Private equity firm distributes $2 million in distress funds to ex-employees of Art Van
In the ever-evolving landscape of retail, digital strategies are taking centre stage. However, the industry has been grappling with a different challenge - the impact of private equity firms on retail bankruptcies and job losses.
Art Van Furniture, a well-known retailer, offers a telling example. After being acquired by Thomas H. Lee Partners, the company took on significant debt and embarked on a rapid expansion. This move left Art Van with a larger lease footprint, a factor that would later contribute to its downfall.
The retail giant filed for bankruptcy in 2019 and failed to find a buyer in Chapter 11, eventually closing its doors for good. Notably, many of these bankrupt retailers, including Art Van, have liquidated in bankruptcy.
The story doesn't end there. Some of Art Van's best leases were rolled up into a new retailer, Loves Furniture, which, unfortunately, also went bankrupt.
The impact on the workforce was significant. Elizabeth Warren, Democratic Sen. from Massachusetts, has sponsored legislation to address the concerns raised by Art Van employees. In a show of support, Thomas H. Lee Partners donated an additional $1 million to a hardship fund for former Art Van employees. Eligible employees can receive $1,200 each from the fund, which now has a total of $2 million.
This isn't an isolated incident. A study from December linked 542,000 lost jobs and 18,000 closed stores to private equity-owned retailers. Since 2016, dozens of private equity-owned retailers have gone bankrupt. As of July 2020, approximately a third of retailers owned or previously owned by private equity firms have filed for bankruptcy.
The situation has led to a push for legislation to increase liabilities for private equity firms and prioritize worker pay in bankruptcies. Shirley Smith, a former Art Van sales manager, has been at the forefront of this push, working with United for Respect.
Online retail is being shaped by various forces, including challenges with reverse logistics. However, the role of private equity firms in retail bankruptcies and job losses cannot be overlooked. While they don't necessarily lose money when their retail investments close or liquidate, the human cost is immense.
References:
- Wall Street Journal
- Reuters
- CNBC
- Retail Dive
- CNBC
- In the realm of AI and editorial analysis, the impact of private equity firms on retail bankruptcies and job losses has emerged as a significant topic.
- The financial implications of private equity involvement in retail have been evident, with studies linking 542,000 lost jobs and 18,000 closed stores to private equity-owned retailers since 2016.
- The importance of education-and-self-development in this context becomes evident, as former retail workers, like Shirley Smith, become advocates for legislative changes to prioritize worker pay in bankruptcies.
- The health and well-being of the workforce is not just a concern in the wake of the pandemic, but also in the broader context of private equity's influence on retail, with senators like Elizabeth Warren sponsoring legislation to address the issue.
