Dollar stores are private equity with a checkout lane.
In 2025, Dollar Tree sold Family Dollar to a group of private-equity firms: Brigade Capital Management, Macellum Capital Management and Arkhouse Management Co.
It’s a business model cosplaying as poverty relief while quietly siphoning money from the people least able to lose it. They already run on a thin-staff, high-volume model. That 23% increase is not a glitch. They know their customers can’t drive across town to complain. They know the regulators won’t scale fines to revenue.
> Has private equity ever done anything good for anyone outside of the investors?
If it's not publicly traded, it's super secure from any public accountability.
And while I'm increasingly hostile toward the shareholder model, we do get one transparency breadcrumb from this (gov managed) contrivance: The Earnings Call
Earnings Calls give us worthwhile amounts of internal information that we'd never get otherwise - info that often conflicts with public statements and reports to govs.
Like CapEx expenditures/forecast and the actual reasons that certain segments over/underperform. It's a solid way to catch corporations issuing bald-faced lies (for any press, public, gov that are paying attention).
AT&T PR: Net Neutrality is tanking our infra investment
ATT's EC: CapEx is high and that will continue
I'll bet 1 share that there are moves to get this admin to do away with the requirement.
One of the reasons cited? All the work it takes. Which is just an insane response. If your business is so poorly run and organized that reconciling things each quarter represents a disproportionate amount of effort, something is very wrong. It means you definitely don't know what's going on, because by definition you can't know, not outside those 4 times a year. In which case there's a reasonable chance the requirement to do so is the only thing that's kept it from going off the rails.
>If it's not publicly traded, it's super secure from any public accountability.
Under the existing legal and regulatory model, yes.
But what abusing that model long-term will eventually result in government-level change that effectively bans the existence of such exploits, wide-spread vigilantism, and/or some sort of collapse.
> what abusing that model long-term will eventually result in government-level change that effectively bans the existence of such exploits, wide-spread vigilantism, and/or some sort of collapse
The endpoint of vigilantism and collapse is more economic opacity. Not less.
My personal view is companies with more than any of 1,000 employees, $10mm revenue or a $100mm valuation should have to file a simple annual disclosure showing the cap table ad balance sheet, a simple P/L, list of >5% beneficial owners and their auditor. But the path to that is through legislation in a complex, stable society.
Those are single-member LLC revenue numbers. You can get $10M in revenue just by being in a low-margin business. For industries with a 1% margin that's $100k a year in net income, i.e. wages and benefits for one person.
And how are you going to calculate valuation for a closely held private company? In particular, how are you going to calculate it without making them do the thing you don't know if they're required to do without having the calculation already?
> But what abusing that model long-term will eventually result in government-level change that effectively bans the existence of such exploits
After a couple of generations watching my government become increasingly captured by the lobbyists funding elections - I'm fairly skeptical that your optimistic assertion will come to pass.
Doubly so now that capture is rapidly accelerating into a hostile, fascist takeover.
If you have a pension, you're an investor in PE. If you live in a country with a sovereign wealth fund, you're a beneficiary of PE. If you're connected to a school with an endowment, a lot of that money ends up in PE funds, and can fund lots of research and student resources.
So ya, I'd agree the PE is rarely good for anyone but the investors, but you'd be surprised how many people are investors without realizing it.
If all of those things never invested a cent in private equity funds that buy up existing companies to turn the screws on their customers and put the money into new business creation instead, they wouldn't be making any less money and the whole world would be better off, including the investors themselves in their role as customers and employees.
I'm not sure why private equity is singled out here, when every time a public company does a bad (eg. Boeing), people crow about how public companies only care about juicing next quarter's earnings.
The big difference is the extent to which PE will go to juice the quarters earnings. Public companies cannot and will not just fire all staff, fleece customers to the point they won’t return and take on debt that they have no intention of paying back. PE will do all of the above and more if it means they get their money. Which means, you as a customer get screwed over more when PE is involved.
>Public companies cannot and will not just fire all staff, fleece customers to the point they won’t return and take on debt that they have no intention of paying back.
Why? Is there some code of conduct for public companies but not private ones?
> Is there some code of conduct for public companies but not private ones?
No but there’s a difference between private companies and PE owned companies. PE model is very different from regular private companies, and it often involves extracting maximum profits at the expense of the company itself.
And as far as public companies go, shareholders will have to say something about the operation of the company if you start intentionally sinking it.
Because a PE fund is at most a seven year timeline, and everybody knows it. There is absolutely no incentive to add value beyond the next sale, and often you only need to add the perception of value. To quote my CTO of a PE owned company: "we want to make it look like we're on the road to <big investment in strategic roadmap>", not actually accomplish it
> Because a PE fund is at most a seven year timeline
Berkshire Hathaway is a PE fund with permanent capital.
