Retail (Short Charm Bracelets)

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Some teen quotes simply to drive home the point that Apollo Global Management's investment in Claire's Stores ain't exactly paying off. Bed Bath & Beyond ($BBY) may close 80-100 stores. Golden Gate Capital-owned Eddie Bauer is reportedly looking for a buyer while also focusing on a debt restructuring: Guggenheim Securities is reported running the sellside mandate.

A Rare Retail Surprise to the Upside

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Long-watched Claire's Stores Inc. surprised to the upside this past week asApollo Investment Corporation's operators appear to be working their magic (yes, a rare PETITION shoutout to the PE bros). The company's bonds reacted favorably and now many think that the company will manage to make it until...wait for it...at least 2018 - not exactly the greatest vote of confidence given that we're in Q3 already and most retailers are gonna want to give the holiday season a spin (unless we're talking about Gymboree). Elsewhere, Nordstrom ($JWN) is talking a go-private transaction.

News for the Week of 2/5/17

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  • Athleisure. Start the funeral dirge. Under Armour reported dreadful numbers and guided poorly, citing the Sports Authority bankruptcy as a reason for decreased exposure to product. Then S&P kicked UA while it was down, downgrading its corporate credit rating from investment grade to high yield. It's not a restructuring candidate with double-digit growth but its results don't bode well for retailers, generally. Good thing J.Crew is NOW starting to focus on athleisure.
  • Avaya. Doing a little damage control.
  • Cumulus Media. What the public is learning.
  • Europe. Some expect a bigger year for restructuring in 2017.
  • Private Equity. Some doubts about portfolio quality.
  • Solar. The technology continues to take hold and grab share but there'll be a lot of carnage along the way. Meanwhile, Exxon got pummeled, noting over $2b in writedowns.
  • Retail. As distressed investors and bankruptcy professionals lick their chops over the possibilities with rue21, True Religion, Claire's Stores, J.Crew and others, "fast fashion" gets a second look as a culprit in the demise of retail (adding to the typical Amazon narrative). Still, even H&M and Uniqlo have announced intentions to scale back growth plans and/or close stores in the US.
  • More Retail. The Finish Line Inc. announced its sale of Jack Rabbit Sports this week (66 locations) for undisclosed terms. "Undisclosed terms" = GU gels and a jock-strap. Peter J. Soloman served as financial advisor. The quote, "The acquisition eases fears that the chain would face liquidation with no strategic buyers for the business"...basically sums up specialty retail. Reasons for the company's struggles are particular to specialty running stores, including, notably a marked decline in marathon participation. It's just not that easy to take a selfie while running 26.2.
  • Morer Retail - Canada. Once high-flying e-commerce startup Shoes.comcapitulates under the weight of multiple lawsuits, thwarting an IPO. In addition to shutting down the e-comm channels, the Vancouver-based company will shut down two brick-and-mortar locations - effectively flushing $45mm of PE down the toilet. Still, that URL seems like it would fetch some value...
  • Fast Forward: Walmart is looking to disrupt Amazon while Amazon is looking to disrupt Alphabet and Facebook. And UPS. In other words, Amazon is after EVERYONE.
  • Rewind I: Usually we reserve "rewind" for topics we've discussed in previous weeks but we're making an exception here: apparently HMV still exists in Canada. Or did. What a major blast to the past. What were they selling, exactly, 8-tracks?
  • Rewind II: Payless Shoes. 4400 stores? Wow.  Apropos, retail now the sector with the most distressed debt. In other retail news worth a rewind, Sports Direct is reportedly in talks to acquire Eastern Outfitters, the parent company of Bob's Stores and Eastern Mountain Sports from Versa Capital Management out of bankruptcy. If those names sound familiar, it's because Versa literally just bought them in bankruptcy last year in the Vestis Group case. So, add this to the growing list of Chapter 22 cases. 
  • Rewind III: Given our revelation last week of the connection between Puerto Rico-Dentons-New Gingrich, its intriguing that Greenberg Traurig is distancing itself from another Trump supporter.
  • Chart of the Week: Sometimes to disrupt the incumbents, you have to bleed cash like nobody's business...

News for the Week of 01/22/17

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  • Distressed Investing. A short discussion of opportunities in post-reorg equities.
  • Fraud. With lofty valuations and lofty P/E ratios come lofty expectations. And fraud. Here's hoping this is confined only to tech. 
  • Hospitals. They're going away.
  • Malls. Simon Properties and General Growth Properties take a hit from The Limited Brands bankruptcy, which is only valuable on an IP basis. But don't worry: pop-up stores and pickup centers will ease the pain. Wait, what?
  • Mexico. Pemex is selling a baseball field to sure up liquidity. Yes, you read that right.
  • Retail & Retail Analytics. Some analytics around retail. Meanwhile, in the face of talk about renewed IPO activity in '17, Claire's Stores unsurprisingly abandoned its IPO, further calling into question Apollo's $3b take-private transaction. And then there's BCBG trainwreck. But hope is not lost for physical retail: a number of e-commerce retailers are increasing their physical presence, including Bonobos, Rent the Runway and others.
  • Rewind I: More on the Dallas pension fiasco.
  • Rewind II: New developments with Takata pummel the stock.
  • Chart of the Week: