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?
Think Outside the Box, We Say
We can't seem to get over our own obsession with private equity/biglaw/bank recruiting; we've written about it here, here and here. Why? Mostly because its stupid-absurd which, in turn, makes it funny. But after reading about the rise of corporate pop-ups here, we came up with what we think is a genius way to jumpstart business development and recruiting efforts in one fell swoop: a biglaw pop-up store. Stick with us here: picture a mall with next-wave bankruptcy candidates like Charming Charlie, Nine West, Bon-Ton Stores ($BONT), Sears Corporation ($SHLD), Destination XL ($DXLG), Destination Maternity ($DEST), etc. (collectively, the "Effed Retailers"). Picture, also, within close proximity, a corporate pop-up for, say, Law Firm AB&C LLP featuring all kinds of fancy screens rolling clips of how bada$$ and extreme its attorneys are while arguing (or singing) in court on behalf of retail clients. Imagine the product placement opportunities for the likes of Payless Shoesource, rue21 Inc., Gymboree, and True Religion (the "Successfully Reorganized Retailers"). "Stop by the AB&C LLP popup for awesome limited edition kicks and 'lit' specialty women's apparel," they'll say. In the opposite corner there can be a skull-and-crossbones banner hovering over an ominous display of retail carnage, e.g., hhgregg, Gander Mountain, etc. - all of which were, conveniently, of course, represented by other firms. Like, literally, a pair of running kicks should be on fire and death metal ought to be playing on the loud speaker. Of course, the managers of the Effed Retailers will see this and, in a panicked frenzy, start dialing corporate HQ asking, "Who is our Restructuring counsel?" Oh, really? Fire them. We need to hire AB&C LLP stat!" Meanwhile the Successfully Reorganized Retailers will generate some revenue from the product placement which, of course, they'll want to pay back when they inevitably are no longer "successful" and need to file for Chapter 22. Cha Ching! Another retention. Don't forget the REITs: Simon Property Group ($SPG) can continue to boast about 97% occupancy rates thanks to AB&C LLP filing space. And, finally, think of the branding potential. Law students and future law students will walk by and say "Holy crap. I want to go work at THAT law firm, AB&C LLP." Massive cross-benefit for recruiting. Whichever of your firms deploys this strategy first can send royalties via Paypal to email@example.com.
Bon-Ton Stores is beginning to look a lot like Toys R Us. Meanwhile, we've previously discussed Appear Here here and here. Now Simon Property Group ($SPG) is dedicating pop-up space in certain of its locations. It's a brilliant move, frankly: this plan lets digitally-native-vertical-brands test physical locations; it could also be accretive to SPG as they can generate buzz that couples with the DNVBs' online communities/networks to bring e-commerce shoppers to physical locations; it also gives SPG early looks at potential retail investment opportunities. Meanwhile, the knock against Abercrombie & Fitch and other retailers was that millennials didn't want to be human billboards rocking an A&F sweatshirt with 485-font lettering on the front. That is, unless you show em the paycheck. Now you can get paid for walking around big cities with Ipad-based advertisements on your back. Seems like a nice supplemental income for our friends in NYC.
More = Busted Tech, Investment Banks & REITS
Biglaw. Summer Associate satisfaction surveys (firewall). In case anyone actually gives a sh*t.
Busted Tech. A view that recent IPOs will never make money. Meanwhile, Toys R Us is a harbinger of, you guessed it, BUSTED TECH.
Canadian Retail. Also looking increasingly ugly.
Cov Lite. We're old enough to remember when people said it was dead and would never come back. Memories are short AF.
Delaware. This article about retail bankruptcy cases avoiding filing in Delaware misses the mark widely. Like, way outside. Any DE practitioners want to opine - without attribution - on this?? Email us here.
Investment Banking. Jefferies can't trade for sh*t but advisory fees baby. Given these advisory fees, it looks like UBS wants to get back into the restructuring advisory game. Again. For, like, the 283th time.
