to always charge a premium.
There's also been a huge trend reversal on "conspicuous consumption". Even the wealthy now do their wealth-signaling through minimalism, instead of flash and excess. Self-proclaimed "luxury brands" have a dwindling market.
Definitely a Brave New World. I guess we won't be getting our His and Hers gold plated, nuclear powered mini-subs this Christmas after all...
Apparently some here are unfamiliar with this holiday tradition: https://www.mentalfloss.com/article/89283/stories-behind-12-...
https://www.computerhistory.org/revolution/minicomputers/11/...
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> Walk through Neiman Marcus, Nordstrom, Macy's, H&M, and they start to blend together. But are any of these luxury brands? Nordstrom might be upper-tier retail but it’s hardly luxury.
Could you tell the difference at a glance from something from Neiman Marcus and a clone of that shirt sold by target? I can't.
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They all seem to have decided on a "market expansion at the expense of brand dilution" strategy. Ditto most of the formerly-consistently-good clothing brands. I'm not really sure which stores/brands replace the ones that have done this, these days. [EDIT] I suspect part of this is because the cost of actually-good clothes hasn't dropped like shitty-clothes costs have, because (this is further speculation on my part)…
You'd be surprised. The cost of rubbish clothing has fallen, but then the cost of very reasonable mid-quality has dramatically fallen. I used to buy Levis, then Gap for mid range. Now, I get the same quality (and literally the same factory) jeans from Joe Fresh, for 1/4th to 1/5th of the price. Suit shirts are the same. An online tailor I've been using for a decade sells shirts at half the price of Banana Republic (c…
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Your theory is good, but is it what happens in practice? In the headlines, you will find examples of "corporate raiders" who bought the company to "extract value" which means doing pretty much what a leech does. Also most of these examples showcase that the company would have been better off without the private equity buyers. Could there be good buyers, sure.
"extract value" -- what does this mean? Sell off the furniture? Fire 50% of the employees? I have image of Richard Gere saying "I buy companies that are in financial difficulties, I break it up into pieces, and I sell that off." Like stealing cars and selling them for parts, right?
There are other models for PE and going private- sometimes companies don't use nearly so much leverage and are effecitvely bought as part of portfolio, sometimes you see very rich individuals take their companies that they used to own private again, sometimes they do use tons of leverage but buy and run the companies mostly as is, just growing the company in place and paying down debt from cashflow.
PE's and LBOs aren't necessarily bad things at all and the economy as a whole is better for having them exist. The problem is that the risk/reward profile tends to exaberate inequality. The PE/LBO firm is already rich individuals who may make our lose millions on a bet on the company. The control their own risk and decide. The workers and communities who also have a stake in the company? They have very limited upside and the downside is that they lose their jobs and anchor institutions in their communities, and they have very little control over whether or not to accept the risk.