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
Neiman Marcus files for bankruptcy
91–100 of 276 posts
Re: Neiman Marcus files for bankruptcy
#92Earlier quoted context omitted.
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…
> 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, Debts? Lemme guess, PE? Right you are!) There's an incentive to do this and the edge is ... what?
Re: Neiman Marcus files for bankruptcy
#93Earlier 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.
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-life-crisis kinda thing.
I moved to NYC for after high school, and was incredibly shocked to see people actually wearing Gucci, Louis Vuitton, and not feeling self-conscious but rather better for it. I was likewise shocked to see how expensive the trendy secondhand stores were, again compared to the bay area. It all seemed designed so that, if you saw someone dressed in a certain style of clothing (either "boho-chic" or fancy brands), you could be safely confident they were rich.
I used to be repulsed and holier-than-thou about this kind of thing. But now, when I go back to the valley to visit my parents, I recognize the same things flourishing there, where I naively thought the "humble Californian spirit" wouldn't allow them to take root. It's been kind of sad to see the Santana Row-ification of the south bay take place during my lifetime, but everything moves in cycles, I suppose.
Does this match anyone else's experience? Is there a place where humility has survived as a popularly-held virtue, even in the face of not-atypical wealth/abundance?
Re: Neiman Marcus files for bankruptcy
#94Earlier quoted context omitted.
I assume someone must lend the money (as it's not created from nothing). How does it work?
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)?
Re: Neiman Marcus files for bankruptcy
#95First guess: private equity? Neiman Marcus, laden with debt after a private equity takeover, Yup.
To be fair, if they had a PE takeover, they likely weren't in great shape before the takeover. The takeover gave them a little bit longer to live at least.
I had a Russian guy want to do something similar with my shop. I bit him. It was awkward. My father told me I should have beaten him instead.
Re: Neiman Marcus files for bankruptcy
#96Earlier quoted context omitted.
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…
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?
Re: Neiman Marcus files for bankruptcy
#97Earlier 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…
It's a bust-out. It's much easier to look at the examples in mob movies, like when they took over the outdoor store in the Sopranos or burned the nightclub in Goodfellas.
They take over a business with existing good will and loot it, using that good will to delay the collapse until they've extracted all the money and left others holding the bag, usually creditors (especially tradeline partners like suppliers, or landlords) and employees.
Ref: https://www.experian.com/assets/decision-analytics/white-pap...
Re: Neiman Marcus files for bankruptcy
#98Earlier quoted context omitted.
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)…
Yeah. It's not just department stores--which I have less direct experience with. A lot of the old line "mail order" outfits like LL Bean, J Crew, Lands' End, etc. (as well as many of the at least semi-premium outdoor clothing/gear/etc. brands) are much more of a both quality and customer service crapshoot than they once were. At the risk of painting with an overly broad brush, when everything is made in the same, mos…
I ordered stuff from Banana Republic Factory about a year ago. I was on their email list, saw something I liked in the ad, clicked on it, bought it. It was on sale, a shirt for like $30. I had good experiences with stuff I bought from them in an actual store years prior.
The shirt came, and it was synthetic blend of polyester IIRC- the shirt felt like wearing a garbage bag, but much worse was that the fabric was so thin that you could see through it. I had a white shirt with a light logo on it of a tech company, and you could clearly read the logo through the shirt- and even with a plain white tee on you could clearly see where the sleeve ended on the undershirt- this was something I would have expected to see in the bargain bin of a Walmart for less than $10, not for $30 (which was the sale price) from a reputable brand.
What's worse- is they wouldn't even take it back without a fee of $6- I don't live near a Factory store, and a regular Banana Republic wouldn't take it back. I told the CS rep that they should be embarrassed for even selling something of such low quality, and to not take it back is just appalling. She didn't care, and that's the last I have ever ordered from BR online.
Re: Neiman Marcus files for bankruptcy
#99Interesting 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?
Re: Neiman Marcus files for bankruptcy
#100Earlier 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…
They're required to pay a fixed interest rate on the debt. So during an economic downturn when profits dip, they can become insolvent. By comparison, when the capital came from stock, the dividends could adjust up and down with their profits.
Like any form of leverage, it magnifies both the upside and downside risks.