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Pier 1's bankruptcy filing may hold a silver lining for the struggling home-goods retailer

Sun, 02/23/2020 - 11:22am  |  Clusterstock

  • Forth Worth, Texas-based home furnishings retailer Pier 1 Imports has filed for Chapter 11 bankruptcy.
  • With its filing, Pier 1 noted that it is pursuing a sale. 
  • "Somebody believes in them, because they've convinced banks to give them nearly $260 million, which allows them to continue operating the business," Texas bankruptcy attorney Sid Scheinberg told Business Insider.
  • Visit Business Insider's homepage for more stories.

Pier 1 Imports has filed for Chapter 11 bankruptcy, the home goods retailer announced in a press release on Monday.

Chapter 11 may sound like a dire prospect for any company, but Pier 1's filing may reveal a ray of hope for the future of the business. When it voluntarily filed for bankruptcy in the eastern district of Virginia, Pier 1 noted that it is pursuing a sale as it goes about shutting down 450 stores around the country.

Pier 1 didn't immediately respond to Business Insider's request for further comment. 

Attorney Sid Scheinberg, who serves as the chair of the bankruptcy and creditors' rights section of Dallas law firm Godwin Bowman PC, said that it's a good sign that the retailer has obtained a $256 million debtor-in-possession financing from Bank of America, Wells Fargo National Association, and Pathlight Capital.

"Somebody believes in them, because they've convinced banks to give them nearly $260 million, which allows them to continue operating the business," Scheinberg said. "There's something there that's worthwhile to continue operating or get sold."

In its release, the company announced its intent to keep its stores and website "open and operating" throughout the bankruptcy proceedings, as well as to continue to "honor customer commitments," compensate employees, and pay vendors and suppliers.

The statement noted that Pier 1 "intends to conduct a court-supervised sale process and complete the sale through a Chapter 11 plan," with the deadline for "qualified binding bids" to be set around March 23. While those banks are setting themselves up to become more high-priority debtors — and thus get first crack at being paid off — they are also taking on risk with such a move.

While a retailer may file for bankruptcy with a buyer in mind, a judge can always throw those plans into flux by ordering the business to be sold at auction. With that in mind, Scheinberg said that it's interesting that the company has filed in Richmond, Virginia, rather than in its home state of Texas. 

He added that a strategic filing can help clear the way for such a sale. He said that leases can often be the "worst debt" that a retailer accrues.

"I think the big reason they filed is they've got a lot more retail stores that they really need," Scheinberg said. "They're stuck with all these leases. Bankruptcy is probably the only tool that allows them to reject all these leases easily without having to make some sort of deal with every one of these landlords."

SEE ALSO: Pier 1 braces for sale after filing for Chapter 11 bankruptcy

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SEE ALSO: Barneys is closing for good in a week, cutting hundreds of jobs. This is what the iconic department store looks like in its final days.

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NOW WATCH: How Sears went from retail icon to empty stores

I bought a 20-year term life insurance policy, and there are 4 reasons I'd tell anyone to do the same

Sun, 02/23/2020 - 11:01am  |  Clusterstock

When my oldest daughter was born five years ago, I knew it was time to buy life insurance. And yet, it was another four years until I actually purchased a policy. That's because I didn't know where to start.

The most basic choice — whether to select term life insurance or a whole life plan — sent me into a spiral thinking about everything I didn't understand about insurance. 

Looking back, I wish I could tell myself that it's not that complicated. While whole life plans cover you until you die, term life insurance plans provide you with life insurance for a set number of years. 

However, term life insurance has many benefits, and is a good fit for most people. Here are the four reasons I'd tell anyone to get term life insurance. 

It's cheap

Most people shopping for insurance — especially young people — are concerned about premiums, or how much they'll be paying for insurance. One of the biggest benefits of term life insurance is that it's much cheaper than whole life insurance. 

With two young kids and a business, I'm always looking to minimize expenses. I found a $250,000, 20-year term life insurance policy that costs me $29 a month. It's cheap enough that I don't think twice about paying the premium, or even notice when it's withdrawn from my checking account. 

