Private Equity’s $36 Billion Retail Bet Not Going So Well – Bloomberg 03-15-13

Salient to Investors:

The private-equity investment of $36 billion in US brick-and-mortar retailers before the recession in 2007 has not turned out well. Of the 8 largest retail private-equity buyouts during that period, only Dollar General has gone public

Leon Nicholas at Kantar Retail said there is nothing special about specialty stores anymore, and their advantages on product assortment, expertise and price have disappeared.

Many of the survivors have dubious futures and depressed stock valuations.

Chris Bertelsen at Global Financial Private Capital said the evidence shows the business model is in trouble and wouldn’t touch a public Toys “R” Us with a 10-foot pole.

Newly frugal consumers flocked to the Web for its ease and lower prices, thus weakening a specialty chain’s profit margins because consumers can comparison shop at will on the Web’s endless aisles.

Paul Swinand at Morningstar said specialty retail is a tough game to play now, competing with discounters like Wal-Mart and Amazon’s selection and service.

Read the full article at http://www.bloomberg.com/news/2013-03-15/bain-s-17-billion-retail-bet-not-looking-so-special.html

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