Beyond the Sun
With President Barack Obama’s campaign launching an offensive to paint Republican candidate Mitt Romney’s time as head of a private equity firm in a negative light, here’s the Nevada connection: Between 2000 and 2002, Stage Stores, a clothing chain, shut down three stores in rural Nevada as part of a bankruptcy.
The stores’ closures came after Bain Capital had sold off its interest in the company in 1999. Obama’s campaign said the chain had been saddled with debt after an aggressive expansion under Bain, and after Bain made $170 million profit from the investment.
Nationally, 5,795 workers at Stage, which sells name-brand clothing in small to mid-sized cities, were laid off between 1999 and Feb. 2002, according to the Obama campaign.
It’s unknown how many workers were laid off in the Nevada stores in Winnemucca, Elko and Fallon.
In Winnemucca, 166 miles northeast of Reno, Rich Stone, owner of a dry cleaner next to the former Stage Store, remembers the retailer as a fine fit for the community.
Since it closed, residents of the small town of 8,900 and surrounding Humboldt County can’t buy non-Western-themed clothes there. They have to travel to Reno or shop online, Stone said.
“It’s a void,” said Stone, who is also a city councilman and a Republican. “We lose a lot of sales tax revenue.”
In its place now is a Boot Barn, which sells Western apparel and boots.
Stone was philosophical about the store’s closure.
“That’s America. That’s capitalism,” he said. “If somebody’s not making money, they’re not going to do it. You’re not going to keep it open as welfare for people without jobs. That’s just common sense.”
Romney’s experience in the private sector has been a key argument in his campaign to become president, pointing to his record turning around companies like Staples and Sports Authority. The Romney campaign, while it could not discuss the Stage Stores case in detail on Monday, said that companies he had invested in while in the private sector had created thousands of jobs.
But Romney’s time there also provides ammunition for Obama’s campaign. In an Obama campaign ad released Monday, a steelworker in Kansas City called Bain a “vampire” for sucking out money from GS Technologies.
Sarah Pompei, a spokeswoman with Romney’s campaign, said, “We welcome a discussion about jobs and the economy. President Obama thinks economic development means rewarding his donors with taxpayer money from the so-called stimulus.”
She said Obama’s campaign “has chosen to attack the free market.” The jobless “deserve a leader who understands how the economy works,” she said.
The Stage case also focuses attention on private equity firms, like Bain Capital, that buy inefficient companies, take them private and resell them at a profit.
Bain Capital, which Romney co-founded before he left in 1999 to head the Winter Olympics in Salt Lake City, bought regional retailers in the 1980s and consolidated them under the Stage Stores brand in the 1990s. The company went public in 1996. It filed for bankruptcy in 2000 and closed 331 stores.
Joseph Gilbert, a professor of management in the Lee School of Business at UNLV, said the record of private equity firms is mixed.
“There are cases where private equity firms have really helped companies,” he said. “They have put in better managers, cut excess fat.”
But there are also cases where the firms have taken out loans to give executives bonuses and left the companies “saddled with debt.”
“Sometimes, they’ve fixed the company into bankruptcy, which is a sad ending for everybody,” Gilbert said.
Currently, Stage has 13,000 employees and 800 stores in the United States, according to the company’s website. That’s twice as many as after it filed for bankruptcy.