Feb 20, 2019

Payless was another step in private equity's retail apocalypse

Photo: Paul Hennessy/NurPhoto via Getty Images

Private equity's retail apocalypse hit another miserable milestone yesterday, with Payless ShoeSource refiling for Chapter 11 bankruptcy. The shoe store chain also plans to liquidate all 2,500 of its North American locations, costing around 16,000 people their jobs.

The bottom line: Physical retail is under severe stress, regardless of ownership structure, but private equity is almost always buying into mature industries that are prone to disruption. Engaging in large dividend recaps only makes the margin for error that much smaller, and the likelihood for failure that much larger.

Timeline:

  • Payless was taken private for around $1.3 billion in 2012 by Golden Gate Capital and Blum Capital. The firms would later pull hundreds of millions of dollars out of the company via dividend recaps, which ballooned its debt load to unmanageable levels.
  • The company first filed for bankruptcy in mid-2017, with some creditors actually getting a bit of compensation related to the dividend recaps (although the PE firms didn't admit any fault).
  • But the new majority owner, via creditor conversion, was Alden Global Capital — a private investment firm best known in media circles for buying newspapers and then cutting costs to the point of disrepair.
  • The rep for some short-term Payless lenders told a bankruptcy judge yesterday that Alden's stewardship since the original bankruptcy was a "total failure."

Go deeper: Payless' second bankruptcy follows a pattern

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U.S. coronavirus updates: Death toll nears 11,000

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios

Recorded deaths from the novel coronavirus surpassed 10,900 in the U.S. early Tuesday, per Johns Hopkins data. More than 1,000 people in the U.S. have died of coronavirus-related conditions each day since April 1.

Why it matters: U.S. Surgeon General Jerome Adams said on Sunday this week will be "the hardest and saddest week of most Americans' lives" — calling it our "our Pearl Harbor, our 9/11 moment."

Go deeperArrowUpdated 38 mins ago - Health

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 11:30 p.m. ET: 1,347,803 — Total deaths: 74,807 — Total recoveries: 277,402Map.
  2. U.S.: Total confirmed cases as of 11:30 p.m. ET: 368,196 — Total deaths: 10,986 — Total recoveries: 19,828Map.
  3. Trump administration latest: President Trump's economic adviser Peter Navarro warned White House colleagues in late January the coronavirus could take over half a million American lives and cost close to $6 trillion, memos obtained by Axios show.
  4. 2020 update: Wisconsin Supreme Court blocks governor's attempt to delay in-person primary voting delayed until June.
  5. States latest: West Coast states send ventilators to New York and other states with more immediate need — Data suggest coronavirus curve may be flattening in New York, Gov. Andrew Cuomo said.
  6. World update: U.K. Prime Minister Boris Johnson moved to intensive care as coronavirus symptoms worsen.
  7. Stocks latest: The S&P 500 closed up 7% on Monday, while the Dow rose more than 1,500 points.
  8. What should I do? Pets, moving and personal health. Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Docs: Navarro memos warning mass death circulated West Wing in January

Image from a memo to President Trump

In late January, President Trump's economic adviser Peter Navarro warned his White House colleagues the novel coronavirus could take more than half a million American lives and cost close to $6 trillion, according to memos obtained by Axios.

  • By late February, Navarro was even more alarmed, and he warned his colleagues, in another memo, that up to two million Americans could die of the virus.

Driving the news: Navarro's grim estimates are set out in two memos — one dated Jan. 29 and addressed to the National Security Council, the other dated Feb. 23 and addressed to the president. The NSC circulated both memos around the White House and multiple agencies.

Go deeperArrow2 hours ago - Health