Brief (and Limited) Reality Check

There's a lot of bluster in the restructuring community about Amazon, e-commerce and the death of brick-and-mortar retail. It's hard not to be sanguine about the future of retail when the bankruptcy roll is littered with names like General Wireless Operations, hhgregg Inc., Gander Mountain Co., Gordmans Stores Inc., and Vanity Shop of Grand Forks Inc. - and those are just the filings that have occurred in March.

In the interest of completeness, though, there is SOME nuance here and that nuance largely depends on socioeconomic and geographic considerations. This Washington Post story features interesting data about the adoption of e-commerce and while it has grown in nearly every state, there are some states that have been very slow to adopt it, e.g., Idaho, South Dakota, Colorado, Arkansas and Arizona. The macro trend remains the obvious, of course, but we thought this was worth noting. Sometimes it's erroneous to paint with too broad a brush.

Private Equity Track Record

Back in October, Garden Fresh Restaurants* filed for bankruptcy. In January, The Limited Stores* filed and ultimately sold for a pittance to Sycamore Partners. Soon, if the rumors are true, Gordman's will file. What do all of these companies have in common? Sun Capital Partners. Gordman's would be the third Sun Capital portfolio company bankruptcy in five months - which doesn't really enhance the image of private equity firms now, does it? Thousands of jobs are now gone (a typical and increasingly earned PE trope), but Sun Capital has gotten its dividends and fed its LPs. Did Sun generate returns for its LPs? Looks that way. But we're not sure a track record of multiple liquidations is what Sun was hoping for. 

UPDATE: Shortly after publishing this, Gordmans Stores Inc. did, in fact, file for bankruptcy. You can find the case summary for it here

* click on company names for case rosters