J.Crew. Investors are pissed.
New York. Is it in danger of becoming Detroit?
Puerto Rico. The hits just keep on coming. Sad, really.
REIT Investments. This is an interesting piece about alternative investments by REITS. Simon Property Group ($SPG) looks particularly active.
Retail (Taxes). When you're industry is in secular decline, fight for scraps. Here, tax changes.
In our ongoing quest to call bullsh*t on Simon Property Group's David Simon, we noted back in May that Starbucks' ($SBUX) disappointing Teavana franchise exposes Simon Property Group ($SPG) to vacancy risk. As of last quarter, there were 78 Teavana locations in Simon Property Group malls. Well, now they are ALL closing. Sadly, this may affect over 3000 jobs.
The endless parade of articles celebrating the cultural impact of the mall are starting to jump the shark. The New York Times just got in the mix. We GET IT. Retail is in trouble and bankruptcies abound. Malls, by extension, are also in trouble (though folks like David Simon of Simon Property Group want us to think otherwise). But enough already.
We've been beating up the REITS here saying, essentially, that Simon Property Group's David Simon and some of these other REIT CEOs are full of sh*t when talking about retail and the affect of declining mall traffic, e-commerce, and prolific bankruptcy on their bottom line. Apparently, Goldman Sachs agrees; it downgraded GGP Inc. ($GGP) the other day.
3D Printing. Increasing evidence of its rise from the CEO of Jabil Circuit Inc. ($JBL) - and not just for prototyping. If this continues to grow, it will have wind-ranging implications for manufacturing.
Alitalia. Apparently it's getting a lot of interest.
Credit Cards. Chargeoffs are on the rise. This helps explain, to some degree, why consumer spending is coming in below expectations.
Dodd-Frank. Peace out. We would love some investigative reporter to do a story on the hundreds of millions of dollars that were proffered to big law firms to draft "living wills" that nobody...like not one person...ever thought were based in reality to begin with. That said, not to get political but haven't we seen this deregulation movie before?
Post-Reorg equity. Brookfield Asset Management has a hedge fund ($300mm seeded, unclear of size now) that is chomping at the bit for post-reorg equity. We're curious to know which ones they think are attractive as several have flat-lined without having a large institutional sponsor underlying the stock. Peabody Energy($BTU), Midstates Petroleum ($MPO), Basic Energy ($BAS), Goodrich Petroleum Corporation ($GDP) and Sandridge Energy Inc ($SD) come to mind.
Radio Shack. Interested in some esoteric home furnishings? Well, interestingly, the carcass of Radio Shack remains up for auction and you can get a piece of it for your crib.
Simon Property Group ($SPG). We've beat these guys up ad nauseum because we don't buy the BS they're feeding us about how healthy they are - despite the noted new "click-to-brick" folks above and the opportunity that may present. This is a reason why. And we expect to see more of this.
In a previous discussion of new retail models, we mentioned Appear Here's launch in NYC to be a marketplace for short-term retail space. That launch should get a bit of a boost: this week the company reported a $12mm Series B raise. Interestingly, Simon Property Group is among the slate of investors.
Bankruptcy Code Section 4:20. Just kidding...the bankruptcy code isn't available for folks who make money off of weed.
Busted Tech. Answers.com takes a stray bullet in this piece about IAC's plans to shut down About.com. The fact that About.com has actually still been running this whole time renders us - yes, even us - speechless. Meanwhile, more busted tech is coming...soon. On the flip side, Quora is now a unicorn so who the hell really knows?
Canada. Housing is looking like an oncoming disaster - particularly in Toronto - and blood is appearing in the water.
Casual Dining. Quietly, a NYC mainstay is disappearing.
