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Analyst’s Take: Are Private Equity Firms Enabling Faltering Retailers?

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Though it may be depressing to consider, it’s necessary to address the question: Time after time, private equity firms swoop in to rescuing faltering retailers—but are they doing more harm than good?

You probably know the answer. Generally, yes.

Even though you know the punchline, the entire article is worth reading, as it includes many useful datapoints and insights. Here’s a key quote:

“While retail is no doubt a rough game these days, the game is far from over. The trouble is that, with too much debt and, often, the wrong talent (two factors driven by private equity sponsors), it can be next to impossible for retailers to get back in the game.”

Separately, I was very saddened to learn of the passing of Jeff Brotman, one of the founders of Costco, who was one of the titans of American retailing. His contribution to the company’s success started with its founding. Others, including Sam Walton, jumped on the club store bandwagon, but it was Brotman, and his team, that refined the concept and created the culture that led to the company’s dominance. It was not until I read his obituary that I learned that Brotman was an early investor in Starbucks, testimony both to his foresight and to the cosy nature of the business community in Seattle. Here’s his obituary from the local paper. And here’s a very sweet editorial about him in the same paper:

Finally, a long read. This weekend’s New York Times Magazine has an essay on the fat-acceptance movement, the history of the weight loss industry and Weight Watchers (which recently hired one of the most capable retail executives in America, Mindy Grossman, formerly of HSN and Nike, as CEO), as well as the writer’s personal experience. The article may not be your cup of tea, with or without Splenda, but I think it’s crucial to understanding some very broad trends and changes in mindset that affect, among other things, the food, fitness and clothing sectors.

Faye Landes, co-founder and general partner of Back to the Future Ventures, advises emerging consumer and retail companies on strategy, branding and fundraising. She was one of Wall Street’s leading consumer and retail analysts for over 20 years and was widely recognized for her ability to anticipate sweeping trends, such as the widespread adoption of activewear. She has frequently appeared on CNBC, Bloomberg TV and other media outlets and has presented at industry conferences all over the world. Read her “Analyst’s Take” column here weekly. Contact her at faye@backtothefutureventures.com.

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