Black Friday Success Brings Encouraging News for Retailers

Early reports suggest that Black Friday was successful for both online and store retailers. More people hit the shops than last year and online shopping increased significantly over the holiday weekend, prior to “Cyber Monday” when online sales are expected to receive another boost.

The traffic at stores nationwide on Friday increased 2.2 percent over last year’s figures, though spending only increased 0.3 percent, both according to research group ShopperTrak. The slight rise in sales may reflect consumers’ ability to find the best deals online, as Internet sales increased 33 percent over last year on Thanksgiving, while on Friday, sales increased 15.9 percent, according to Coremetrics.

Perhaps the most encouraging statistics were the increased number of shoppers and average amount spent per person from Thursday to Sunday. An estimated 212 million people shopped, up from 195 million last year. That is the highest number of Thanksgiving weekend shoppers since the first survey in 2004 according to The New York Times.

The average spent was about $365, more than a 6 percent increase over last year, according to a survey of about 4,300 Americans by the National Retail Federation.

Consumer confidence appears to be on the rise as well, as the National Retail Federation data indicated shoppers were not only buying gifts, but buying for themselves. Increases in purchases of discretionary items such as jewelry and electronics show that consumers are more willing to splurge on big-ticket items for their own use.

Though these increases may signify that perhaps the economy is indeed slowly on its way to recovery, turnaround professionals do not foresee that Black Friday success and optimistic holiday sales projections will significantly aid U.S. retailers and manufacturers.

“While Black Friday sales appear encouraging they come at the expense of flat or decreasing profitability due to the deep discounting that is occurring to build up volume and deplete inventory,” says Kenneth J. Dalto, principal, Kenneth J. Dalto & Associates of Farmington Hills, Mich. “This will have little effect on the fate of the retailers, who will continue to struggle, especially in the first and second quarters of 2011.”

About 80 percent of respondents to a recent Turnaround Management Association survey said increased holiday sales projections would be insufficient to lift domestic manufacturing orders. If any increase occurs, it will be slight, some said, because retailers are loath to incur excess post-holiday inventory.

Burlington Coat Factory Financing Deal Pulled - What are the Implications?

The froth of the high yield market and the volume of leveraged recaps by equity sponsors have been widely reported. Many in our industry have opined that the high level of deal flow is hiding the problems of troubled companies as they are able to ink deals for new financing at better pricing or on covenant-lite terms that rival what we saw before the credit market contraction of 2008. We are used to seeing reports like Debtwire’s calculation that $26 billion in new issue bonds were marketed in the month of October alone. We restructuring practitioners bemoan that these deals are shifting the debt “maturity wall” out even further to 2013 or beyond.

So, it was interesting to note yesterday’s report that Burlington Coat Factory’s $1.5 billion refinancing/dividend recap was pulled after investors pushed back on pricing offered based upon the ratings assigned to the deal (read the Bloomberg article). One deal certainly does not make a trend and maybe the market simply wants to see how retailers perform this Christmas season. In any case, we should bookmark this one and see where things go from here.

Your thoughts?

TMA Mourns the Passing of a Friend - Jim Matthews

I was notified by Pat Lagrange and Lisa Poulin, TMA’s chairman and president, respectively, that Jim Matthews passed away Friday, November 12. Pat and Lisa wanted TMA’s leadership to know of Jim’s passing because he had been a dedicated member of TMA’s leadership on the local, regional and national level for many years.

We are lucky to know a lot of people professionally, and we see these folks year in and year out in the course of our professional lives. We remember quite a few and usually, it’s because they touched us in some way. I met Jim Matthews about 10 years ago at a TMA conference. I remember him because he always took the time to talk about opportunities, even though at the time, it was very unlikely that there was anything in our relationship for him. Nonetheless, Jim would take the time to consider how we might work together and I had always hoped that we would find a way to do so. I last saw him in the fall of 2009 and once again, we discussed current developments and opportunities.

I was saddened greatly to learn of his passing – to me, he was a young 60. Our association has lost a great member and leader. Personally, we have lost a friend. For those who would like to know the official details, I’ve reprinted his obituary below.

James B. "Jim" Matthews, age 60 of Rowlett, TX, passed away November 12, 2010. He was born April 4, 1950, in Newton, MA, to Gerald and Charlotte (Boisvert) Matthews. A consultant in commercial real estate, Jim was a member of Rotary Club and the Turnaround Management Association (TMA), local and national. He was married to Carol Butler on October 19, 2002, and was devoted to his home and family. Jim earned his Bachelor's Degree from Assumption College in Worcester, MA, in 1972 and his law degree from the University of Miami (Florida) in 1974. He started his own business, Prime Location, in 1983. Jim tackled the daily challenges as new opportunities. He published numerous articles and was a regular speaker for the American Bankruptcy Institute, TMA and the International Conference of Shopping Centers. In 2003, the TMA honored Jim with its Outstanding Individual Contribution Award. His non-profit activities included the Rotary Club of Preston Center in Dallas, TX (president 1993-94); TMA Dallas Chapter (president 1995 and 2000); TMA National Board Member (1995-2005; vice president of Chapter Relations 2001-2003).

