Brent Felgner

Where is LNT headed?
August 1, 2007

Where is LNT headed?
Everyone loves a good turnaround story — witness JCPenney and the undying (for that moment, at least) adoration it received after Allen Questrom brought it roaring back with a vengeance. Questrom did it in about four years. But nine? Who gets nine years to turn a company around?

Linens ’n Things CEO Robert DiNicola, for one. But the New York Post notes last week that the picture may not be so rosy with the retailer’s cash flow declining and the value of its junk bonds tumbling by more than a third since coming on the market. That’s got to worry investor Leon Black of Apollo Management, the paper suggests, whose firm tied up with NRDC Equity Partners and Silver Point Capital for the $1.3 billion deal a couple of years ago. Apollo is looking to go public and it could use some good news from LNT.

But LNT added another $100 million in debt in May, bringing its credit facility up to $700 million, more than half what it was sold for, and the Post reports it’s running just a bit slow on A/P, perhaps a short-term elixir to the cash flow issue.

Of course, if the company successfully turns around, all this becomes insensate speculation. LNT has virtually the entire industry pulling for it — every supplier seems to have a product or program that will be the ultimate key to its success.

But two “things” seem apparent: While some merchandising changes have been made, many observers are still waiting for the retailer to articulate by its actions, a clear strategy and to stake out a unique market space — one that helps it stand out from archrival Bed Bath & Beyond, as well as JCP, Kohl’s and Target.

The other thing? The remaining seven years may prove to be simply too long to wait for a turnaround.


‘Business decision’
All of this might serve to renew Dan River parent GHCL’s ostensible interest in LNT.

Chairman Sanjay Dalmia indicated late last year ( http://www.hometextilestoday.com/article/CA6401594.html ) that he was in pursuit of a U.S. retailing interest that sounded suspiciously like Linens. It matched in scope and volume — except that the price he was willing to pay was far below Apollo and partners’ $1.3 billion tag. But let’s face it, the specialty chain universe in home textiles just isn’t that large.

At the time, Dalmia said he hoped to complete the deal by the end of this year. If LNT’s path continues on its current track — and if Black decides to make a “business decision” — his schedule might not be far off. And Dalmia just might come close to getting it for his lowball offer.


Have you walked through a Sears lately?
Kmart looks good by comparison — consider that statement. When you walk into a Sears — at least the ones we’ve visited in four disparate U.S. markets— you immediately understand why sales and comps are so challenged: There are no customers.

There are a multitude of reasons, but let’s go for the obvious — there’s not much happening merchandise-wise that’s even remotely compelling to make customers want to go there, shop — and spend.

Lands’ End is a mess. The home department itself is a challenge to navigate — you need to be really dedicated. And the assortments are, well, boring. And in one store we noticed a Kmart-like furniture assortment plopped in the middle of soft home that looked like something rejected by National Wholesale Liquidators — scratched, chipped, dinched and dented — a wonderfully strong positioning statement for the rest of the department (please note appropriate sarcasm). On a hot summer’s day there was a handful of customers buying air conditioners, though. 

********************************
DATAPOINTS:
Total import-export value for non-apparel textiles, such as sheets and towels, in the United States neared $18.5 billion in 2006, according to a report from Dublin-based Research and Markets Ltd. ( biz.yahoo.com/bw/070731/20070731005530.html ) 

There were 203 countries conducting foreign trade with the U.S., five fewer than the year before. In total trade, China held a 38.7 percent share; India, 10.9 percent; Canada, 10.1 percent; Pakistan, 8.7 percent; and Mexico, 6.6 percent. Together they represent 75 percent of all imports and exports.

Total import value was $14.7 billion; total export value was $2.8 billion, the report states.

********************************

A cautionary tale
"I’m shocked, shocked to find that gambling is going on here."

The memorable Claude Rains line from Casablanca seems apropos of the news out of Home Depot that four merchants have been fired for violating the company’s ethical standards. The company would not provide further detail citing an investigation by federal authorities. But CBS News reported this morning that it allegedly involved millions of dollars in kickbacks from flooring vendors.

The company holds its annual merchandising staff meeting Thursday.


NEXT: Will the decline in home sales adversely affect home textiles?

Posted by Brent Felgner on August 1, 2007 | Comments (0)