The Cannibals at the Gate | The rise of Finance, MBAs, and Private Equity

[Typhoon]

Gannet | Toys R Us was killed by profiteers, not Amazon

The so-called Retail Apocalypse can be attributed to Amazon and Walmart, but this is only part of the story. Another part belongs to private equity, whose methods of leveraging immense debt are wreaking havoc on the retail landscape. Toys R Us is the most recent victim.

In 2005, three Wall Street firms paid over $6 billion for the company, but only $1.2 billion came from their own pockets; the rest was borrowed. When Toys R Us was purchased, its new owners tethered that $5 billion of debt plus annual interest payments of $400 million to its neck.

Finance executives justify leveraged buyouts by claiming that they allow ailing companies to become leaner and more financially nimble in a way that protects the business and its workers. But how could Toys R Us innovate or change course while weighed down by that anchor?

In practice, these deals favor the equity tycoons who help themselves to enormous bonuses. Simultaneously, their new possessions are left holding debt they cannot pay. An otter cracks open a clam before discarding the shell, and so too do these firms: Toys R Us’s owners reportedly walked away with over $200 million.

The shell is the American worker. Once private equity squeezes out whatever dividends it can, too often the businesses close. The shuttering of all 800 stores will mean the loss of over 30,000 jobs, including 1,600 in New Jersey. Worse yet, Toys R Us notified its workers that their severance plans were being nullified.

In recent weeks, Remington, the 200-year old gunmaker, and Winn-Dixie, the popular supermarket chain, filed for bankruptcy. Both were acquired by private equity executives that loaded them up with unsustainable debt. Their closings will create thousands more lost jobs.

[Nonc Hilaire]

What killed retail is they all became margin whores. Cheap merchandise and limited selection. Toys was full of boxes of plastic crap since inception.

[Mr. Perfect]

Yes. I shed no tears for toys r us

[Enki]

Retail isn't being killed though. It's just a few bellwether brands that we are used to being fixture staples.

The world doesn't really need a giant toy store chain. It's not like there is a lack of toy stores around. And video games slaughtered the toy market, not Amazon or Wal Mart. Kids just aren't into the acquisitive collect every damn garbage patch kid anymore. My son did that with Thomas trains and then downgraded to Pokemon cards, and now doesn't have any need to own all of any collection since he grew up and became 8. Sure he collects massive collections of virtual goods in his video games, but it's one purchase, one game, and one device to play it on. Still loves Pokemon, but he can play the game and collect the Pokemon in the game, he doesn't need to buy endless $ 20 packs of cards. If he needs a bike we'll go to the local bike shop or possibly Target. Otherwise there really is nothing in terms of toys that Toys R Us had to offer. We got a nice art kit for Christmas with big drawing pads and he still loves those. My daughter loves these engineering kits called Tinker Crates that my Dad bought. It's a subscription to do one project each month that is a single function motor focus. One was a hydraulic arm controlled by syringes, pretty cool, and now she understands hydraulics implicitly.

Yeah, these PE guys are vultures, and their business model is parasitic. But ultimately the retail apocalypse isn't occurring in the way its being portrayed.

[noddy]

as a general rule if their actually was a hole created in the market then its usually refilled sooner or later , our societies are quite voracious at finding opportunities for money making.

the brands might die but the supply chain and staff are still around.


retail might not be on its death bed but it certainly is reducing towards a subset that cant be easily bought online -- womens beauty treatments and furniture seem to be the ones left standing at my local malls.

electronics has reduced to 2 mega shops instead of dozens of speciality shops but thats smartphones as much as anything else.

[NapLajoieonSteroids]

Toys R Us made all sorts of wrong decisions, ending up in a bad mistake spiral they could never crawl out of.

First job I held was with Toys R Us, and I worked there on and off from 16 years old, through college. I saw first hand the change over and series of stupid, petty mistakes which began to quickly compound.

As much as circumstances played a role, the people in charge killed a golden goose.