Life insurance will never be cheaper than it is today. Lock in your rate with help from Policygenius »

It does its job

Term life insurance has one job: to replace your income if you die. In my case, I chose a plan that would replace my income long enough to cover my funeral, pay off the mortgage, and allow my husband to stay home for a year with the kids. That's all I want or expect from my plan. It's simple. 

Whole life insurance policies, on the other hand, get complicated. They combine life insurance with investments (which is why whole life plans have some cash value and even pay dividends sometimes).

The thing is, I'm not looking for life insurance that's an investment. I have a retirement account and a rental property for that. I would rather pay for a cheaper term insurance policy and use the money I'm saving to invest separately (which is a good option for most people, according to this analysis). 

In the future, I hope to not need insurance

One of the perceived drawbacks to using term life insurance is that, eventually, your term expires. By then you're older and possibly sicker, so buying another term plan can be very expensive. 

That's a good thing to be aware of. And yet, I'm hoping that by the time my term expires (in 19 years) I won't need life insurance. 

If you're financially stable with little debt and a robust savings account, you don't need a big payment when you die. Instead, you can rely on your assets to cover funeral expenses and provide some financial support to loved ones, if necessary. 

I can't predict the future, but I'm actively working toward being "self-insured" in this way by the time my term life insurance policy expires. 

It's money well spent

The ironic thing about life insurance is that the best-case scenario means you're throwing money away. I really hope that I'm alive and well in 19 years, and that I've "wasted" the $6,960 I'll have paid in life insurance premiums by then. 

But the truth is, that money won't have been wasted at all. Right now, having life insurance and knowing that my family is protected if I die gives me tons of peace of mind. I sleep better knowing if the worst happens my husband won't be scrambling. Sure, I hope I never need the life insurance policy, but I'm happy to pay for it knowing that it could make an unbearable loss slightly easier on my family in the worst-case scenario. 

I spent four years knowing I should buy life insurance, but paralyzed by the options. Now that I've had insurance for a year, I see the ways it's eased my stress levels, for a small cost. That's why now I'm the person telling friends and family: "Don't wait."

Let Policygenius help you find the right life insurance for your needs »

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A WeWork exec who was Rebecca Neumann's cousin regularly ran up huge expense reports before other execs ganged up and forced him out

Sun, 02/23/2020 - 10:56am  |  Clusterstock

Mark Lapidus left his high profile executive role as a real estate kingpin for coworking giant WeWork in October, 2018, under mysterious circumstances, according to WeWork employees who worked in the real estate group at the time. 

The official story, among those who heard it, was that, as one of WeWork's earliest employees, he was exhausted from non-stop dealmaking and travel, disliked the humdrum of a company grown past its startup roots to over 9,000 employees, people with knowledge of the matter told Business Insider.

But there was more to the story. 

As Business Insider previously reported, in the summer of 2018, a woman who formerly reported to Lapidus and later worked on the same real estate team, sent a document with allegations that, while they didn't name Lapidus directly, involve involved the department he once ran and its general culture. Among some of her softer allegations: bosses were sleeping with subordinates and rampant hard drug use. She was threatening to sue. Business Insider obtained a copy of the document.

WeWork conducted an internal investigation found credible claims of drug use and sexual relationships between employees and their bosses. It offered her a settlement. Neumann also bowed to pressure from several members of his senior leadership team to negotiate an exit for Lapidus, sources told Business Insider. 

Until that investigation, Lapidus had seemed untouchable.

He was the first cousin of Rebecca Neumann, wife to then-WeWork CEO Adam Neumann, and had been with the company since nearly the beginning. He had overseen some of WeWork's most precious real estate deals as the global head of real estate through 2016, before he moved into other roles on the team. For years, the company had gathered on a large property his parents owned for a raucous party known as Summer Camp.

Former colleagues characterized him as a good dealmaker who loved to schmooze and party.

His expense reports, per records viewed by Business Insider, offer a window into a wild lifestyle enabled by WeWork.

In May 2017, Lapidus spent more than $5,000 for a team outing at hot London nightclub The Box, per records reviewed by Business Insider.