Dead Malls/Investing. David Simon's optimism notwithstanding (see above), everyone is all over the "short the malls" thesis - now even extending it to the "A Malls" that, prior to recently, were generally considered to be impervious to this retail malaise (note: there's over $1b of short interest on SPG currently). And this guy from Alder Hill Management LP is the poster child. (Let us know if you want his report: PETITION has it.) Some are throwing shade all over this hype. Finally, according to this, maybe we should all be doing a better job to ensure that algorithmic shopping doesn't gain more ground and malls actually DO survive.
Oil & Gas. Nothing like a good old corruption allegation that embroils multiple law firms and a private equity shop to help push a company (here, Cobalt International Energy) closer to bankruptcy (paywall).
Oil & Gas II. Wait. So now we're at an oil and gas deficit?!
Retail II (Jamming like a Boss). While Gibson Brands was able to refinance its debt and push out issues, Guitar Center is looking increasingly troubled. Given that the company is private equity-owned, undoubtedly there is an over-leverage story here (like with all other PE-owned retail), but we wonder whether the show-room trend is particularly applicable to this kind of business. We asked our artsy friends and one of them openly admitted to strapping in at the local GC and then purchasing on Amazon. The pricing was the same and he didn't have to worry about lugging it home. We find the in-store lessons narrative dubious as well. There are countless online resources for learning guitar - YouTube, most notably. Meanwhile, we enjoyed this decidedly millennial take on the death of retail.
Retail (Canadian Lumber Edition). Kidding, more like Canadian cashmere. Washable cashmere company Kit and Ace is restructuring in an additional acknowledgement that brick-and-mortar retail is tough - even if you're a VERY proven founder of successful apparel companies (in this case, Lululemon). Choice quote within: "Really it was just another store." Something tells us "Just another store" won't be part of the restructured company's marketing strategy.
Solar. SunEdison. Sungevity. Suniva. Verengo. SolarCity. Okay, just kidding about the last one but who knows what would've happened sans Elon Musk's Tesla/Solarcity merger shenanigans. Now Heliopower. We know many of you know the solar story: too much subsidy, too much debt, flooded supply from China pressuring margins, yadda yadda yadda. But we wonder if any of you have a notion with respect to a potential successful business model. We're serious: we're crowdsourcing your view here...
Taxis. Calling for a bailout.
The Profit. That's what Marcus Lemonis calls his CNBC show and now we'll get to see whether he can make some with the Camping World-led purchase of select portions of the Gander Mountain business in bankruptcy.
Fast Forward (Beauty). Uh oh. We noted last week that beauty category has been largely e-commerce resistant. Well, maybe not.
Rewind I (Bueller, Bueller). Get on with it already. Takata has become the new Westinghouse. Lots of noise. Just a matter of when. And, shocker! iHeartMedia's proposed subscription service with Napster - YES, NAPSTER - hasn't helped generate enough revenue to counteract $20b of debt.
Rewind II (Literally): We are as guilty as anyone hyping up the potential of autonomous cars but if anything is indicative of the wholesale difficulty to achieve 100% adoption, it's this piece about surviving Blockbuster franchises. Suffice it to say, there won't be driverless cars rocking the streets of Alaska anytime soon.
Rewind III (Shipping): We all know that the shipping industry hasn't been immune to its fair share of troubles the past year or so. Notably, Hanjin, Toisa, Daewoo, Ezra, and International Shipholding have all seen themselves in bankruptcy court. And, of course, Algeco Scotsman restructured as did Modular Space Corporation, as container companies, naturally, have also felt the effects. So, we thought this use case for surplus modular containers was interesting and we're dying for one of our readers in, say, Texas, to get one of these and report back.
Rewind IV (Apologies...More on the Retail Apocalypse): Last week we highlighted Jeff Jordan's early 2014 call on retail. Subsequently, he dove into the mall scene: you can read it here. The below excerpt should be particularly interesting to PETITION readers as we've been saying for some time that restructuring pros who continue to claim that Bonobos and Warby Parker will fill the retail void are, quite plainly, making a$$es out of themselves. As are, quite notably, REIT CEOs. Nothing has changed since JJ wrote this...