Toys R Us & Executive Compensation (Long Anger)

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Last week there was an uproar about Toys R Us' motion seeking approval of a proposed executive incentive plan. Then the Official Committee of Unsecured Creditors (UCC) came in, negotiated down the sweetheart arrangement, and filed a statement in support of the company's motion. We wrote about it all here. Since then, the bankruptcy court held a hearing and despite continued objection by the United States Trustee for the Department of Justice, the court approved the plan. Color us unsurprised. Also color us impressed by the company's sequencing.

There is 100% strategy embedded in the Company's plan, just weeks before Christmas, to get approval of its incentive plan. Note that we also highlighted that the company recently filed its store closure motion and that it only sets forth procedures for closures rather than specifically identifying closures. To date, only UK stores have been identified for closure. We suspect the US number may surprise people; we suspect a lot of employees will be losing their jobs; we suspect people will be pissed and that the incentive plan will reemerge as an issue in that context. On the bright side, at least Toys R Us was able to bring this Xmas's "hot toy" to the market. Oh, wait, that was Walmart($WMT). Womp womp.

All of which brings us, albeit circuitously, to General Electric ($GE). In 2015, former CEO and Chairman Jeff Immelt "earned" $37.25mm which included an 8% bonus increase (to $5.4mm) and a 9% salary hike ($3.8mm). In 2016, Immelt's comp stacked up to a smaller-but-still-impressive $21.3mm. When Immelt retired earlier this year, some figured that he walked away with $211mm. Ironically, by leaving earlier than he originally planned, he presumably got to take advantage of GE's (relatively) higher stock price prior to its utter and disastrous capitulation a few weeks later. 

Then this week, adding insult to injury, GE cut 12,000 jobs in its power equipment division, a 4% reduction of GE's total workforce. Why? Disruption, that's why. The division "has been hit hard by the rise of renewable energy." Notably, the energy business of Alstom - which services coal producers - is part of that division. Immelt, using his infinite "business judgment" (which is to say nothing of the Baker Hughes transaction), purchased Alstom in 2015 for a whopping $10b. Awesome. Timing. Bro. 

What are the ramifications for Immelt? Well, certainly none. He nearly got a new gig as the CEO of the highest valued private company in the world. And once the new tax plan goes into effect he can bequeath his ill-earned wealth to his family free of the shackles of the estate tax. We're sure that seems fair to those 12,000 people looking for jobs on the eve of Christmas. 

Grocery (Short Mom & Pops; Long Dollar Stores & Judges)

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This is a good example of what happens when a Walmart ($WMT) rolls into town, prices compresses like a boss, and puts local shops out of biz. People have to drive 40 minutes to go grocery shopping. That's bananas. Which explains Dollar General Corp's ($DG) strategy to, as the Wall Street Journal put it, "build thousands more stores, mostly in small communities that have otherwise shown few signs of the U.S. economic recovery."Which, in turn, illustrates, in part, the juxtaposition between what is happening in various communities across the country and the macro-economy generally. On one hand you have a record 86th straight month of nonfarm payroll expansion and unemployment at 4.1%. On the other hand, you have job and resource drain. Apropos, Todd Vasos, CEO of DG is quoted, "The economy is continuing to create more of our core customer." Speaking of jobs, we now have two precedents for judges ordering shuttered/shuttering retailers to, uh, not shutter. Last week we noted that Starbucks' ($SBUX) plan to shut Teavana locations down got blocked by a judge siding with Simon Property Group($SPG). Now Whole Foods has run into the same problem. Landlords 1, failed retail 0? Seriously...are there ANY winners, here, really?

