Monday, March 27, 2006

Top candidates for buyouts

CNN/Money lists the top retail chains that are likely to be bought out by private equity firms.
Retailers are attractive buyout prospects because they typically carry relatively low levels of debt on the balance sheet relative to their sales turnover, therefore providing a quick influx of cash to private equity firms...
Among their picks:

Borders: "Borders essentially is like a library with a cafe," said Crawford, adding that a buyout firm could help make Borders more current and competitive. "Barnes & Noble offers so much more to its customers. It's a social space, it's a gift store that sells higher margin products and the merchandising overall is better, " he said.

BJ's Wholesale Club: "BJ's owns the Northeast market but Costco and Sam's Club are making inroads in that region," Crawford said. "Time is not a friend to BJ's and I think it needs to look for a strategic partner to improve the business."

Pier 1: "Pier 1 can't hope to merchandise its way out of this situation," Crawford said. "The company has lots of cash and great brand cachet. This makes it attractive to a buyout firm. It would make sense to dramatically shrink its store base, liquidate part of the inventory and better integrate its online and store operations."

Rite-Aid: "Consumers tell us that the service they receive at Rite Aid is below their expectations and its difficult to shop in its stores. The brand is losing relevance with consumers today," he said. "I think a buyout firm would focus on improving these two areas, particularly the redesign of the stores."

No comments: