It’s been a hectic (and often troubling) past few years for private equity firms involved heavily in the retail industry. A microcosm of that fact can be found in Versa Capital Management’s past 48 hours.
Versa Capital Management
The biggest development for the firm came Thursday, when Versa portfolio company Wet Seal, a teen apparel retailer, filed for Chapter 11 bankruptcy protection in Delaware. The news comes two weeks after the mall chain reportedly notified its employees of plans to essentially cease operations, closing all stores and firing the 148 workers at its headquarters in Irvine, CA.
Clint Carlson's Carlson Capital Double Black Diamond fund returned 3.34% in August net of fees. Following this performance, the fund is up 8.82% year-to-date net, according to a copy of the firm's August investor update, which ValueWalk has been able to review. On a gross basis, the Double Black Diamond fund added 4.55% in August Read More
It also follows just two years after Versa acquired Wet Seal out of an earlier bankruptcy for a mere $7.5 million. Versa tabbed Melanie Cox to be CEO of the company once it took over, and Cox led an attempt for the brand to get back to its more laid-back roots, moving away from the nightlife-centric styles on which Wet Seal had previously focused. Apparently, though, the transition wasn’t enough to overcome the larger market forces that have driven a host of other retail competitors into bankruptcy in recent years.
Wet Seal’s news came shortly after reports emerged that Versa may have found a buyer for another of its troubled portfolio companies: Eastern Outfitters, an outdoor and sporting goods retailer that’s been backed by Versa since 2012. British sporting goods retailer Sports Direct International is in talks to make a stalking horse bid in the bankruptcy auction for the company, according to Reuters; Sports Direct last year made an offer for the intellectual property of bankrupt Sports Authority. Eastern Outfitters is the parent company of the Bob’s Stores and Eastern Mountain Sports brands that filed for Chapter 11 last April.
For Versa, Wet Seal and Eastern Outfitters are just two names in a portfolio heavily focused on the B2C sector. More than 50% of the firm’s deals in the past decade have fallen under the consumer umbrella, according to the PitchBook Platform, including transactions with other notable names like Black Angus Steakhouse.
Article by Kevin Dowd, PitchBook