[Miss_Faucie_Fishtits]

While we're cataloging the fallen, here is a fixture in my portion of the Midwest:

In the Twin Cities, Herberger’s is an anchor tenant in four malls — Rosedale Center in Roseville, Southtown Center in Bloomington, Southdale Center in Edina and Northtown Mall in Blaine — and has locations in St. Paul’s Midway neighborhood and Stillwater. A Maplewood clearance center closed earlier this year.

Bon-Ton was operating 260 stores in 24 states, largely in the Northeast and Midwest, when it filed for bankruptcy in January. The stores operate under different names in addition to Herberger’s, including Younkers, Bergner’s, Boston Store and Carson’s.

While the loss of five Herberger’s locations in the Twin Cities represents yet another blow to the local shopping scene, the liquidation of Bon-Ton will likely be felt more acutely outside the metro area, where the Herberger’s department store chain got its start nearly a century ago.

In small cities across Minnesota, Herberger’s stores anchor downtown business districts and draw rural shoppers from miles around.

https://www.twincities.com/2018/04/19/b ... ts-stores/

[Typhoon]

While we're cataloging the fallen, here is a fixture in my portion of the Midwest:

In the Twin Cities, Herberger’s is an anchor tenant in four malls — Rosedale Center in Roseville, Southtown Center in Bloomington, Southdale Center in Edina and Northtown Mall in Blaine — and has locations in St. Paul’s Midway neighborhood and Stillwater. A Maplewood clearance center closed earlier this year.

Bon-Ton was operating 260 stores in 24 states, largely in the Northeast and Midwest, when it filed for bankruptcy in January. The stores operate under different names in addition to Herberger’s, including Younkers, Bergner’s, Boston Store and Carson’s.

While the loss of five Herberger’s locations in the Twin Cities represents yet another blow to the local shopping scene, the liquidation of Bon-Ton will likely be felt more acutely outside the metro area, where the Herberger’s department store chain got its start nearly a century ago.

In small cities across Minnesota, Herberger’s stores anchor downtown business districts and draw rural shoppers from miles around.

https://www.twincities.com/2018/04/19/b ... ts-stores/

I remember Carson's in Chicagoland. Makes me wonder how the local Fox Valley Mall in Aurora, IL is doing these days. Sears was the anchor store.

[Typhoon]

Atlantic | The Long-Forgotten Flight That Sent Boeing Off Course

A company once driven by engineers became driven by finance.

This reality has probably caused more damage to the US economy than any other factor.

Just as GE, under Jack Welch, became a finance company that also happened to make stuff on the side.

Took a while, but economic reality has caught up with both.

[noddy]

I was about to list off a bunch of once great, engineering driven companies when I realised their is a secondary factor at play.

We are all entitled to cash in on our successful project - the act of selling it to a finance group is the act of taking your reward for all those years of building something.

As consumers, we want our favourite companies to keep on producing high quality product but as producers their is a point you dont feel like working anymore and want to live the good life, under all these brand names are a handful of overworked, overstressed guys that wake up one day and want out.

On this level, the problem is not the failure of existing companies, its the lack of startups replacing them, tho you could argue that Musk and Bezos are part of that processs.

[crashtech66]

I was about to list off a bunch of once great, engineering driven companies when I realised their is a secondary factor at play.

We are all entitled to cash in on our successful project - the act of selling it to a finance group is the act of taking your reward for all those years of building something.

As consumers, we want our favourite companies to keep on producing high quality product but as producers their is a point you dont feel like working anymore and want to live the good life, under all these brand names are a handful of overworked, overstressed guys that wake up one day and want out.

On this level, the problem is not the failure of existing companies, its the lack of startups replacing them, tho you could argue that Musk and Bezos are part of that processs.

Is that to say that there are too many destructors and not enough creators? Or perhaps the system has become biased against small (risky) creators?

[noddy]

Is that to say that there are too many destructors and not enough creators? Or perhaps the system has become biased against small (risky) creators?