Recruiting: More Genius Ideas to Differentiate Your Firm

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Go Long Perks

So, if pop-ups are too complicated, you could always go the perk route and, gawdammit, if biglaw and finance ought to derive inspiration from anyone it may as well be the geniuses on Sand Hill Road. Want your car gassed-up while your werk werk werking that conference call like a boss? Well, there's an app for that. Actually, several, and they all share an affinity for bad name-brands, e.g., Booster Fuels, InstaFuel, WeFuel, Filld and our personal favorite, Bankrupt. Ok, just kidding about that last one. But, we're very excited for the inevitable launch of G-uber, Gyft, and AirbnG. Seriously, bros, InstaFuel and WeFuel? Ugh. Choice quote, “'I live and work in Silicon Valley. If there’s an app to deliver something, we’re usually the first ones to jump on it....'" Is there a service that will deliver this dude a gun so he can be put out of his bro-y misery? Elsewhere in perk land, why not convince your Management Committee to beta test Walmart's ($WMT) latest and greatest technology which will deliver needed products directly to your office. Think about it: that time you spend going to the physical Walmart location or local Walgreens could now be put to MUCH better use. Like, you know, billing. To top it off, maybe your firm can offer you the Hello Alfred amenity so that you never have to bother with restocking your home fridge or picking up dry-cleaning. After all, that's time that could be spent doing much more worthwhile sh*t like...billing.

Fashion (DNVBs = Distressed Opportunity?)

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Look for Our Launch of New 'Lit' Brand "Unicorn & Bankruptcy" 

Why is that so many brands now are named "Something + Something"? Are we the only one's who've noticed that trend? Anyway, Bonobos is a failure because it sold(out?) for 3x its venture capital investment to Walmart Inc. ($WMT) - or so the narrative now goes. Curious. Walmart, after all, reflected the makings of a resurgence this week with a blockbuster earnings report that many largely attribute to Jet.com's Marc Lore and the e-commerce expertise he's assembled around him. Like Bonobos' Andy Dunn, for example. Nasty Gal, however, is an entirely different story; it didn't sell for 3x. It sold for parts in bankruptcy court. Its ubiquitous founder, Sophia Amoruso, now runs a, gulp, digital media company (see above). Seeing Bonobos mentioned in the same breath as Nasty Gal must have Mr. Dunn questioning life's fairness. Anyway, read between the lines in the piece and it sure sounds like there could be a waive of would-be digitally-native disrupters disrupting themselves all the way to bankruptcy court (or an assignment for the benefit of creditors). Choice quote,"'We’re seeing that some of the same brands that get celebrated for raising $10M, or hitting $100M in revenue, are gone a few years later or eek out a distressed sale.'" You're damn right they do. Who wants to start the latest hot DNVB called "Unicorn & Bankruptcy"?

A Surprising Week in Retail Ahead of #BlackFriday

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Walmart, Abercrombie & Fitch, Foot Locker & The Gap Surprise to Upside

Lots and LOTS of brain damage about how to salvage retail these days. And there should be: look at THIS graphic of empty retail storefronts in New York City. So, here, there are some interesting suggestions for the future of retail by a venture capitalist. And, here, a real stretch by Williams-Sonoma Inc. ($WSI) with the acquisition of augmented reality 3D imaging startupOutward for a nice sum of cash. Meanwhile, US e-commerce sales jumped 15.5% in Q3. In a CURIOUS week which calls into question the full power of the "Amazon Effect" (just kidding, no it doesn't) many down-and-out retailers like Abercrombie & Fitch Inc. ($ANF), Gap Inc. ($GPS) and Foot Locker Inc. ($FL) surprised to the upside. TJX Co. ($TJX), on the other hand, broke its 8-year sales growth streak while missing revenue estimates all while competitor, Ross Stores Inc.($ROST), blew it out of the water. Perhaps TJX' miss is a one-time thing that truly is attributable, as its CEO said, to poor merchandising and weather or, as we asked on Twitter, maybe the discounters are subject to a trickle-down effect...? Elsewhere, we should note that Poshmark, an app-based fashion marketplace that we have credited for contributing to millennials' distaste for malls, raised $87.5mm in Series D funding. Finally, Black Friday may put a dent in household debt levels as credit spending is on the rise. We're sure that'll play out just fine.