Broadly speaking, making generalisatios about PE is almost impossible because it's an asset class which is, essentially, all non-public business. Instead, it's more useful to think about which element private equity touches you're specifically complaining about: capitalism in general, financial transparency, leverage and liability.
The problem with PE is only the hyper aggressive and generally terrible ones make the news.
The quiet ones that simply run business well, don't make the news.
There are PE firms that specialize in rescuing distressed companies with potential and turning them around. In many cases not firing anyone and holding onto the form they acquired for a long time.
> Is there some code of conduct for public companies but not private ones?
There's a pattern of behavior, to be sure. The primary control on public companies is shareholder scrutiny. Gutting your company for short term gains, is not always popular. The more diverse the shareholder cohort, the less popular it tends to be.
Private companies don't mind it when they can literally start a new company with the assets from the old without the pesky plebian investors.
No? Companies aren't about making things anymore, they're about stock buybacks and making as much money as possible while doing as little as possible (or selling our data). That's why the refrigerators have ads and break after two years. At least private equity is more honest about being vulchers, whereas Kohler is going to look you dead in the eyes and try to convince you you need a toilet with a camera in it. What a joke.
>At least private equity is more honest about being vulchers,
Again, what's the basis of this? Half the people in this thread seem to take it for granted that PE is somehow "worse" than public companies, but can't seem to articulate why. The only legal difference between public companies and "private equity" is that the former has stricter reporting requirements and can be bought by non-accredited investors. There's nothing about "ostensibly, trying to make a good or provide a service" or whatever.
PE does this wealth extraction trick which breeds the ill-will.
Eg: purchase a few mom&pop veterinarian business in some area. Squeeze the service rates, trim hours, reduce staff, add some debt. The PE investor gets cash out - the business is destroyed and the community loses a (critical? valuable?) service.
It's a common pattern. But not all PE is like this. Like "not all men" and "not all guns" - but enough that the pattern is easily associated - and disliked by many w/o the power to keep them out.
Private equity is far worse. It means 100% ownership by a group of sociopaths who are executing on a plan to extract as much cash as possible quickly with no other goals at all.
At least public companies have some diversity in ownership and agenda.
>Private equity is far worse. It’s mean 100% ownership by a group of sociopaths who are executing on a plan to extract as much cash as possible quickly with no other goals at all.
...as opposed to the average public company? An average company might have more "average joe" shareholders (almost by definition, because private equity is typically off limits to non-accredited investors), but outside of meme stocks, there's not enough of them to make a difference. The rest of the shareholders (eg. pension funds, insurance companies, endowments, family offices) can be assumed to behave like ruthless capitalists chasing the highest returns, regardless of whether the company is public or not.
I see these private equity takes on HN frequently and am really baffled by the ignorance. There's a very clear difference between a public and private company - the fiduciary duty to shareholders.
There is a legal requirement for directors of public companies to act in the financial interests of all shareholders. In practice, and according to precedent, this means long term viability of the company, in other words, a sustained profitable business.
There is no such requirement for a private company. In practice (esp. recent history), this means private equity firms acquire successful businesses to "mine them" of their wealth - capitalizing their assets for personal gain, and leaving nothing left.
The question for public companies isn't how many retail vs institutional investors they have, it's whether an investor can make a claim about a breach of fiduciary duty. It's patently false to say that the institutional investors (who yes, do have more sway) aren't interested in the company acting in their financial interests.
>There is a legal requirement for directors of public companies to act in the financial interests of all shareholders. In practice, and according to precedent, this means long term viability of the company, in other words, a sustained profitable business.
All that means is that controlling shareholders can't use the company as a piggy bank and raid it to fund their other ventures. It doesn't mean the business has to be "sustainable" or whatever. In fact, it's perfectly legal for the board to sell to a "vulture" PE firm that will sell the business off for parts, as long as the sale price is good enough.
Yes, that's the major difference between the public and PE companies that OP was highlighting. The owners of a public company can't raid it to fund other ventures. They have to sell it off to someone else to do that.
Selling off a public company like that is generally not trivial and is not surprise sprung on shareholders.
> All that means is that controlling shareholders can't use the company as a piggy bank and raid it to fund their other ventures
Yes, you're getting it now.
> It doesn't mean the business has to be "sustainable" or whatever. In fact, it's perfectly legal for the board to sell to a "vulture" PE firm that will sell the business off for parts, as long as the sale price is good enough.
As discussed elsewhere in this thread - the sale itself is required to maximally benefit the shareholders.
> There is a legal requirement for directors of public companies to act in the financial interests of all shareholders
No, there isn't.
The whole point of Revlon duties is that they trigger "in certain limited circumstances indicating that the 'sale' or 'break-up' of the company is inevitable" [1]. Outside those conditions, "the singular responsibility of the board" is not "to maximize immediate stockholder value by securing the highest price available."
> There is no such requirement for a private company
Are you thinking of minority rights? These vary based on whether a company is closely held or not [2], not whether it's public or private.
Why bring up Revlon duties when as you say, their relevance is only during company acquisition or restructuring?
It's well established over hundreds of years of case law that directors of public companies have to act in good faith to benefit the company (and therefore, the shareholders).
> Why bring up Revlon duties when as you say, their relevance is only during company acquisition or restructuring?
It’s an exception that proves the rule. In that specific case, what you’re saying applies. In all others, it does not.
> It's well established over hundreds of years of case law
Where are you getting this from?
> directors of public companies have to act in good faith to benefit the company (and therefore, the shareholders)
Where did you get that this only applies to public companies? What you’re describing is basic English and Delaware corporate law.
Also, there is a massive difference between “all shareholders” and “the shareholders”. And nothing about public companies says they can’t be structured in a way that sometimes undermines some shareholders. This comes up most commonly when different shares have different voting or blocking rights. But it’s also fundamental to the intent behind B Corps, publicly traded or not.
* If a company controlled by PE goes bankrupt, shareholders (PE) likely make a profit
* But if a publicly listed company goes bankrupt, shareholders lose their money
In other words, PEs almost never lose money, so they could extract the last bit of a company, even more short sighted than shareholders of a public company
>* If a company controlled by PE goes bankrupt, shareholders (PE) likely make a profit
That's not necessarily a bad thing, or sign of anything sinister. If a business is failing, and you buy it for pennies on the dollar, and despite your best efforts it still goes under, so you liquidate it, you can still turn a profit if the price you paid is lower than what you got from liquidating it. That's not bad, because private equity (or anyone else, for that matter) isn't expected to operate as a charity. The only reason they're willing to stump up the cash to buy the business in the first place is the expectation that they'll make money. It's also not bad for the original owners either, because the fact that they hold to PE rather than someone else, or liquidating it, suggests that the PE offered a better deal than either.
>But if a publicly listed company goes bankrupt, shareholders lose their money
> If a company controlled by PE goes bankrupt, shareholders (PE) likely make a profit. But if a publicly listed company goes bankrupt, shareholders lose their money
This isn't remotely true. Plenty of private equity investments go bust before they can pay themselves back. And plenty of public company investors milked a company for interest payments or dividends into the ground.
> PEs almost never lose money
Private equity funds regularly lose money. Usually to lenders.
You're complaining about leverage in general. Probably not private equity per se.
If you’ve ever spoken to employees of a public company that was sold to private equity, you’ll know how much of a difference there is. It is a significant difference.
> The rest of the shareholders (eg. pension funds, insurance companies, endowments, family offices) can be assumed to behave like ruthless capitalists chasing the highest returns, regardless of whether the company is public or not.
Right but they are seeking the highest returns as equity holders typically, usually through things like stock buybacks.
Private equity firms have much more devious ways of looting the companies, like management fees, acquiring other portfolio companies, and various other tricks.
If you’ve ever seen the Goodfellas scene where they bust out the nightclub, that’s quite literally their business model.
>Private equity firms have much more devious ways of looting the companies, like management fees, acquiring other portfolio companies, and various other tricks.
"looting the companies" is non-nonsensical when they also own it. It's like saying a scrap yard is "looting" the cars it bought by taking out the valuable parts to resell or whatever. The rest of the stuff might make sense in the context of the LPs getting screwed over, but not in the context of portfolio companies that they own.
PE puts very little of their own money into the deal though, while they own it they don't buy it. They use incredibly high leverage and often saddle the company with monstrous debt, then loot the assets to pay the interest and take management fees while doing all this. Red lobster is a great recent example. They sold off all the real estate, then had stores lease it back, turning profitable locations into losers. They often do the same thing with manufacturing, goodwill, brandnames and sales channels.
Think of this like an oil well. If you pump off all the gas, you depressurize the reservoir and can never get the oil. You need to slow your production to get the oil first, but private equity is happy to skim the cream and leave the milk to spoil.
Looting the companies is accomplished by stacking up debt and then giving themselves the money. Occasionally there are a few variations like looting a pension fund or taking a high quality product and making it horrible and selling that until people notice.
It’s literally their business model, it’s happened thousands of times and is a very clear fixture of the modern American business climate.
If you don’t know this it’s because you aren’t looking or it’s in your interest to say you don’t know this.
> Has private equity ever done anything good for anyone outside of the investors?
Yes. Productivity typically goes up [1]. Its reputation for job cutting is overblown [2], as is its record on price increases [3]. And historically, it's tended to decrease concentration in the industries it operates in. (The conglomerate break-ups of the 1980s were fuelled by new entrants and carve-outs.)
Instead, what I think we have is a category error. Berkshire Hathaway is a private equity shop as is all venture capital [4], and most family businesses of any scale are structured identically to sponsor-owned firms. Meanwhile, LBOs have been unable to shake the private-equity label for decades, unless they're lead by a founder, in which case they're "take private" transactions. In essence, we brand failed alternative asset strategies as private equity ex post facto.
Moreover, transaction size is negatively correlated with returns, particularly for leveraged buyouts. So the biggest private equity deals, which represent a minority of transaction activity, are disproportionately (a) bad and (b) public.
Finally, we get a lot of false conflation of market failures to private equity per se. Private-equity owned hospitals are bad [5]. But I haven't seen great evidence they're worse than other privately-owned hospitals with similar scale. The problem is hospitals probably shouldn't be run for profit or on-locally. But because nobody in particular is defending private equity, that's easier to attack.
The question anyone reading this analysis should ask is: if private equity is so benign, where do the returns come from?
The unlock, which these papers don't understand, is the extractive nature of P/E that is hidden.
A few clues:
1. A .5%-1% increase in prices is meaningful (Overall industry prices rise after buyouts, but again the price increase is on average very modest.) Retails margins routinely are measured in fractions of percentage points (bps). As an example, even if overall hospital prices stayed similar, P/E firms have been caught jacking up prices on people who need it most. Research on "Surprise Billing" in emergency rooms spiked immediately after PE firms took over staffing groups. Are you surprised?
2. Equity multiples are "effectively" a form of stealing from retail / pension plans: this is where the real 'theft' happens (if you want to call it that). If you reraterevenue from 6x (private) to 15-20x, someone is now paying 2-3x more per dollar to have that company in society. The key is the P/E OWNERS reap that value, so even if there are no job cuts, the wealth being created aggregates 'money supply' to the owners. This has downstream impacts on inflation.
3. Independent of aggregate effects - local effects are quite devastating. This is not P/E's fault, but closing down plants can kill towns for good. The question here is ownership - a family feels some tie to the community to attempt to help their friends and neighbors. P/E absolutely destroys this tie - the subtle but measurable effects compound.
Finally, even if you like P/E as a VEHICLE (which - I would argue it hasn't been a 'good' ones since like the late 90s), you can't ignore the fact that it's returns have largely been eaten by fees.
You're right to say that P/E is just playing the market. That doesn't mean that its impact on society has been good - the entire reason we're in the current political and economic situation we are today are by following the 'laws of the market' which have hollowed out the middle class and created a pretty large affordability crisis despite the world having achieved record levels of wealth.
The transfer from 'doers' to 'owners' has been a net negative for American society, and one of the primary reasons we don't 'build' things anymore - it's just not capitally "efficient"
> if private equity is so benign, where do the returns come from?
“During the last 10 years PE on average did not outperform the public markets in aggregate” [1]. (Individual firms overperform, some of them consistently.)
> even if you like P/E as a VEHICLE (which - I would argue it hasn't been a 'good' ones since like the late 90s), you can't ignore the fact that it's returns have largely been eaten by fees
Yup! Though nitpick: we often stop calling it PE when it works. VC is PE. So are Berkshire Hathaway and founder-led “take private” transactions.
> transfer from 'doers' to 'owners' has been a net negative for American society
PE is often an exit vehicle for small builders. Particularly in the space that deals with SBA loans.
What are you arguing then? That a growing asset class that increases prices, destroys communities because of lack of ties, and shifts wealth from builders to owners that doesn't outperform public markets in aggregate is a good thing? Hard to argue this is 'good for society!'
> VC returns as an asset class (outside of a handful of firms) have underperformed in the past 20 years. I don't even count it here.
> PE as an exit for small builders
Agree. But again, it's the builders who have built over multiple decades who profit (great!) one time. The employees - typically - don't. Search can help this (because searchers are usually more dependent on employees) so this is a good example of "micro-PE" being generically better than larger scale PE.
Private equity are the crows of the economy. They pick off weak / dysfunctional businesses and open space for fresh competition (or for other markets to open up).
As far as I’ve seen that’s as far from the truth as it can be. They in fact consolidate terrible businesses, undercut the good ones and drive them out of the market until only they are left, after which point, they get even worse.
From what I've seen, they take a terrible business and liquify its valuable assets for their investors, freeing up capital to be invested more productively elsewhere in the economy. Of course those investors could take the money and commission a bunch of statues of themselves, but frequently they do something more productive than that.
A lot of the negative reaction to them seems to me to be mostly emotional. They'll dismantle a business that holds a lot of nostalgic value for people, even though it's long since ceased to be a viable and productive company. But it wasn't their fault that the business was in that situation in the first place! Years of mismanagement and neglect or perhaps disruption from a competitor left the business in zombie-like state. PE came along and put it out of its misery rather than allow it to slowly crumble while depreciating the value of its illiquid assets.
> lot of the negative reaction to them seems to me to be mostly emotional
Mine specifically stems from PE buying up all but one 24x7 emergency vets in a 20 miles radius from me. All of them were thriving businesses. There is only one remaining non PE ones has its days numbered. After monopolizing the emergency vet market, they shut down a few locations, which previously acted as competition for each other, effectively cementing monopolies in those individual neighborhoods as well. Now, you pay $200 to just get your pet checked out and always have to wait anywhere between 6-8 hours in triage if your pet isn’t literally dying, because they are perpetually understaffed and there are no other options. They also recommend unnecessary tests and treatments, present them as “optional” but refuse to treat your pet if you don’t agree to their “optional” treatment plan.
Lots of businesses have big positive externalities [1]. They provide more benefit to their communities than they take in for themselves. Unfortunately, these sorts of businesses are easy pickings for PE.
Artists are a classic example. They generate huge positive externalities for a community while reaping almost none of the benefits for themselves. Artists get severely exploited by the economy for this!
To counteract this problem we need other ways of addressing the positive externalities. In the case of artists, this usually comes in the form of public (and private) patronage and endowments for the arts.
What you are describing the best-case scenario. They happen.
What also happens is, they take operating businesses with reasonable returns, buy up all it's supply chain or it's competitors to reduce costs or enable monopoly pricing, then load the company up with debt, squeezing it into a terrible company. That is the bad scenario which people object to.
They could do this, but there's not enough targets of this type for the money invested in the sector. They've also proven to not have the advertised & applicable expertise to run companies any more efficiently than current management. Nostalgia had nothing to do with it unless that's one of the company's assets. I've been inside on three PE acquisitions, and 5 sales by PE to new funds. The playbook was the same for them all: predictable, decent cash flow, cut expenses, grow enterprise sales, sell on before long term cracks from lack of strategic investment showed. If anything they accelerated the decline of healthy going concerns, but at each sale the insiders did great.
If only it actually played out that way[0][1][2][3]
Whatever legal and theoretical role they play in the economy does not match the actual, real role they are playing: PE firms are by and large, economic vampires. They have a well documented history of sucking the life out of a sector at the expense of workers and consumers alike
That's not true at all! Funds often look for mature companies with predictable cash flow. They can make returns while also squeezing margins under the illusion of expertise and economies of scale and seek to the next fund for a multiple. They're an alternative to the massive headache of going public and getting a liquidity event, not typically the model for your weak and dysfunctional company.
Nobody in this comment chain was saying it was good for the customers. The GP was saying that they clear out room for new businesses, and if brick-and-mortar-fabric-superstore were still a viable model someone would be doing it.
I am looking for fabric right now and am terribly frustrated not to have anywhere but limited quilting shops available. Online is not an answer, because you can't handle the fabric for weight, exact color, and stretchiness.
JoAnn drove all the medium-sized fabric stores out and left us with nothing.
The lack of customer density over time drove out all the fabric stores - medium sized or not.
At-home sewing has been declining since I've been alive, and it was just barely hanging on when I was a kid. The demographics simply cannot support these stores in most locations outside of hyper-dense cities.
Not to mention the folks who shop for fabric tend to be some of the most cost-conscious consumers around. They are more or less the prototype of a customer who will go to a B&M store and then price match on-line,.
I'm honestly surprised even Jo-anne survived as long as it did.
Consolidation frees up real estate, allowing new businesses to open. Where I live, old supermarkets are now farmers’ markets, trampoline parks, and health clubs, and an old car dealership is a church.
They pick on the weak companies but the basic model is to pick over the corpse and leave someone else holding the bag. Make it look good on the surface, leverage it to the hilt, extract cash and let it die.
this would be somewhat arguable as okay except for their introduction into categories like daycare, emergency rooms, drug and alcohol rehab, care homes for the geriatric and disabled, etc. things that probably shouldn’t be profit oriented to begin with yet are and are being snatched up by private equity, worsening outcomes in basically all of them
Except that Americans pay far more for these services than places where they aren't profit oriented. Try again. Reality does not support your assertion.
You stay in this one. If PE wasn't producing value it would disappear. What, you think people dump money into PE because they want to twirl their villainous moustaches?
Most people would say that extracting wealth and concentrating it into an ever shrinking group of elites is making the world worse. They do this both from the companies you and I might work for, but more importantly from the markets that have no defenses.
In theory it helps people who have some sort of trade and just want to do that trade, focus on that, while the business experts from the PE firm handle the business side. Running a business is a skill, and people who want to sell some other skill often don't have it as you can't be good at everything.
Are there other ways of addressing that gap, like hiring experts? Sure, but its not like PE is entirely evil.
Keep in mind there is some selection bias here. You only hear about private equity when its being comic book evil. When things work out or its a non scummy PE company, you never hear about it.
> Has private equity ever done anything good for anyone outside of the investors?
This is a bit like asking if public equity has ever done anything good for anyone outside of its investors. It really depends on what is meant by "anything good."
Has any company that has taken venture capital (a variety of private equity) ever done anything good for anyone outside the VCs?
Private equity is more often associated with late stage takeovers and reorganizations than with startups, however. An example might be the privatization and refocus of Dell. Was a refreshed Dell good for its workforce and customers?
So I work in commercial real estate, obviously a large private equity influenced industry. I've worked in REPE and in other capacities.
There's degrees of PE. Some good, fine, and some worse.
Take real estate development. It's probably one of the suckiest businesses to be in. I know 3 developers who have committed suicide because when things go wrong, your entire life collapses (you put up all your assets in order to obtain construction loans). The litigation, brain damage, and risks are enormous. Increasingly, the payoff is awful (due to worsening legislation and NIMBYism and worse market condiditions)
However, private equity in development I think is a good thing. When there are investors willing to put this money at risk, we get much needed construction of housing (see Austin, TX where rents are falling off a cliff due to over building).
Now look at Los Angeles, which new permits are literally almost non-existent because LA is one of the most hostile places for developers. You can't make money in LA, so there's no capital available.
Then you end up with "affordable" housing developers adding the only supply at $600-900k/unit costs vs the market rate developer at $300-600k/unit.
----
On the other hand, "value add" private equity is much more suspicious. It's more cut throat, easier to end up in crony capitalist situations by operating with a "cut expenses, provide less, make big bucks" model. The people in this world are the kind of guys who have never done anything hard with their hands other than gotten a sore thumb from pounding too hard on their keyboards to adjust their excel model ("Mr. The Model is Always Right") too hard all night long.
This is how we end up with old properties who get flipped 4x each being sold with "upside the seller was too stupid to take advantage of" and ending up in situations where tenants get priced out due to private equity seeking infinite growing returns. Oh and by the way, every previous owner did "lipstick on the pig" jobs because why not try to save costs and make your levered IRR 16% instead of 12%? You cannot show that kind of return when you promised 18%... then it'll make it harder to fundraise your next deal!
This isn't to say that "value add" is a dirty business. We certainly need to balance the incentive to modernize and renovate properties. An d developers overbuilding isn't always a good thing.
So its nuanced. I think people need to fairly give credit that there are both good and bad. The capital efficiency is real and produces real world outcomes since there is a strong financial incentive at the end of the door.
But financial incentives sometimes bump up to issues causing harm in real life, which need to be recognized and called out.
Not yet. Sometimes employees if they get second bite of the big apple. PE do well in capital-intensive sectors. I'm not sure if their playbook fits the real needs of dollar stores. Instead of focusing on things like debt and aggressive cost cuts, most customers just want fair prices, stocked shelves, clean stores, friendly cashiers and basic respect—things that PE firms often ignore. In DFW, I was surprised to see 1-2 person dollar stores!
That's a good point. Private Equity is a fairly broad umbrella term that encompasses a variety of investment strategies and business models.
The type of Private Equity that most here are referring to is the type that buys up existing businesses, squeezes as much money as possible out of them, and throws their desecrated corpses in the gutter. These "investors" are a blight on society, this activity should be criminalized, they should be in prison.
But there are a lot of well-meaning investors who do great things for society that also get stuck with the same label.
Just like crows! People hate crows even though they play a valuable role in ecosystems.
I would argue that moribund businesses who maintain a competitive moat but are otherwise extremely unproductive and inefficient are the real blight on society. If PE firms can liquidate those businesses and open up the market while freeing up capital for more productive investment then I fully support them.
I would love to hear some counterexamples though. Productive and innovative businesses with really solid fundamentals (balance sheets) that were acquired and dismantled by PE.
Weren't they losing money for years on all-you-can-eat seafood specials [1]?
It's not uncommon in the fast food business to be breaking even or losing money on all aspects of the business while the true value of the company, its real estate portfolio, steadily grows. The fact that investors decided they wanted to cash out should be a surprise to no one.
Why is private equity different from any other form of organization? Publicly traded companies are even more addicted to getting revenue. Non-profits like universities may not have shareholders, but somehow the price of tuition keeps skyrocketing even faster than the prices at the dollar stores. And it's not like the religious charities have been pure.
> Dollar stores are private equity with a checkout lane.
Dollar Tree and Dollar General are publicly traded.
So Family Dollar might be the result of PE tactics, but the other two aren't, and Dollar Tree sold Family Dollar because they saw it as under-performing.
It's actually sort of weird Dollar Tree couldn't make it work. I know the dollar stores all have somewhat different businesses, but you'd think that Dollar Tree could have either turned Family Dollar around or knew it was selling a loser (see the market for lemons) to PE.
And this is exactly why I only shop at Costco. While other retailers try to get me to buy more stuffs, Costco try to make sure I'm satisfied enough that I'll renew my yearly membership (their main profit source). The incentive structure aligns very well.