'definately the latter as far as I can see.

Think of all the levels of legislation on entering the car industry today, versus unleashing the model-t amongst the horses before.

Its a mindboggling change in public expatation that almost makes it illegal for non corporates to participate in many markets.

Us little people can do cafes, restaurants, nail salons and hairdressers - the only cowboy territory is software but apple and now google are putting increasing barriers to entry on even that.

[Simple Minded]

Is that to say that there are too many destructors and not enough creators? Or perhaps the system has become biased against small (risky) creators?

'definately the latter as far as I can see.

Think of all the levels of legislation on entering the car industry today, versus unleashing the model-t amongst the horses before.

Its a mindboggling change in public expatation that almost makes it illegal for non corporates to participate in many markets.

Us little people can do cafes, restaurants, nail salons and hairdressers - the only cowboy territory is software but apple and now google are putting increasing barriers to entry on even that.

It's a double whammy! the regulatory roadblocks to entry on one hand, and the mercilessness of the free market in crushing inefficient producers.

Bicycles, farm tractors, motorcycles, cars, computers, etc. The first few years of wild, Wild West mode are fascinating. Especially when looking back at history.

As soon as the table is set with one of more efficient producers of a quality product, the consumer will not tolerate less.

[noddy]

true enough but their isnt one consumer with one opinion.

police are constantly taking home made vehicles off the road, powered by electric motors or small motor bike engines, young machinists and whatnot are creative creatures.

on one hand we have all these middle class folks demanding smaller, more efficient city vehicles, on the other hand, they must look pretty and not make the place look 3rd world, so all this hand waved nonsense about danger on stuff that bareley hits 20mph gets plucked out of the back orifice.

what do "they" really think, is it government and industry telling us "they" want all these things banned, is it the usual whining suspects in the community ? would some communities not care about such things ?

if the horse industry had of protected itself like the modern motor industry, we wouldnt have had cars - unlicensed lumps of noisy steel doing 50mph through pedestrians on cobble stone roads, apparently the middle class would be screaming to get them off the road.

In the same vein ,super cheap electric carts that can sneak to work and back are illegal until such time as a large corporate makes one and does all the licensing work... nothing dangerous about these at all.

when it comes to boeing competitors, the engineering problems are a lot higher, and it seems absurd for home hackers to compete.

yet simultaneously we have the rise of sensor feedback flight control boards for all these cheap drones, flight systems that used to be only available on million dollar millitary jets are now $20 shipped from china and the algorithms and techniques are common knowledge.

https://duckduckgo.com/?q=home+made+man ... &iax=image

all these fun, new startups are most like to happen in Asia or even Africa, places that allow a new Henry Ford to run amok in public at a risk.
America is probably a lot more likely than any other western country, my country they would be in jail for constantly breaking the law.

[Simple Minded]

true enough but their isnt one consumer with one opinion.

police are constantly taking home made vehicles off the road, powered by electric motors or small motor bike engines, young machinists and whatnot are creative creatures.

on one hand we have all these middle class folks demanding smaller, more efficient city vehicles, on the other hand, they must look pretty and not make the place look 3rd world, so all this hand waved nonsense about danger on stuff that bareley hits 20mph gets plucked out of the back orifice.

what do "they" really think, is it government and industry telling us "they" want all these things banned, is it the usual whining suspects in the community ? would some communities not care about such things ?

if the horse industry had of protected itself like the modern motor industry, we wouldnt have had cars - unlicensed lumps of noisy steel doing 50mph through pedestrians on cobble stone roads, apparently the middle class would be screaming to get them off the road.

