Why is anyone still buying retailers from private equity firms?
On March 9, 2017, private equity firm TowerBrook, the owner of women’s clothing retailer J. Jill, dumped half of its stake via an IPO at a price of $13 a share into the lap of the unsuspecting public, during a time when brick-and-mortar retailers that are owned by private equity firms are heading into bankruptcy court, one after the other.
By Wednesday at close, shares of J. Jill had dropped to just over $10. And then after-hours and today during regular trading, they plunged another 51% to $4.86!
Why are investors still buying brick-and-mortar retailers – or anything – from PE firms? No one knows. But inexplicably, it’s still happening.
By 8:31 PM on Wednesday, shareholder rights law firm Johnson Fistel announced that it is ‘investigating potential violations of the federal securities laws by J. Jill Inc. … and certain of its officers and directors.’ It added, that the investigation ‘seeks to determine whether certain statements regarding J. Jill’s business and prospects were false and misleading when made.’ Other class-action law firms will follow.
But at the time of the IPO, Fortune gushed:
Founded in 1959, J. Jill is a women’s apparel brand that focuses on customers between the ages of 40 to 65 and relies heavily on catalog- and web-driven sales, which generate 43% of total revenue with the rest relying on brick-and-mortar retail. The company’s strong direct-to-consumer model is linked to J. Jill’s heritage as a catalog company and it circulated 57 million copies of catalogs in 2015 alone. J. Jill contends that those direct channel relationships can also fuel sales at the company’s 275 stores.
This post was published at Wolf Street on Oct 12, 2017.