Later that month in Las Vegas, Lapidus paid $36,000 for a table at Encore Beach Club and another $9,000 for one dinner while he was at real estate conference International Council of Shopping Centers (ICSC).  The Vegas event, ICSC, has in the past been notorious for hard partying and wild spending across the real estate industry.

At ICSC, Lapidus racked up $9,500 in room charges at the Wynn hotel, including more than $500 at the spa.

One WeWork real estate executive recalled being shocked by Lapidus's spending, since the conference was full of people ready to shower WeWork executives – their clients – with dinners, bottle-service tables, and other gifts.  But another explained that the large tab was the result of an event WeWork threw to schmooze its landlords and other groups.

To read the full investigation into a trail of settlements at WeWork, and how one woman on Lapidus' team got paid over $2 million in cash to go away ahead of WeWork's major Softbank fundraise, click here.

Have a WeWork tip? Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at mmorris@businessinsider.com, or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.

Now Read: WeWork paid over $2 million to a woman who threatened to expose claims of sex, illegal drugs and discrimination in a horrifying 50-page document.

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Here's exactly where to keep your money for every financial goal

Sun, 02/23/2020 - 10:50am  |  Clusterstock

 

No financial goal is complete without a time horizon.

Knowing how long you have to reach your goal informs your savings strategy, including where to keep the money so you can preserve it or grow it.

The best place to keep money earmarked for specific financial goals — whether it's a down payment, travel, unexpected bills, retirement, or your kids' college education — ultimately depends on when you need it.

Here are some general guidelines to follow:

You need your money in 1 to 3 years

Money you need access to in the next few years is best kept in a highly liquid account, such as the following:

High-yield savings

A high-yield savings account is a deposit account that earns more interest than a checking or traditional savings account, but comes with the exact same features: accessibility, FDIC insurance, and no market risk. Some high-yield savings accounts limit withdrawals to six times per month.

The best high-yield savings accounts charge no monthly maintenance fees, so there's no outlay on the saver's end. The interest you earn — known as the annual percentage yield (APY) — will be deposited into your account on a monthly basis, adding to your balance and thereby increasing your next interest payment. Remember that any interest you earn is included in your gross income for tax purposes at the end of the year.

Money-market account

Money-market accounts are another type of savings account. They're not to be confused with money-market funds, which are a type of low-risk investment.

There's little difference between a high-yield savings account and a money-market account. Both typically come with low or zero monthly fees; relatively high interest rates, often above 2%; are FDIC insured up to $250,000 or more; and are smart options for storing savings you may need in short order.

CD

If your savings is already set aside and you don't need to contribute additional funds to reach your goal, a certificate of deposit, or CD, could be a good option.

A CD is yet another savings product. Unlike the others, however, it's best for storing money that you won't need until a predetermined date — i.e. not an emergency savings fund that you may need to tap unexpectedly. 

CDs offer a fixed interest rate for a set period of time, usually ranging from three months to five years. If you decide to withdraw your money before the maturity date, you'll forfeit any interest earned up to that point, in most cases. If you don't want to tie up your money completely, but still want to earn a higher interest rate than a savings account, consider a no-penalty CD.

You need your money in 3 to 5 years

If your financial goal isn't in the near future, you can utilize a CD to lock in a growth rate that will likely keep up with inflation. If you're comfortable taking on some risk, you might consider investing in the market through a brokerage account. 

CD

Again, a CD is best for money you don't need — or want — to get to quickly. In an effort to preserve your savings, a CD is a good way to create a barrier between your money and your impulse to spend.

Typically, the longer the term, the higher the interest rate you'll lock in. One downside to note, however, is that many CDs don't accept additional contributions after the initial funding period. 

Brokerage account

When you have extra money sitting in your savings account that you don't need for a few years, it may be time to invest it. The opportunity cost of sitting out of the market is high, particularly if you're young.

The typical advice on the right timeline for investing is not to invest money you need in the next five years. Depending on your risk tolerance, however, three years may be enough time for your money to recover from a loss, barring a recession or an otherwise unusual downturn.

Historically, the stock market has returned an after-tax average of about 6% to 7% annually, which is many times over what your money could earn in a savings account. If your risk tolerance is low, stick to lower-risk investments, like bonds.

You need your money in 5 years or more

If your financial goal is more than five years away, you have a long-term horizon. That generally means you can afford some fluctuation in the interim if it leads to greater returns.

Brokerage account

The key to any type of long-term investment success is choosing an asset allocation that matches your risk tolerance and time horizon. Generally, a low risk tolerance will mean investing more in bonds and less in stocks or equities. If you want help coming up with a strategy that's specific to your goals, talk to a certified financial planner or investment adviser.

Retirement account

Most people need decades to save adequately for retirement.

Whether it's an employer-sponsored plan at work or an IRA, your retirement account is basically an investment account with tax benefits. When it comes to funding a multi-decade retirement, investing provides the only kind of growth your money requires. 

SmartAsset's free tool can find a financial adviser to help you find the right place for your money »

Join the conversation about this story »

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Suddenly losing her job inspired this marketing pro to start a project to help Chicago's laid-off tech workers find their next gig — and break the shame of layoffs

Sun, 02/23/2020 - 10:45am  |  Clusterstock

  • When Megan Murphy was laid off from her job at a Chicago-based tech company before Thanksgiving, she created a spreadsheet and slack channel, and invited other job-hunters to join. 
  • The newly-born Chicago Superstars allows laid-off local tech workers to network, connect with recruiters and find new jobs. 
  • As waves of layoffs hit the tech industry across the country, crowd-sourced spreadsheets, job seeker databases and online communities like Chicago Superstars have cropped up around the country, pointing to a demand for a space where job-hunters can band together and support each other. 
  • Visit Business Insider's homepage for more stories.

When Megan Murphy was suddenly laid off from her marketing job at a Chicago-based software company in November — right before the holiday season — she had few resources on which to draw, and no network to call on to find her next gig.

"What does it say about me as an employee that I'm not critical to the organization? My brain was spinning," Murphy told Business Insider. 

It didn't take long, though, for inspiration to strike. Taking her cue from a trend that started in Silicon Valley last year in the wake of layoffs at Juul, Zenefits, and Uber, she created a spreadsheet for laid-off workers to circulate their names, positions, companies and LinkedIn profiles. Referrals help people get hired faster than employees who throw their resumes at online job postings, Murphy reasoned. 

"Job boards are everywhere," Murphy said. "The power of the community is how we can help you avoid that application-tracking black hole." 

Chicago Superstars, as the project came to be known, is one of the latest examples of how the tech industry is banding together for support in a time when mega-companies like Uber and WeWork go through rough patches that see big layoffs.

To help laid-off workers grappling with the emotional toll of suddenly finding themselves without job or purpose, Murphy took the project one step further and added a form that invited applicants to join a chat room in the Slack app and support each other through the process. 

"Misery loves company," she joked in a blog post describing the project.

Like many *incredible* people in #chicagotech, I just got laid off.

I'm building a list of people I know to be both spectacular and open to new opportunities in Chicago.

and I'm sharing Thursday.

Want in? Drop your details

Robert F. Smith on becoming the richest black man in America, what companies get wrong about diversity, and what he's doing to help mint more black billionaires

Sun, 02/23/2020 - 10:42am  |  Clusterstock

  • Robert F. Smith was among the first African Americans to run a private equity fund, he told Business Insider.
  • The billionaire businessman pushes diversity initiatives at every software company he invests in, and says it helps them create better products.
  • Smith made headlines in May after announcing that he would pay off the student loans of a Georgia-based, historically black college's graduating class.
  • Visit Business Insider's homepage for more stories.

Robert F. Smith is the richest black man in America, and one of only four to currently have a net worth of more than one billion dollars. The son of two Denver-based school teachers, he earned degrees from Cornell University and Columbia Business School before founding Vista Equity Partners, a private equity firm that specializes in software companies, in 2000.

From the journey of becoming a black private equity titan, Smith knows one piece of conventional wisdom to be true: Life really is lonely at the top. Smith is now spending his $5 billion fortune to make sure it doesn't stay that way.

