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Neiman Marcus files for bankruptcy

reuters.com

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Re: Neiman Marcus files for bankruptcy

#191

Post by whatok »

bsder wrote: post #184
whatok wrote: post #179

Earlier quoted context omitted.

All I've taken away from this is Valentino is more expensive in 2020 than it should be. By nature of you even being physically close enough to a Neiman Marcus in 1995, chances are you were of higher income than the rest of the country. They're still located in mostly more wealthy areas of the country.

If you consider driving 3+ hours close ... And a "grad student" is generally damn poor (and I was) ... My point was that Neiman-Marcus had a product (properly fitted business suits) that was actually (probably upper) middle class. And that product, in fact, served its purpose really well. People still underestimate the effect that an excellent suit has on people's perception of you in business. Being tech, I normally…

You valued and knew to value a suit for your purposes in 1995. Most people now or in 1995 did not drive three hours to buy a suit. The number of jobs that require a suit for everyday use is definitely down vs 1995 and you can rent a suit (not vouching for fit here) if you need one for interviews which is the primary use for most people who do not wear one on a daily basis.

I'm not disagreeing with anything you said on making a good impression but that doesn't change anything on the fact that Neiman Marcus has never been for middle class shoppers. A one-off purchase does not make a customer base.

Re: Neiman Marcus files for bankruptcy

#192

Post by abfan1127 »

apsec112 wrote: post #170
freepor wrote: post #167

Earlier quoted context omitted.

Please familiarize yourself with the terms “per capita” and “inflation.”

The numbers I used were inflation-adjusted. I gave total income because that's what the parent comment referenced, but per capita income has grown too, although not as much (US population is up 60%, compared to total income growth for this group of 223%). Also, "please familiarize yourself" is a slightly rude way of putting it.

English might be his/her second language. Thank you for shining a light on the middle class income.

Re: Neiman Marcus files for bankruptcy

#193

Post by ypzhang2 »

_bxg1 wrote: post #61
adventured wrote: post #42

Earlier quoted context omitted.

> Self-proclaimed "luxury brands" have a dwindling market. There's no evidence that supports that as a comprehensive statement. It very much varies from brand to brand and situation to situation. The king of luxury, Bernard Arnault (LVMH), recently became one of the richest people on the planet (current net worth of $76 billion) because luxury has been massively expansive over the past decade. His wealth increased fo…

> So what situations are causing this? China for one. I think this is a key point. I was really just talking about America, where many people have rebounded from that sort of thing after embracing it 20-30 years ago. For China, traditional signals of wealth are still new and novel. People aren't sick of it yet.

Not sure the numbers bear that out:

https://www.prnewswire.com/news-releases/porsche-posts-recor...

https://www.cnbc.com/2020/01/13/lamborghinis-2019-sales-jump...

Anecdotally as well, Hermes does VERY brisk business by where I live (midwest), pre-COVID

Re: Neiman Marcus files for bankruptcy

#194

Post by gamblor956 »

formercoder wrote: post #151
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...

The web of incentives behind LBOs is very complex. They happen because in reality a lot of the time many of the people involved make money. This is availability bias. You only hear about the explosions. You don't hear about the thousands of LBOs that happen which never blow up.

The financial structure of a LBO is that a PE fund uses the assets of an acquired company to pay for the acqusition. They generally put little if any of their own money down other than as earnest capital. They then take out additional loans using the acquired company assets as collateral and pay themselves distributions out of those loans. The acquired company is left to repay the massive and increasing debts.

You don't hear about the successful LBOs...because they're extremely rare. The only LBOs that worked out for the acquired companies are for those like Hilton, which occurred right before interest rates dropped, allowing the acquired companies to refinance their debts at lower rates than incurred by the LBO. The recession that occurred right after that LBO also let them fire tens of thousands of workers and shutter hundreds of locations and blame the recession rather than the shitty PE management and pillaging.

Toys R' Us and Neiman Marcus are the prototypical LBOs. Whether or not the LBO succeeds, PE gets rich, everyone else gets screwed.

Re: Neiman Marcus files for bankruptcy

#195

Post by gamblor956 »

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…

The theory is that PE exists to run existing companies better than their current owners.

