Category Archives: Retailing

Vroom to wind down e-commerce vehicle sales

Vroom, the online car retailer that has its head office in Houston, is winding down its e-commerce vehicles and closing its one physical dealership, Texas Direct Auto, in Stafford. It will maintain its auto finance company and its vehicle analytics company.

The company went public via a $468 million IPO in June 2020 that priced its shares at $22 and gave the company a market cap of $2.8 billion. The shares peaked at $74 a few months later. In aftermarket trading, the shares are now $0.26.

Vroom has never been profitable and as of September 30, 2023 it had an accumulated deficit of $1.8 billion. Since the beginning of 2022, the business has been producing an EBITDA loss between $50 million and $60 million a quarter.

The company relocated from Manhattan to Houston in 2022 as part of its cost-cutting exercise.

The company had been trying to raise funds to scale the business. However, it faced an impending hurdle in that it has a $213 million debt due to mature in March 2024.

Late last year, the company settled with the state of Texas over allegations that it failed to disclose significant delays in transferring titles to buyers. Vroom agreed to pay $2 million in penalties and $1 million in attorney fees.

Vroom has about 900 employees, not including those employed by the auto finance company. The company occupies 100,000 square feet of office space in the Westchase area. That lease expires in November. The TDA dealership is approximately 58,000 square feet under a lease that expires in September.

Vroom – Press release

Academy promotes from within for CFO role

Academy Sports and Outdoors, based in Katy, has promoted Carl Ford, Senior VP, Finance to be its CFO. He replaces Michael Mullican, who was appointed President of the company at the beginning of June.

Academy went public in September 2020 with an IPO share price of $13. It now trades at $57, though that is about $10 off its 52-week high as comparable net sales in its latest quarter were down 7% . It currently has 269 stores in 18 states.

Mr. Ford joined the company in January 2019. Prior to joining the company, he spent 15 years at Belk, a department store chain based in Charlotte, NC, ending up as the VP of Financial Planning and Analysis. He started his career at Deloitte and Touche.

Mr. Ford will have a base salary of $500,000 and will receive equity awards valued at $1 million, which are a mixture of time and performance-based restricted stock units.

Mr. Ford’s promotion is the latest of a series of changes at the company. Back in April, Ken Hicks, who had been CEO since May 2018, announced he would transition to Executive Chairman, effective June 1. In turn, Steve Lawrence, the Chief Merchandising Officer, was promoted to CEO. Matt McCabe, Senior VP, General Merchandise Management of Footwear, was promoted to Mr. Lawrence’s role.

Mr. Mullican’s role as President covers Strategic planning, logistics & supply chain, legal, compliance, and risk management functions.

Sec filing – 8-K Academy CFO

Mattress Firm to be acquired for $4 billion

Source: Social Woodlands

Tempur Sealy, based in Kentucky, has agreed to buy Mattress Firm, based in Houston for approximately $4 billion. The purchase price consists of $2.7 billion of cash and $1.3 billion in stock.

Mattress Firm was a public company until it was acquired by Steinhoff, a South African company, in September 2016 for $2.4 billion. The following year, Steinhoff was hit with an accounting fraud (not involving Mattress Firm) and, in October 2018, Mattress Firm filed for Chapter 11 bankruptcy. It exited 48 days later, having shed 640 uneconomic leases.

Ironically, one of the contributing factors in the bankruptcy was that Mattress Firm and Tempur Sealy had a spectacular falling out in February 2017, that caused revenues to fall significantly. A new supply agreement with Tempur Sealy was signed in 2019, allowing Tempur and Sealy beds to be sold in Mattress Firm’s stores again.

Post-bankruptcy, Steinhoff owns 50.1% of the common stock whilst creditors that provided the exit financing owned the rest (prior to dilution due to management equity).

Revenue grew from $3.3 billion for the year ended September 2020 to $4.4 billion in each of the following two years. For the 12 months ending March 2023, revenues fell 9% over the comparable period to $4.2 billion as consumer spending shifted towards services. It currently has 2,329 stores ($1.8 million revenue per store).

The transaction values Mattress Firm at 9.3 times adjusted EBITDA. In addition, Tempur Sealy expects to generate $100 million in annual savings by year 4.

Mattress Firm filed to go public in January 2022 but withdrew its filing a year later, having incurred $10.5 million in costs.

The deal is expected to close in the second half of 2024.

Conn’s CEO ousted after a year

Chandra Holt, CEO of Conn’s, a Woodlands-based retailer of furniture and electronics, is out after just over a year in the role. She is replaced on an interim basis by Norm Miller, a current Director and the former CEO. No reason was given for her departure.

Conn’s operates 158 retail stores located in 15 states. However, the key to whether the company performs is its Credit Segment. The average credit score of its customers is around 600. This is considered subprime. For the year ended January 2022, the average interest rate it charged on its credit financing was between 18% and 36%. 51% of its product sales were financed in-house, 28% were financed through a third party. Only 21% of purchases were made with cash or credit card.

For the last couple of years revenue was boosted by stimulus spending. Now, with higher inflation, gas prices and interest rates, it is no surprise to find that Conn’s is struggling once again. The stock price has dropped from $27 a year ago to under $7 now. The market capitalization is currently $184 million.

Ms. Holt joined in August 2021 from Walmart, where she led the US eCommerce business and had been the COO of Prior to Walmart, she held various leadership roles at Walgreens and Target.

Ms. Holt’s tenure has proved costly for the company. When she joined she received;

  • a base salary of $1 million.
  • a sign on equity award with a grant date value of $6 million that would have vested over 3 years.
  • a pro-rated 2022 equity award with a grant date value of $1.4 million, vesting over 3 years
  • a relocation allowance of $330,526

She also received a cash bonus of $2.2 million for the year-ended January 2022 as the company maxed out on its Executive bonus plan.

As a result of her termination, Ms. Holt will receive her salary for the next 24 months, plus a pro-rata bonus for 2022.

The equity awards will continue to vest through the severance period, which means they will be fully vested by the end of it. About a third of the awards were based on the future performance of the company, so they may not be granted at all. And with the collapse in the stock price, they are currently worth about 30% of the original value.

For these keeping score, that’s $5.7 million cash compensation in 14 months (not including whatever bonus is paid for this year).  Plus stock worth $7.4 million at the time of award.

Mr. Miller, who only stepped down as Executive Chairman in April, will receive a monthly salary of $210,000. He also received restricted stock worth $1 million and will continue to receive quarterly grants worth $750,000 while he is interim CEO. The stock will vest after one year. In case you are wondering, he received a $1 million salary and a $3 million cash bonus last year .

SEC – 8-k – Holt termination



Vroom relocates head office from Manhattan to Houston

Vroom, the online car retailer has moved its head office from Manhattan to the Westchase area of Houston as it attempts to cut costs to maintain its long-term viability.

The company had been burning through cash as it chased triple digit annual revenue growth. It is currently losing about $7,000 on every car sold. The company now has a new CEO and CFO that are working on a plan to realign the business.

The company went public via a $468 million IPO in June 2020 that priced its shares at $22 and gave the company a market cap of $2.8 billion. The shares peaked at $74 a few months later. They now trade at $1.35.

In 2021, the company had revenues of $3.2 billion and had an adjusted EBITDA loss of $340 million. It sold 75,000 vehicles through the Vroom platform.

The Houston angle is the result of the company buying Texas Direct Auto (TDA) in Stafford in 2015. TDA remains its only physical dealership. At the time, TDA was the largest independent dealership in the USA and a pioneer on selling cars online. TDA sold 7,212 used cars in 2021 and had revenues of $230 million.

The new CEO is Tom Shortt. He became CEO in May, though he joined the company in January as COO. Prior to joining Vroom, he was a Senior VP at Walmart, where he developed an ecommerce supply chain strategy. Before that, he worked at Home Depot, Acco Brands and Fisher Scientific.

CFO Bob Krakowiak joined the company in September 2021 and is based out of Detroit. Previously he worked at Stoneridge Corporation and Visteon, both automotive electronics suppliers.

Key aspects of the realignment plan are;

  • Increasing gross profit per unit by better data analytics. The company acquired CarStory, an analytics company, for $117 million in January 2021
  • Building a captive finance offering. It acquired UACC, an auto finance company, for $316 million in February 2022
  • Better logistics. No more shipping cars from Oregon to Florida for a flat fee!
  • A more efficient title and registration process. Vroom and Carvana have very high consumer complaints in this area.

The company has recently reduced its headcount by 270 or 14%.

The good news is that the company is expected to have about $500 million of liquidity by the end of 2022 and there is only $625 million of long-term debt which is due in 2026 (other than the securitized debt associated with UACC).

The bad news is that selling vehicles is a very competitive business and $7,000 is lot to make up!

Vroom – Investor Relations presentation

Mattress Firm files for Initial Public Offering

Source: Social Woodlands

Mattress Firm has filed for an Initial Public Offering, five years after it was acquired by Steinoff International for $3.8 billion. The company has its head office in downtown Houston.

The company has not yet determined how much it plans to raise in its IPO.

Mattress Firm entered and exited Chapter 11 in late 2018 to shed itself of 640 unwanted stores. As part of the process, the lenders who provided the exit financing also acquired a 49.9% stake in the business from Steinhoff.

Steinhoff $7.4 billion fraud

Steinhoff was founded in Germany in 1964 and moved its head office to South Africa in 1998. In late 2017, the company announced accounting irregularities in its European operations. A PwC report ultimately published in 2019 found that a small group of Steinhoff executives had recorded fictitious transactions totaling $7.4 billion over a period between 2009 and 2017.

Steinhoff has proposed a global $1.6 billion settlement with investors harmed by the fraud. To help pay for this, in September 2021, Mattress Firm paid a special distribution to its shareholders of $1.2 billion. Steinhoff, as 50.1% owner, got $601 million. The special distribution was financed by new term loan of $1.25 billion. Of this, $523 million was used to pay off the old term loan taken out as part of the Chapter 11 proceedings.

Improved financial performance

Mattress Firm now has 2,353 stores, down from almost 3,500 when it was last a public company. Impressively, revenue per store has grown from $1 million in 2019 to $1.7 million in the year to September 2021. Adjusted EBITDA margins have grown from $153 million (5.2%) in 2019 to $669 million (15.2%) in 2021.

As o September 2021, the company has $1.0 billion of net debt and $77 million of stockholder equity. Included on the balance sheet is $1.5 billion of goodwill and intangibles.

Management paid $135 million

As part of the special distribution, in addition to the $1.2 billion paid to the shareholders, senior management received $135 million in cash bonuses in September 2021. John Eck, CEO since December 2019, received $39.2 million. Maarten Hager, CFO since February 2020, received $11.75 million. The top five executive officers received $75 million.

In addition, four non-exec directors of Mattress Firm also received $3.845 million each as part of the $135 million payout.

S-1 firm Mattress Firm

Restaurant operator appoints new CFO

Muscle Maker has appointed Jennifer Black as its new CFO. She replaces Ferdinand Groenewald, who will stay on with the company as the Chief Accounting Officer.

Muscle Maker is a franchisor and owner operator of Muscle Maker Grill, Healthy Joes and Pokemoto restaurants. It has 25 owned and 10 franchised restaurants. The company went public in February 2020 and has its head office in League City. It has a market capitalization of $15 million.

Prior to joining Muscle Maker, Ms. Black was the CFO for Eagle Pressure Control, based in the Fort Worth. She has also worked for AG Resource Management and Basic Energy Services. Ms. Black will be allowed to work from her home in the Fort Worth area and will receive a base salary of $190,000.

The head office of Muscle Maker was in Fort Worth before moving to League City last year.  CEO Mike Roper is also based in the Dallas-Fort Worth area.

Mr. Groenewald joined the company in June 2017 as its Controller. He left in May 2018 but was rehired as its CFO in September 2018.

S-1 filing Muscle Maker CFO

Fertitta Entertainment tries to back out of deal with SPAC

[UPDATE 12-09-21 – The deal has now been terminated. FEI will pay the SPAC $6 million immediately and either a further $10 million if the SPAC completes a deal to take another company public or $16 million if they don’t.]

The transaction to take Fertitta Entertainment (‘FEI’) public via a SPAC has effectively collapsed. Although the deal is not officially dead, the two parties have exchanged letters blaming the other for the deal failing to complete by the proposed deadline.

The deal with Fast Acquisition Corp (‘FAST’), a blank check company was announced back in February. The transaction would have seen most of the assets owned by Tilman Fertitta go public (446 restaurants and 5 Golden Nugget Casinos). Mr. Fertitta would have ended up owning 59% after the deal closed.

The deal was expected to close by December 1, 2021. If the deadline passed, the merger agreement allowed either party to terminate the agreement. FEI sent a letter to FAST, stating it would abandon the transaction.