Retail (Long Organized Crime)

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Long Live Tony Soprano

So, apparently organized crime is a "new" threat to retail. Granted The Sopranos hasn't been on TV for years, but wethinks organized crime has always had a grand ol' time boosting valuable merchandise. Not entirely sure what's new about this. The masterplan that the Sun describes at the Apple Store in Towson hardly sounds like a sophisticated operation. But, what do we know? That said, we read the piece and we couldn't help but think about Walmart's ($WMT) employee delivery program. We mean, seriously, what could go wrong? 

Rewind I: Wage Increases Squeeze Profits

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Buffalo Wild Wings & Hersha Hospitality Trust Shine a Light on Jobs

When Toys R Us filed for bankruptcy a few weeks ago, we noted that part of its business plan - which, of course, gave JP Morgan ($JPM) and other DIP lenders comfort that the business is viable - included minimum wage increases to compete with Walmart ($WMT). Notably, Walmart subsequently had the opportunity to raise wages again and opted not to. Back in the beginning of the distressed dining wave, we highlighted, prior to the election, that minimum wage increases were increasingly cited as one of the causes for bankruptcy. Notably, in this week's onslaught of earnings reports, a number of firms - from the very successful Buffalo Wild Wings ($BWLD) to the not-so-much Hersha Hospitality Trust ($HT) - noted that wage increases were squeezing profits. We snarked on Twitter that BWLD's "Fiscal Fitness" program must be the new euphemism for "More Work, Fewer Hours" as the company announced hour curtailments to offset wage rate increases. The Philips Curve is finally kicking in, it seems. Maybe that has something to do with 3% GDP growth. 

Walmart Gives Retail a Brief Reprieve

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A number of retailers have cited wage increases as one of the reasons for filing for bankruptcy. John Morberg, the CEO of Garden Fresh Restaurant Intermediate Holdings, made sure to highlight this issue upon that company's bankruptcy filing. On the flip side, Toys R Us includes wage increases in its go-forward business plan. Target recently announced wage increases too. But Walmart, which had previously announced wage increases didn't match Target in its earnings announcement on Tuesday, providing relief to a lot of retailers already squeezed by various macro trends. Speaking of Target and Walmart, they are innovating to compete with Amazon for the "last mile." This could get ugly.

Notable (Molycorp, PwC, Sears, Toys R Us, Westinghouse)

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Molycorp. Oaktree Capital Group LLC may attempt to IPO Neo Performance Materials Inc., a remnant of the Molycorp bankruptcy.

PwC Law Firm. Yes, you read that right. PwC is launching a law firm in Washington DC to focus on international corporate restructuring. 

Sears. Is it the blueprint for everything Amazon is doing?

Toys "R" Us. This nine-year old kid has a future in marketing. If Toys doesn't figure out some way to market this, they deserve to liquidate. Meanwhile, Walmart smells blood in the water: with Toys' Babys "R" Us also in bankruptcy and NYC Mom-favorite Giggles closing, Walmart is expanding its private baby line. 

Westinghouse. Private equity firms are at the gates. 

Grocery (What is Dead May Never Die)

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This space is getting uglier and uglier by the week. Info dump here: Jet.com (aka Walmart's ($WMT) e-commerce division) is launching its own grocery line to compete with Amazon. Walmart is also getting into the "meal kit" space. And The Fresh Market continues its descent into distressed territory with its secured notes down 15 points and Cerberus Capital Management - already big in the space - purportedly buying in.

Fallout from Toys R US & More Distressed Retail

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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."

Notable (Sears Canada, Joyus, Community Health Systems & More)

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Busted Tech. Joyus, an online shopping platform that relied heavily on video, shuttered this past week announcing in a leaked memo that it would undertake an assignment for the benefit of creditors. The company had no venture debt but did raise nearly $70mm from Accel Partners, a Time Warner venture arm and investors affiliated with a Walmart ($WMT) venture affiliate.