In the same vein ,super cheap electric carts that can sneak to work and back are illegal until such time as a large corporate makes one and does all the licensing work... nothing dangerous about these at all.

when it comes to boeing competitors, the engineering problems are a lot higher, and it seems absurd for home hackers to compete.

yet simultaneously we have the rise of sensor feedback flight control boards for all these cheap drones, flight systems that used to be only available on million dollar millitary jets are now $20 shipped from china and the algorithms and techniques are common knowledge.

https://duckduckgo.com/?q=home+made+man ... &iax=image

all these fun, new startups are most like to happen in Asia or even Africa, places that allow a new Henry Ford to run amok in public at a risk.
America is probably a lot more likely than any other western country, my country they would be in jail for constantly breaking the law.

true nuff, deregulation sparks creativity. So the question becomes who is against potential competitors?

but you and I are also talking about two different creatures, you creating software, or me creating hardware for personal use, or for the use of a friend or a few customers is one thing. once the prototype get out on the general market, what was acceptable for me or you or a few customers in terms of crudeness, cheapness, and inconvenience, probably won't appeal to a large market.

Jitterbug cell phones is a great example.

Think how cheaply a Volkswagen Beetle could be built today. $1500-2000 out the door? But lack of AC, power steering, defrosters that work, and entertaining video screens will greatly reduce customer demand.

auto pet peeve: Obama's Cash for Clunkers was nothing more than an auto industry subsidy, disguised as compassion for the poor. It obliterated the low cost used car market. Massive corruption, lots of workable autos, and salvageable parts were destroyed. No honest press about the reality of what happened at the time or since.

[noddy]

Yah, the brave new world is corporates and governments squabbling over minor details, the rise of the new woke left wing is all corporate orientated - their basic world view is, uni education leads to corporate job and the government should be focused on making that happen for everyone and keeping the corporates healthy.

narrow bands of oppurtunities, in ossified structures for a risk free environment, a virtual life in the real world.

[Simple Minded]

a reminder of the innovative past: https://www.hemmings.com/blog/article/1 ... ortractor/

a couple weeks ago I ran into a friend who used to be an engineer, but who is now a builder of high end fancy houses. He loves aesthetics. He talked about software and I asked him what he uses. He replied that he uses Solidworks 2006 and runs it on a Windows XP computer. I replied "you are brilliant!" I am temped to do the same before they are all gone.

not to far from here in West Virginia there are some areas who cater to the off roading community. hundreds of miles of trails, forestry service roads, and old mining roads. drive whatever you want on the streets, dirt bikes, ATV, quads, off road 4X4's, etc. local cops turn a blind eye for obvious reasons.

https://www.google.com/search?source=hp ... HHantNr67Q

you're right cheap transportation is easy to solve. just won't happen in urban areas or highly regulated areas. look at the pictures coming out a Asia showing 1000 lbs of chickens strapped to a bicycle, or a small dump truck made from a moped.

[noddy]

Its kinda interesing just how absurd a conversation with westerners on these topics is actually.

its *obvious* that the individuals doing this stuff is bad, that nobody wants it, that its dangerous and not up to standard, properly trained professionals with the right credentials and the backing of corporations is the high quality outcome and their are reasons we dont allow it anymore.

when I speak to my Chinese coworkers or Indian ones, its just like going back 100 years, endless possibility, excitement for the potential, people wanting to try these things for themselves.

[Simple Minded]

Its kinda interesing just how absurd a conversation with westerners on these topics is actually.

when I speak to my Chinese coworkers or Indian ones, its just like going back 100 years, endless possibility, excitement for the potential, people wanting to try these things for themselves.

well said. ask a redneck or farmer to paint the house or barn, and using hay bales instead of scaffolding to paint the house or barn is a viable option. not that OSHA would approve, but OSHA is a long way away.

down on the farm, screwdrivers are often used as chisels or pryers, and big Cresent wrenches make fine hammers. not acceptable in an industrial setting, too many prying eyes.