FAST sent a letter in response stating that FEI was not permitted to terminate the agreement because the primary reason for the failure was that FEI didn’t deliver audited financial statements for the year ended September 30, 2020 by March 31, 2021, the deadline in the original merger agreement. FEI’s audited financials were issued August 2, 2021.

Changing Terms

One problem that FAST had was that Mr. Fertitta kept changing the terms of the deal. In late May, FEI proposed adding a bunch of assets, such as certain Vic & Anthony Restaurants, and the Galveston Pleasure Pier, that were originally excluded from the deal.  FAST accepted the revised terms, which would mean that Mr. Fertitta would end up with 79% economic ownership post-close.

In August, the online gaming division of Golden Nugget (GNOG), announced it would merge with DraftKings. FEI own 80% of GNOG, which is publicly-traded. Although that stake was part of the transaction with FAST, the management of FAST were not aware of the deal prior to the announcement.

It’s not clear why the deal has collapsed but Mr. Fertitta holds all the chips in the deal and clearly thinks he has better options elsewhere.

What is curious about the spat is that the two sides amended the merger agreement on June 1 to reflect the additional assets being added. However, there was no mention of a revised date for the financial statements, even though that deadline had come and gone.

FAST may have to liquidate

With the pending collapse of the deal, the management of FAST will have to complete an acquisition by August 2022, otherwise it will have to liquidate its operations and return the $200 million IPO proceeds to shareholders.

SEC filing – 8-K


Three former Houston public companies exit bankruptcy

In the past few days, three Houston-area companies that were publicly-traded have exited Chapter 11 bankruptcy.

Francesca Holdings, the boutique retailer, filed for bankruptcy in December. It auctioned off its assets to TerraMar Capital and Tiger Capital. Together they bought the assets for $18 million in cash plus $1.25 million due at the end of the year. They plan to keep open 275 stores out of a total of 461.  The company appointed a wind-down officer to liquidate the remaining assets.

Cindy Thomason, the CFO of Francesca Holdings, has been appointed the CFO of the newco that is operating the ongoing stores.

Superior Energy Services also filed for bankruptcy in December, though it announced a Restructuring Support Agreement three months earlier. The oilfield services company converted $1.3 billion of debt into equity. It exited Chapter 11 free of debt and $242 million in cash. A new Board of Directors was appointed, but the existing management team was retained.

Prior to filing, the old Board agreed pay $7.3 million in retention bonuses to the six executive officers of the company. CEO David Dunlap got $3.2 million, while CFO Westy Ballard got $1.1 million. The bonuses will be paid in September 2021.

Noble Holding Corporation, the drilling contractor, filed in July 2020. The company technically has its head office in London but its operational headquarters are in Sugar Land. $3.4 billion of unsecured debt was exchanged for 86% of equity in the newly-reorganized company. The company leaves Chapter 11 with $216 million of second lien notes and $178 million drawn on a new $675 million revolving credit facility.

As with Superior, a new Board of Directors was appointed but the existing management team was retained. However, former CEO and Executive Chairman Julie Robertson resigned. She received a $3.75 million lump sum payment when she transitioned to the Chairman position in March 2020.

SEC filing – Francesca Holdings Ch 11 exit

SEC filing – Superior Energy Ch 11 exit

SEC filing – Noble Corp Ch 11 exit

Houston-based retailer files for bankruptcy

Francesca’s Holdings has filed for Chapter 11 bankruptcy in Delaware. The company intends to use the proceedings to implement a sale process. It operates a nationwide chain of boutique stores.

The company has its head office in NW Houston. It was formed in 2007 and went public in July 2011. Prior to filing, its current market capitalization was $8 million. The company has borrowings and term loans of $12 million. In its most recent quarter, sales were $76 million, down 29% year-on-year and it recorded an operating loss of $12.7 million.

At the end of January 2020, it had 711 stores in 47 states. It currently has 558 stores open.

The company has obtained $25 million debtor-in-possession financing facility from its existing lender, Tiger Finance. The company has entered into a Letter of Intent with TerraMar Capital, an investment firm, for TerraMar to become the stalking horse bidder for the auction and sale process. The LOI contemplates the purchase of the company as a going concern.

FTI Consulting has been retained as financial advisors to the company and will manage the sale and auction process. The target date for the sale completion is January 20, 2021.