Retail.Captain-Obvious

This is interesting. Upshot: retailers ought to move away from the traditional seasonal approach if they want to compete with millennials insatiable year-round appetite for experiences. (PETITION NOTE: of course, it's too late for a number of retailers: we suspect this year's holiday season is make-or-break for a number of retailers, e.g., Nine West, Charlotte Russe, 99 Cents Only Stores). And marketers are focused on the 26 year-old millennial who apparently barely know how to put on pants in the morning (firewall). Good luck, though: JP Morgan Chase, Citigroup, and Bank of America just reported numbers and noted higher credit card-related losses in the last quarter. Each is increasing reserves against losses. Spending was up last month in auto, retail and restaurants, by the way. Query whether that spending will translate into future credit card losses and reserves.

Fallout from Toys R US & More Distressed Retail

Blah, Blah, Private Equity = Death to Retail?

Courtesy of the New Yorker, some more Toys "R" Us history here. Mattel ($MAT) had to amend its credit agreement, reflecting significant leverage ratio uncertainty after the Toys "R" Us bankruptcy filing. Jakks Pacific Inc. ($JAKK) reported that it now expects a net loss in '17 and then, as if to pour salt on the wound, the ratings agencies unleashed a downgrade. Folks are getting increasingly nervous about the retail fallout amidst conflicting reports about store closures/openings. PETITION NOTE: lost in all the noise around Toys is that their new business plan calls for increased employee wages - implying a belief that Walmart's ($WMT) wage increases have helped Walmart provide a better "experience."  PETITION NOTE II: It appears that the lenders firmly believe that comparisons between Toys "R" Us and (liquidated) Circuit City are misplaced. Toys is THE LAST LARGE free-standing toy seller. Circuit City was generally expendable given that, at the time, the space was considered saturated and uber-competitive. Now, Best Buy ($BBY - up ~26% YTD, which is down after cratering the other day) fills that void. Just like Barnes & Noble ($BKS - down ~37% YTD) fills the (physical) book void (well, at least until Amazon book stores sprout in force - already it's popping up in New York and LA). And Dick's Sporting Goods ($DKS - down ~50% YTD) now has significant sporting goods market share. We're not saying WE would invest on this "LAST" basis because we wouldn't be caught dead with DKS, BKS or BBY in the PETITION 401(K); but, we are saying that the lenders appear to be lending, at least in part, on that basis. And word is that the DIP is over-subscribed (and Reorg Researchcaptures how lenders are clamoring for inclusion). Meanwhile, the list of distressed retailers seems to grow by the day: note: Belk Inc., Fresh Market, Bi-Lo, 99 Cents Only Stores and more (blah blah, private equity). But, to put an exclamation point on this, see, "Private equity drove Toys "R" Us into bankruptcy, sure, but that isn't quite the same thing as destroying it."