Luckily, most OSHA rules don't apply to the building or farming industries. Even OSHA knows better than to do that.

stands to reason that emerging markets have much more of a Wild West or redneck "git r done!" mentality. less oversight, less regulation, more in common with doing something in a rural setting, or doing something for yourself or a friend/small/local market. when you don't have a CNC machine available, you often find that you can make do with a drill press, a hacksaw, and a file. you can't compete on a part cost basis with the manufacturer making thousands, but if you don't need thousands, so what.

same mentality still exists in machine job shops, and custom automation. the original thinkers who are fast on their feet know they can't compete with GM or Toyota when it comes to making cars, so instead they focus on building the equipment GM or Toyota use in their assembly lines.

what the creator creates depends on what the customer demands or will accept.

[Simple Minded]

Its kinda interesing just how absurd a conversation with westerners on these topics is actually.

its *obvious* that the individuals doing this stuff is bad, that nobody wants it, that its dangerous and not up to standard, properly trained professionals with the right credentials and the backing of corporations is the high quality outcome and their are reasons we dont allow it anymore.

when I speak to my Chinese coworkers or Indian ones, its just like going back 100 years, endless possibility, excitement for the potential, people wanting to try these things for themselves.

I think the east vs west optimistic outlook is valid for other reasons also. In the west, a lot of us are the fourth generation to experience a significant level of prosperity.

Who is more optimistic, the person in a small village who recently gets access to electricity and easily accessible drinkable water, or the urbanite who upgrades their laptop from a computer with 500 MB of RAM to 6 one with 16 GB of RAM?

As kids, you and your buddies could work after school earning a few bucks, then buying some sand paper, some spray paint, some WD-40, duct tape, and a bunch of candy. Then after much serious brainstorming, discussion, imagining, and goofiness, everyone had "new" bikes cause you and your buddies got together painted your POS bikes (multi-color paint schemes were cooler), painted over some rust, swapped handle bars and seats, taped over the rip in the seats, and lubed the chains.

Now the white collar parents buy their kid a new 21 speed bike, the kid posts a picture on his Facebook page, 15 minutes he only has 5 likes, or someone he never met and will never meet posts a picture of their new 24 speed bike....... and the kid gets despondent about how unfair life is! His parents must be racists!

Sometimes a 50% jump in prosperity is a really big deal, sometimes its not.

[Simple Minded]

in other breaking news:
https://spectator.us/just-best-decade-h ... seriously/

Seems Fred doesn't really care how well "we" are doing, if Fred perceives that "he" isn't doing all that well.

Damn subjective they are, those concepts of good, bad, and better. Almost personal judgement calls.

"They" are doing better! Why aren't "you" happier? he said to me.

[noddy]

Sometimes a 50% jump in prosperity is a really big deal, sometimes its not.

thats true for many, and their is also many who are experiencing a 20% drop in prosperity.

so by global standards, or even us 100 years ago, they still have plenty, they have no reason to believe the decrease is going to stop either and that creates a whole new pscyhological effect which cant measured by amount of toys.

[Simple Minded]

thats true for many, and their is also many who are experiencing a 20% drop in prosperity.

so by global standards, or even us 100 years ago, they still have plenty, they have no reason to believe the decrease is going to stop either and that creates a whole new pscyhological effect which cant measured by amount of toys.

As an old friend of mine would say:

nt7-WKXL5vw

[Simple Minded]

so by global standards, or even us 100 years ago, they still have plenty, they have no reason to believe the decrease is going to stop either and that creates a whole new pscyhological effect which cant measured by amount of toys.

never underestimate the effects of psychological reference points.

in the olden days it was our parents and grandparents stories of The Great Depression.

now it's a picture on Facebook of someone's hamburger or someone's breast implants that are bigger than yours......

We're all Greta Thunbergs now.......

[noddy]

so by global standards, or even us 100 years ago, they still have plenty, they have no reason to believe the decrease is going to stop either and that creates a whole new pscyhological effect which cant measured by amount of toys.

never underestimate the effects of psychological reference points.

in the olden days it was our parents and grandparents stories of The Great Depression.

now it's a picture on Facebook of someone's hamburger or someone's breast implants that are bigger than yours......

We're all Greta Thunbergs now.......

not me, my titties get bigger every year and I dont even need implants.