The financial and legal reality is that PE simply loads the target company with the debt used to acquire the company (i.e., PE doesn't actually put up any of its own money), and then pays itself by taking out more debt secured by the acquired company. And then they charge the acquired company a management fee for the privilege of having all of its useful assets being used as collateral for loans the PE company never intends to repay.

Re: Neiman Marcus files for bankruptcy

#196

Post by economicslol »

apsec112 wrote: post #158
lkrubner wrote: post #127

Everyone talks about the "Amazon effect" but the changing distribution of income is also worth considering: " Retail is suffering because the middle classes have lost $1,355 trillion in income since 1970 " http://www.smashcompany.com/business/retail-is-suffering-bec...

That is quite the abuse of statistics! US GDP (edit: inflation-adjusted) was $5 trillion in 1970, and $19 trillion in 2019. The income percentage of the middle three quintiles went down from 53% to 45%, but 45% of $19 trillion is still much, much more than 53% of $5 trillion. Income for this group did not shrink, it just grew more slowly than other groups. The income was "lost" relative to a hypothetical world in whi…

Speaking of abuse of statistics, lumping the bottom 20-40% with the top 60-80% of wage earners is extremely deceptive. It's well known that income growth is wildly different for those groups. Inflation adjusted wages for the median worker only increased by 9% from 1973 to 2014.

Re: Neiman Marcus files for bankruptcy

#197

Post by alexpetralia »

jackcosgrove wrote: post #165
onlyrealcuzzo wrote: post #13

Earlier quoted context omitted.

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…

As long term GDP growth rates decline due to demographics, an economy becomes less able to service debt. In order to keep systemic risk constant, use of leverage should decrease, not increase. Something doesn't add up.

No in fact it is precisely the opposite. As GDP growth declines, there is more accumulated investment savings (supply glut of capital) chasing fewer high-returning investments. The savings has to go somewhere, and often it goes into high-yield debt (exactly the type private equity issues). Low growth translates into the increased use of credit.

Re: Neiman Marcus files for bankruptcy

#198

Post by whatok »

paganel wrote: post #163
hnmullany wrote: post #129

Earlier quoted context omitted.

That's not correct - creditors are usually banks for secured term debt or bondholders. The interest rates are not absurd. In this case, the bondholders are suing the private equity fund for stripping the asset. The bond in question looks like it had about a 10% interest rate

To be fair a 10% interest rate for debt sold in the last 2-3 years was kind of absurd, even for many junk bonds (of course I'm talking about the pre-virus situation).

10% would have been high over that timeframe but imagine what shape that business was in.

Re: Neiman Marcus files for bankruptcy

#199

Post by cat199 »

paganel wrote: post #173
chadash wrote: post #18

Earlier quoted context omitted.

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.

It might be because of China and the Chinese market/customers. It's only anecdotal, but last October I got to visit Vienna for one day (I live in Europe) and I was surprised to see a a lengthy queue outside the Louis Vuitton store close to the St. Stephen's Cathedral. First, I was surprised because I couldn't understand why would anyone still wait in that sort of queue for something to purchase in this day and age (w…

> couldn't understand why would anyone still wait in that sort of queue for something to purchase in this day and age

for the social media photo / story of buying it in $exotic_locale

bonus points if you are confusing things by buying french items in austria, obviously

Re: Neiman Marcus files for bankruptcy

#200

Post by stainforth »

nutshell89 wrote: post #159
twblalock wrote: post #144

Earlier quoted context omitted.

I don't buy that explanation. A lot of traditional mall and department store retail is suffering, but other kinds of retail is doing great selling to middle-class Americans. Examples include Home Depot, Lowes, Walmart, Target, and Amazon. They are winning because they offer more convenience to customers as a result of their size, selection, and online presence. Besides, this article is about a luxury retailer, not th…

Neiman Marcus suffers from two additional factors imo - a lot of their retail is in pricy urban real estate markets (Beverly Hills, Palo Alto, Stockton Street, Michigan Ave, Hudson Yards, Tysons, Houston's Galleria, etc.) where rents have escalated in recent years in comparison to cheap Amazon / Walmart style giant warehouses outside of town. Additionally, NM has been owned by PE for years putting financial strain on…

Why don't those landlords just lower their rents to meet demand then?
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