iBankCoin
Joined Dec 1, 2015
135 Blog Posts
@JeffMacke

“Idiot Bankers Can’t Retail”: Sunday Lessons From Ken

In response to The Butcher of Sears Holdings It is Showtime writes

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I could write a whole history of retailers failing due to leverage and / or being run by financial gurus, if I thought anyone would read them.

I was a senior in high school when the Haft Family made its early push for Dayton Hudson / TGT. I left for college the next year and never really moved back to MN. That was 1987. My earliest memories of tagging along on store visits with my dad (he worked for Dayton’s) are mixed in with Ali – Foreman which puts them in 1974 and 5. By that math “Asshole Bankers Don’t Understand Retail” was the final lesson of a 12 and a half year live-in retail apprenticeship under the guy who was central to the creation of the modern Target.

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Which is nothing I did. I was just lucky as hell to be raised by (and get along with) a very unusual guy who was certainly one of the top 10 merchants from 1950-2000. He’s wildly underrated but I’ll argue his placing with anyone.

(Forgive the digression. Quite a bit of coffee is involved in these Sunday morning columns and visits to the comment section.)

Ken’s problem with retail LBOs was the debt. He wasn’t afraid of the risk. He loved risk. What he hated were cheap, dirty stores. Or empty cash stands when there was a line. Or flimsy displays… Wow, did Ken Macke hate flimsy displays. You end up with all of those when you lever up retailers whether it’s to do an LBO or buyback or dividend.

Retail margins are terrible. 10% is about your cap. There’s no room to add excessive debt payments without cutting spending. Cutting spending leads to sloppy execution which becomes a messy store. So help me God if a Target store was dirty my dad would grab the nearest flimsy display and use it as a staff to Smite the store manager dead like Ken was Moses himself (I may be conflating that memory… I was a kid).

The Haft family ended up crapping out of Daytons. The Hafts had been front-running their own press clipping. They’d get long, announce a bid then sell down the position in the ensuing ramp. (Did you honestly think Ackman invented the idea?) Lather-rinse-repeat. In the summer of 87 the Hafts were out. By the time of the article, October 15 1987, the Hafts were long up to 4.9% at $50. They’d bought huge in the fall of 1987.

Which means the Hafts were levered long into about $300m of DH right into the crash of 87. The stock fell somewhere around 40%. So Endeth the lesson on mixing leverage and actual business.

(Another funny point on the article… Check the part where it says Daytons sent a “tersely worded 2 page fax”. The original draft of the fax was 2 words. “F— you”. The lawyer wouldn’t let Ken send it. I was listening to my dad on the call when he complained “Which part of ‘f*** you’ do you think the Hafts won’t understand?”)

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15 comments

  1. zerosum

    After reading this, all I can think to write is: “I’m sorry for your loss.”

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    • JeffMacke

      You mean snarkily, to the Hafts? Bc that’s super funny.

      If you mean for me don’t be at all sorry. I’m 46 and stuff I talked about with my old man is still actually useful. He started dying of a degenerative brain disease in the early 90s. The real him has been gone for decades. He was born on a kitchen table in Iowa and got to see the whole world. I was there for the ride. I’m so blessed that I’ve honestly spent extended periods of my life questioning my worthiness.

      My cup runneth over. All I’m trying to do is earn it a little.

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    • zerosum

      The response to the Hafts is a classic and I will be stealing it, as arguing with my attorneys is both fun and useful! But I did mean you, actually, and thanks for expanding on your relationship a bit. I’ve got 10 years on you and my dad is still alive, still an upstanding citizen and completely independent…but the useful things I’ve learned from him wouldn’t fill a thimble. I look to others for wisdom; thanks for sharing some of your dad’s.

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  2. Dr. Fly

    Thanks for sharing Jeff.

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  3. anjing bau

    Yes thx for sharing

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  4. aformalcat

    Your Dad was amazing.

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  5. tradingnymph

    “Showtime” Jeff gave you a shout out…SO COOL. FWIW, It may get really ugly tomorrow, G20 isn’t going to give the world any master plan. This 2 day rally on that hope was rather silly imho.

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    • JeffMacke

      Trading Nymph, it hasn’t missed my attention that you are a wonderfully loyal and insightful commenter. Thank you!

      This was an accidental column. Which is to say I realized I’d written a 400word response so figured I should make it more public.

      Tbh I was wrong not to ask Showtime first…

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    • tradingnymph

      Jeff thank you!! This made my day, which I needed after that stupid surprised RR cut out of China messed up my nice sweet sell off, lol. Darn Central Banks. But Yen still pushing up so it should fade fast. I am SO glad you made it public, I loved it.

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  6. jacked rabbit

    This story should be the first night of a fantastic mini series. I need to know what Ken thought about unions, the Russians, the onset of television, MI Nesta winters and George Milan.

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    • jacked rabbit

      Mikan, George Mikan. DAMMIT.

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    • jacked rabbit

      Mi Nesta!?! Minnesota winters.

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    • JeffMacke

      Ken liked George Mikan. I knew who you meant. I was friends w/ his granddaughter, Missy.

      He had no geopolitical interests at all. We had a chance to go to the Soviet Union in 1987. Ken stayed home to fight the Hafts and plan Christmas. “How were the Russians?”

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  7. chuck bennett

    Born on a kitchen table, straight out of a movie. The man was a real character from your stories. You are lucky guy to have the memories and you have done the man well.

    Shit, you moved your kids to sunny Cali from upstate NY. They will surely have a few praises for you in time. Lol

    Regards

    Chuck Bennett

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  8. gsofield

    As always…thanks for sharing. Look forward to every post.

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