In 2005, Jim co-sponsored a group for small business recoveries after the Katrina disaster in New Orleans. He was brilliant, wise, generous, fun loving, kind and determined. One of his greatest joys was making a child laugh. The world is a better place because of Jim. The eagle is the only bird which flies into a thunderstorm. Friday this eagle flew home. Jim is survived by his wife, Carol Matthews of Rowlett; son, Greg Matthews of Dallas; father, Gerard Matthews of Plainville, MA; stepchildren, Cathy Hanson and Chris Delk; grandchildren, Michael, Erika, Andy, Jack and Emily; sisters, Charlotte McMahon, Maryclaire Quine and Ann-Marie McCarthy; brothers, Michael and Daniel Matthews; 14 nieces and nephews; and 19 great nieces and nephews. He was preceded in death by his mother and brother, Gerard J. Matthews, Jr., in 1993.

Services will be held 11:00 am Tuesday, November 16, at Rest Haven Funeral Home-Rockwall Chapel with Daniel Prescott officiating. The family will receive friends at the funeral home Monday from 6:00 - 8:00 pm. Memorials may be made to the American Cancer Society. Services under the directions of Rest Haven Funeral Home, Rockwall, TX.

Rest Haven Funeral Home in Rockwall
2500 State Highway 66 East
Rockwall, TX 75087

Holiday Cheer Brings Refinancing Deal

The sparkling lights projecting from the Cobb Energy Performing Arts Centre was the yuletide pickup my colleagues and I needed after weeks spent searching for answers to save a company. Little did we know we would find a solution at the annual holiday party organized by the Atlanta TMA Chapter and the Atlanta Commercial Finance Association. The festivities spread over three floors, with a bar in the lobby, hors d’oevres on the second level and desserts on the third. Approximately 150 people were there with gifts for the Toys for Tots program.

Rob Barnett, Paul Share and I were planning to attend that evening but we were having difficulty mustering the enthusiasm to go out and put on our happy faces. It appeared as though our case was on a cheerless course that I had seen before, ironically, during the holidays. In those cases, the client either: a) endured the misery of managing the liquidation of their business or b) suffered through painful staff layoffs.

Our client, a cabinet manufacturer and supplier to multi-family housing developments, had reached the end of the line with its lender. The company was in default again and the lender closed the door on further funding.

Our team began developing an efficient and value-driven wind down plan and called potential investors and other lenders as a last-ditch effort to save the company. Management had cut to the bone and reached a break-even level. The lending freeze persisted, so we knew we could not count on refinancing. The cabinet maker had significant collateral, but its assets were heavily weighted to equipment and real estate.

The dread of the onset of an upcoming liquidation process was upon us.

With mellow strains of a four-piece jazz ensemble playing holiday music in the background, Rob, Paul and I made the rounds. Rob struck up a conversation with Jim Miller of FirstCity Crestone (FCC). Jim began to talk about his current business interests and something just snapped into place: FCC might be a good fit for the cabinet maker. It offered a unique approach - a hybrid of asset-based lending and private equity investment.

The team receives the Transaction
of the Year Award at the 2010 TMA
Annual Convention.
That conversation was the beginning of a deal that saved the company, retained 180 jobs, and allowed the senior lender to be repaid in full. Our team also earned the 2010 TMA Transaction of the Year Award in the small company category. Read about it here.

That holiday party represents a great example of why TMA matters in our business. It’s an example of the importance of networking and the role the Association can and does play in providing opportunities to network.

The holidays are here. Put your best foot forward.

Best wishes!

From Bankruptcy Court to the World Series

When Nolan Ryan and his ownership group paid $593 million for the Texas Rangers in a bankruptcy court auction in August, it's hard to imagine they envisioned their investment would pay off only a few short months later. But following its first postseason series win and first World Series appearance in the team's 50-year history, the timing couldn't have been better for the new owners.

Win or lose against the San Francisco Giants this week, the Hall of Fame pitcher and his ownership group stand to potentially increase the team's value by $50 million to $100 million based on their postseason run, according to a recent Bloomberg article. The story estimates the Rangers' advancement to the World Series to be worth $40 million next year in increased ticket sales, sponsorships, suite rentals and concessions, in addition to taking in $1 million per game in gross profit from this year's playoffs. It's also estimated that "baseline attendance" for the Rangers will increase for five years.

Considering that prior to emerging from bankruptcy court, the Rangers were in need of a $21.5 million loan from the league to pay its bills, the outlook couldn't be much better for Ryan and his ownership group. Even with the Rangers facing elimination from the Giants.