Healthcare. Community Health Systems ($CYH) announced its preliminary Q2 financial and operating results and they weren't very pretty. Net operating revenues were down nearly $400mm relative to the same quarter last year. Categorical losses, however, were generally lesser than the year before. The stock - and that of spun-off Quorum Health Corporation ($QHC) took a dive after the report. Meanwhile, smaller ($1-10mm) healthcare providers continue to file for bankruptcy.

Noble Group. With $3b of debt and various other issues, lots of folks are souring on the name.

Och-Ziff. We've heard of camp counselor bonuses from satisfied parents but this $280mm package takes things to a whole new level. Also, long luck. 

Pure Unsupported Fantasy. Otherwise known as Sycamore Partners' claim that Dollar Tree Stores submarined the Family Dollar merger. So Dollar Tree says, anyway.

Sears Canada. And we thought we were aggressive with some of our commentary:nice headline. Meanwhile, it appears that Eddie Lampert and Bruce Berkowitz couldn't figure out a way to get along in the sandbox, calling off their joint effort to bail out the embattled Canadian retailer. Now ESL Partners LP may sell some of its stake to take a tax loss. Berkowitz's Fairholme Capital Management LLC increased its holdings not too long ago.

Shopping Holidays. Get ready because it is undoubtedly coming. Fresh on the heels of Amazon Prime Day, other retailers are getting jiggy with it (looking at you Walmart and JD.com) and intend to start their own shopping holidays. Looks like the big retailers want to make Labor Day even more pointless.

Retail (Who the hell can keep up?)

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Toy's R' Us YOY down $33mm and comp stores down 4%. Neiman Marcus, meanwhile, reported that it is terminating its proposed sale process. Hudson's Bay Co., considered a buyer, is suffering itself and apparently the two parties couldn't figure out what to do with Neiman's $4.8b of debt. Now the company has to fend for itself. Speaking of bigbox, Sears Canadalooks like the first domino to fall in the Sears empire and its former CEO isn't pulling any punches vis-a-vis ESL. Ascena Retail Group ($ASNA) announced that it's closing 25% of its stores. And now the game of chicken between retailers and malls is at full force with restaurants bouncing around to the Sam Cassell big balls dance (c'mon, you know the reference). Finally, Walmart bought Bonobos and the retail race is on: WMT vs. AMZN!

Notable (Hostess Brands, Shoes.com & More)

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  • Hostess Brands. Slightly older news but we were hunting for Easter eggs last week. Anyway, Hostess Brands is back in the public markets now ($TWNK) and, notably, Apollo Global Management has reduced its holdings from 16.9% to 2.6% according to SEC filings. This appears to be a very successful turnaround and exit for the publicly-traded private equity shop ($APO).
  • Reorg Research. Something tells us that Dechert LLP's subscription rate is about to go up. 
  • Shoes.com. We previously noted the failure of Canadian company Shoes.com.Walmart, it seems, has purchased the URL of the company for $9mm, an interesting comp for distressed IP go-forward.