Buying in bulk is about having the ability to both afford next week’s food this week and have the means to store it. Not to mention the annual subscription.
Responding to a comment about dollar stores preying on the poor with, “that’s why I shop at Costco” is… a choice.
The fact that the strategic wedge with which a successful, relatively socially-positive business manages to sustain itself isn't universally accessible doesn't negate its value.
The Venn diagram between people who shop at dollar stores and people who shop at Costco isn't empty.
This is true, but a valuable - and damning - observation that this variation in business model, that seems to be both decent and profitable, is so rare
Indeed. And I say this as Costco member. There are lot of factors that make Costco memberships work. And a lot of people won't be able to make much benefit out of Costco membership.
I say this as someone who admires their business model and how they treat customers & employees: your typical Costco experience is drive to the suburbs, spend $500 and load up your car with nice to have food products and discretionary purchases. Poorer people cannot do any of these things.
>While other retailers try to get me to buy more stuffs, Costco try to make sure I'm satisfied enough that I'll renew my yearly membership (their main profit source). The incentive structure aligns very well.
This doesn't make any sense. Costco makes a profit on the goods sold as well. They have every incentive to sell you as much stuff as possible. That's why they also engage in the usual retail tactics to increase sales, like having the essentials all the way in the back of the store, and putting the high margin items (electronics and jewelry) in the front. They might practice a more cuddlier form of capitalism than dollar general, but they're still a for profit retail business.
I see you're not terribly familiar with Costco. Membership fees account for the vast majority of net operating income for Costco and they keep markups on items at no more than 14% over cost (15% for Kirkland brand).
So yes, Costco does make most of its profit by ensuring customers are happy and continue to renew their memberships every year.
>Membership fees account for the vast majority of net operating income for Costco
This is financially illiterate because you're mixing revenue ("membership fees") with profit ("net operating income"). While it might be tempting to assume that membership fees is pure profit for them, it's not, because people only buy memberships because they're useful for something (ie. shopping at their stores). Therefore you can't strip that out from the other costs associated with operating a chain of warehouses.
It’s kind of a meme; Costco’s profits are almost exactly the same as their total revenue from membership fees, which leads people to think that the warehouses run at zero margin and the fees are their only profit source. The fees certainly give them room to run the sales at extremely low margins (though large grocers like Kroger only have something like 3% margins), but it wouldn’t take a huge shift in purchasing patterns to change this coincidence. If all the people who don’t use their membership that much dropped them and those who use them were all large-scale buyers, they would have to increase their prices just to give themselves a bit of cushion.
>It seems to amount to a similar principle, that their business model depends on repeat customers, and would fail if they lost trust.
You think dollar general is making $37.9B (in 2023) of annual revenue from one-off customers? Unless you're operating a tourist trap, or some sort of business that people only need a few times in their lifetimes (eg. real estate agents), most businesses rely on repeat customers.
Dollar stores around here pop up in small towns, killing off any locally-owned competition, and are far enough away from the big chains to mean they can charge quite a bit more while offering terrible service.
The sad thing is, people in rural areas that depend on places like Dollar General, and are getting fleeced blame everyone but republicans and they are usually in red areas
I live in a rural area with a Dollar General about a half mile from my neighborhood. For staples, it’s honestly fine. You want a 6 pack and some hot dog buns because you missed it in the Wal-Mart run the other day (15 miles away), it’s great!
You’re not getting fleeced and if you are, the gas savings alone more than make up for it (0.65 per mile per the IRS.)
For folks who depend on the local DG for, idk, clothes and household goods it might be much worse, I don’t shop for those there ever, but on staples it’ll do, especially given the density of stores compared to major chains.
Being in a shopping rich area, I have some luxury of choosing what I get where. DG is a good option for a small list of items, about ½% of my shopping.
But it'd be awful if my best shopping option was 15mi away.
Having moved from a shopping rich environment of some 30 years to a very rural setting, I was innately trained to hate on Dollar General by my 15 years on HN. In reality, it’s a trade off. Nothing more, nothing less. Whereas before you might have fallen back on a country-store with a small kitchen and minor staples (eggs, cheese, milk) next to the RedBull most folks now have a wider variety of options at a price point comparable to or better than that filling station. All the better, DG has rolled out their “Market” concept with fresh options as well.
At this point I’d love to see a conversation about price points and convenience of a Japanese conbini as compared to a Japanese supermarket on HN. Far less politicized and denigrated I would hope.
> But it'd be awful if my best shopping option was 15mi away.
In much of the rural US, 15mi away is having your good shopping close by. A lot of areas make due with their "best shopping option" being well more than 15mi away.
Yes 15 miles for good shopping sounds pretty nice. I'd say I've got it fairly good for being rural - only 23 miles to the nearest Walmart. That town isn't really great shopping though.