Interesting Restructuring News

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  • Grocery. Cerberus Capital Management-owned Albertsons is reportedly in talks regarding a possible take-private buyout of publicly-traded grocer Sprouts Farmers Market ($SFM). Given the tough grocery environment, this is an interesting development. And it may get EVEN MORE interesting given this.
  • Oil&Gas. Crude stockpiles hit a modern record this week as American producers basically flick off Saudi Arabia/OPEC and produce, baby, produce. Crude priced down to ~$48/barrel. This - and the embattled state of Seadrill Ltd. - isn't stopping John Fredriksen from looking at picking off offshore assets. Speaking of offshore assets, the oil players are going face-to-face with power suppliers - for wind. Meanwhile, a dissenting view relating to the effect of the rise of electric cars on oil demand (paywall). Elsewhere, in Canada...
  • Retail. Bebe Stores Inc. ($BEBE) is plans to shut down its brick-and-mortar locations and become an exclusively e-comm brand - a plan that depends on the sudden charity of landlords who have shown ZERO propensity for flexibility with retail tenants. Seriously, like, ZERO. See, e.g., THE TRAIL OF RETAIL CORPSES LINING THE 2017 BANKRUPTCY ROLLS. Meanwhile, Land's End ($LE) continued to suffer from its association with Sears while reporting a perfect storm of, wait for it...decreased net revenue, decreased catalogue and e-commerce revenue, decreased same-store sales, and worsening gross margin. J.Crew  reported sliding sales, revenue and same-store comps but nevertheless reported a (very) small profit - largely on the back of Madewell. And then there is Nike ($NKE) which, in its quarterly report, noted increased profit but modest sales growth in the face of online shipping headwinds.
  • Retail II. Uh oh. It appears that Walmart may be getting it's (e-commerce) sh*t together which doesn't bode well for brick-and-mortar already suffering from the Amazon onslaught. Speaking of which, peace out Payless Inc. Wethinks we'll soon be saying "peace out" to a bunch of Chinese shoe manufacturers on top of the thousands of American jobs that will be wiped out. But dividends for Golden Gate Capital and Blum Capital Partners!
  • Rewind I: We have taken a little bit of heat for two mentions of 3D-printing in this newsletter; we have been accused of over-hyping the technology and its near-term ramifications. Well, noting the Adidas announcement this week, have we?? 
  • Chart of the Week: 

News for the Week of 2/26/17

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  • Busted Startups. Here, Beepi. Despite $150mm of VC and a last raise at a $564 valuation, the used-car marketplace is selling for parts, with Sherwood Partners acting as assignee. With auto-lending for new cars at subprime levels, this capitulation isn't all-too surprising.
  • Busted Startups II. Some argue that part of the failing brick-and-mortar narrative relates to delivery services like Birchbox. Maybe not. Trunk Club sold to Nordstrom and has languished and now JackThreads looks like it's worth JackSh*t. 
  • Clean Energy. Challenges. But progress with storage.
  • Disruption. The fall of Blackberry.
  • Distressed Investing. In malls. These guys have cajones.
  • Greece. Remember the bailout controversies that sent the markets into a tizzy a few years back? Yeah, they're back. Europe looks staged for a lot of volatility in coming months with elections looming in France and Germany. This could create some real interesting investment opportunities. Of course, that's what people said of Brexit, too.
  • Power. Maybe. Maybe not. This week the denials poured down from Toshiba re: Westinghouse. Meanwhile, FirstEnergy drops some bombs in its investor presentation.
  • Restaurants. Five chains that look like dogsh*t in 2017.
  • Retail. Apparently President Trump's promises to make America great again did not take into account all of the vitriol that would be unleashed towards his brands and resulting domino effect: case and point, Perfumania, which was teetering BEFORE folks wanted to wash themselves of the Trump stank. Speaking of mall-based stench, L Brands' Victoria's Secret ain't looking so hot these days as forward guidance looked bleak. And Amazon announced the release of its discount bras. Cue Jaws theme song.
  • Retail II. People have been talking about Toys R' Us for years and in '16 they took steps to deal with the over-levered balance sheet. The company continues to cut costs on the ops side too. Meanwhile, other companies like J.Crew are engaging in Intellectual Property machinations to stave off the inevitable and raise financing - the legality of which remains an open question.
  • Retail III - Department Stores. AlixPartners makes a cameo appearance in this interesting summary of the state of department stores. Choice stat: "As recently as 1999, department stores had total sales of $230 billion. Last year they came in at $155.5 billion, according to Census data." Accordingly, JC Penney is closing 140 stores (and probably still has 300 too many) and Sears is continuing to cut costs with 130 HQ firings. On point, Macy's reported numbers this past week. And so did Walmart - and the market initially responded in a way that is a smack to Warren Buffett (see last week's newsletter). Meanwhile TJX Cos. (TJ Maxx, Home Goods, Marshalls) showed that brick-and-mortar still has some legs (as did Nordstrom).
  • Fast Forward: Ocean Rig acknowledged that it's effed and the stock took a dive: a possible bankruptcy is on the horizon. And Cumulus Media had a setback in its efforts to restructure.
  • Rewind I: Sporting goods - analysts are starting to notice the massive bloodbath and, accordingly, downgraded Dick's Sporting Goods.
  • Rewind II: Let's hope that Sycamore Partners' purchase of The Limited fares better than Versa Capital Management's investment in Eastern Outfitters. $26.8mm price tag. Meanwhile, Wet Seal is available.
  • Chart of the Week: 
  • Tweet of the Week:

News for the Week of 2/19/17

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  • Capital Markets. The return of the Holdco PIK Toggle bond - a precursor to the inevitable market collapse. Or so they say.
  • Coal. Plants are closing. Looks like some votes from coal country were misplaced.
  • Dead Malls. Investing. See, e.g., this piece on Macerich. We don't typically cite to Seeking Alpha's collection of vagabonds and yahoos, but we found this particular analysis of A Malls interesting.
  • Exploration & Production. 17 months after filing its prepackaged bankruptcy case(s)...or was it prearranged?...sh*t, it's been so long that we can't even remember, Samson Resources Corporation finally has a confirmed plan of reorganization. We'd be curious to see what the professional fees are as a percentage of debt ($5.6b): perhaps this should be a new in-court ratio for courts to consider as part of 327(a) review. At least we got a new term of art out of it: "the Kirkland Prepack". So, there's that (2x if you consider EFH this week, too). 
  • Nuclear power. Toshiba took a beating on Westinghouse this week. And now there are whispers of bankruptcy.
  • Retail. We have a Billions-style therapist in-house who keeps using bad sex metaphors to inspire us to be more positive about retail. Ok, no we don't: last we checked none of you are paying for this newsletter and so how the hell would we afford THAT?! Still, there are some positive signs for retail: Barron's, for instance, thinks Macy's stock has fallen too far and has upside. Meanwhile, specialty women's retailer J.Jill has filed its S-1 under the JOBS Act for an IPO which either means there's one retailer bucking recent trends or - more likely - TowerBrook Capital Partners LP is looking to dump this thing before Amazon gobbles it up like it has everything else. Damn...that was cynical and negative wasn't it?  Well, we tried. 
  • Retail II. This week we learned that Warren Buffett dumped his entire position of Walmart stock ($900mm) which, as this piece notes, ain't exactly a vote of confidence in retail. Perhaps Buffett would have reconsidered had he known about "Moosejaw Madness." You read that right: this week Walmart spent $51mm to purchase Moosejaw, a Michigan-based online retailer (with about a dozen B-and-M locations). Interestingly, the business is similar to Gander Mountain which, as we covered last week, is staring down the barrel of a liquidation. Oh, and hhgregg isn't exactly instilling confidence either (yes, its publicly traded). But, in an ironic twist, Amazon is upping to 8 B-and-M book stores.
  • Retail III. This won't help mall foot traffic: frustrated by a lack of options, start-ups like Dia&Co. are looking to tackle the plus-size market (with wholly-unoriginal Birchbox-style monthly mailings). And a fresh round of funding from well-known VC Sequoia Capital will aid the effort. Speaking of Birchbox, note that the business - despite being copied by a slew of other start-ups - isn't exactly a shining tower of success; it recently took on venture debt (and rif'd staff) and now it's exploring pricier options to juice revenues.
  • Shipping. A bloodbath in China for the shipbuilders and Hanjin Shipping = toast.
  • Uber. With $500 million of delinquent taxi medallion loans, NY state regulators seized the Melrose Credit Union. #disruption 
  • Wind. No holding it back. 

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...