The concept of "small convenience store near me" isn't the problem. The problem is that these stores are actively engaging in outright fraud. People who shop there are absolutely getting fleeced regardless of how much gas they burn getting to the store that's regularly ripping them off.
Having a small nearby connivance store and not getting scammed is an option. If the ability to get beer and hot dogs buns without having to drive to a larger more distant store is really worth the higher prices customers are getting fraudulently charged at the register, then these stores can just stop lying to customers and post the accurate prices.
If the laws were meaningfully enforced this is exactly what would happen. These stores would either comply with the law and stop committing fraud or they would be shut down, their CEOs would be sent to prison, and competitors willing to follow the law would step in to fill the need the market has for a small shop that sells beer and buns to rake in that profit for themselves.
Your article lists a few instances of target in an area failing at rates like 9% or 2.67%. The Guardian article shows dollar stores all over the place caught thousands of times and getting error rates like 76% 68% and 58%. One dollar store in Utah was caught cheating their customers in 28 inspections in a row! Maybe the News & Observer could have dug deeper into the Targets in your area and found violations of a similar scale, but they didn't, so from the information we have these are extremely different circumstances.
If Target (or whatever the hell a Sheetz is) were ripping off their customers to the same extent that these dollar stores have been doing it then they should also face meaningful consequences for that.
Here's how shitty of a business person I am: I had no idea that the poor were a "market" you could prey upon.
Somehow I thought that if I presented a business plan that began, "Our target audience are those living paycheck to paycheck…" that I would be quickly shown the door.
Dollar Tree and Dollar General are sometimes located in the poor part of a city, but most of their locations are in areas which are too poor to sustain good margin businesses. Rural towns with a single road and only 1-2 gas stations, etc. their core business is to offer smaller and smaller portions to maintain profits while rival stores go under. They are so prolific, they can get giant companies (think drinks, household items, and pharma) to create smaller and smaller portioned SKUs over time.
The businesses were originally just exploiting a gap in the market, but then PE realized that they could just buy out these local monopolies.
> They already run on a thin-staff, high-volume model.
Like every other retail business not targeting the top 5%.
And Dollar Tree and Dollar General are both publicly listed companies, not private equity.
Dollar Tree sold Family Dollar for $1B 10 years after buying it for $8.5B, a pretty big loss. Dollar Tree’s market cap is $25B, so a pretty negligible part of the national dollar store business is “private equity”.
Costco purposefully targets the upper middle class to nearly the point of exclusion of everyone else. By charging membership fees, product selection, and the bulk pricing.
They could care less about the bottom 50% of the market.
Costco's revenue comes from their membership fees and their ability to strongarm suppliers to give them favorable terms (eg. Costco is one of the largest alcohol importers in the US and tends to strongarm LVMH).
I love Costco (I practically grew up at Costco as a kid), but their ICP is not the kind of person who shops at Dollar General or is on SNAP - it's very much targeted at the 50th percentile income bracket and above [0].
And this is why PE has taken over the dollar market segment - because it's a trash business that no one else wants to service over the long term. PE is basically the last resort if a business cannot raise capital from traditional avenues, and leadership and investors want to exit. For y'all graybeards think of "Sam Vimes Boots theory".
Mine Safety Disclosures did a great overview on Costco's operating model a couple years ago [1].
You’d have to explain why you believe that. Just because someone in poverty can afford to purchase items in the store, doesn’t mean it’s good value, i.e. it’s not necessarily providing relief from poverty. In fact, it’s the opposite. See e.g. “How the dollar-store industry overcharges cash-strapped customers while promising low prices”:
Interesting. The Netherlands is no class society so rich or poor nobody has any goddamn shame to stand in line at the Action checkout if there's a good sale to be had.
Seeing people in BMWs at the Aldi parking lot. Strange country.
I do most of my grocery shopping at Aldi (in the US). There’s plenty of Teslas, BMWs and Mercedes in the parking lot (although late model Hondas, Toyotas and Kias are probably the most prevalent). Turns out people of all income brackets like saving money.
Americans used to claim this too. It’s invariably false. It just means that the wealthiest people do a better job of concealing, or not advertising, how vast the wealth discrepancy between them and the average person is.
> Seeing people in BMWs at the Aldi parking lot
The least wealthy person on the list at https://en.wikipedia.org/wiki/List_of_Dutch_by_net_worth could afford 10,000 high-end BMWs and still be extremely wealthy, far too wealthy to have any interest in lining up at Aldi’s for a sale.
In 2025, Dollar Tree sold Family Dollar to a group of private-equity firms: Brigade Capital Management, Macellum Capital Management and Arkhouse Management Co.
https://corporate.dollartree.com/news-media/press-releases/d...
It’s a business model cosplaying as poverty relief while quietly siphoning money from the people least able to lose it. They already run on a thin-staff, high-volume model. That 23% increase is not a glitch. They know their customers can’t drive across town to complain. They know the regulators won’t scale fines to revenue.