Most famously, Smith volunteered to pay off the student loans of Morehouse College's entire graduating class while delivering their commencement address in May. He later expanded the gift, which the historically black university said totaled $34 million, to cover any outstanding educational debt owed by the students' parents.

Smith's efforts don't only benefit African Americans. Vista exclusively invests in software companies — a rarity in private equity — and has emphasized gender diversity initiatives at all of them. Vista also hosts an annual conference where female leaders from across the firm's portfolio, representatives from Columbia Business School, and other tech executives discuss strategies for getting more women into their highest ranks. After moderating a panel at this year's event on February 19 in New York City, Smith sat down for an interview with Business Insider.

The following interview has been edited for length and clarity.

Taylor Nicole Rogers: One of the things Vista is best known for is looking beyond the Ivy League to pull talent from a wide variety of backgrounds. How do you do that?

Robert F. Smith: What we're really looking for are the smartest people on the planet to work for us. The key is to make sure that we go as broad as we can, so we can be reflective of what this planet looks like in the companies we operate. 

Our products service every industry. We're in 175 countries, we have 225 million users of our software. They all look different. If you design software for just one certain segment and one certain way, then that, most likely, is all that's going to use it. There are about seven billion people on this planet. Only 26, 27 million of us actually know how to write code. So we have got to go find those folks and cultivate and develop them.

You have to create a workforce process and a workforce environment that makes people feel not just invited to the party, but also asked to dance. It's a matter of necessity more than anything else.

Rogers: How do you explain that line of thinking to your investors and to the executives in your portfolio companies who don't share the same approach?

Smith: Take a company like Jamf [a company Vista invested in in 2007 that sells software that allows businesses to pair all of their Apple devices]. This is a company in the Midwest and by its natural evolution, it just would not have the most diverse workforce. But the CEO, Dean Hager ... looked at our best practices and expanded the opportunity set of our applicants. He now has one of the most diverse workforces and one of the faster-growing companies in the portfolio because we went through what I call the retooling effect. 

They [are now] 30% women and they have four or five times the number of people of color that they had five years ago. They put in a concentrated effort and said, 'We've got to change this — not because it's the right thing to do, but because it's a business necessity.'

What companies have to do is be more thoughtful about how they engage their customer base. And what's their customer base? Well, they look like what the world looks like. You've got to build an organization reflective of your customer base so you can maintain product superiority and gain market advantage.

Rogers: Does diversity impact the way that you run your company?

Smith: Our business is a little different in that we're business- and not consumer-focused. We realize the importance of reflecting what the business environment looks like, not necessarily the localized consumer environment. The business environment globally has some attributes associated with higher intelligence and capacity and the ability to execute. You've got to make sure you have people in your organization who are reflective of that.

Rogers: Speaking of the global business environment, there aren't a lot of people out there who look like you that have achieved your level of success. What has that been like?

Smith: I realized when I decided to go into chemical engineering that there were very few African American chemical engineers. I could probably name six African American chemical engineers that I've met in my entire life to date. 

When I decided to go into this world of private equity, there were no African Americans running funds of any size. And today I have a group of more diverse managers who I work with. We have our own organization, where we talk and we help each other create. I call it peer-to-peer engagements to help each other think about raising money and organizing our businesses better.

There was nobody who looked like me running a major private equity firm anywhere near the size that we are — or even near the size that we were at the time. So that's part of being a pioneer — it's not just blazing the trail, but putting some trail markers, knocking the weeds down, and putting some pathways of support behind you for others of your community to follow.

Rogers: You're now one of the best-known philanthropists of your generation, but you've focused your giving on a population not many other donors have: African Americans. Why is that?

Smith: I tell people there's nothing greater than liberating the human spirit. Think about 400 young African American men who had just done the heavy lift. Many of them had college loans and parents PLUS loans coming out of their neighborhoods, fighting what they were fighting for, and then getting educated. Now they did all the heavy lifting. And I thought, what can I do to uplift their spirit that is already high? And I thought liberating 400 spirits 400 years after 1619 is probably a good, good thing to do.

SEE ALSO: A billionaire agreed to pay off my student loans in full. Here's what it was like — and how I plan to pay it forward.

DON'T MISS: Meet Laura Arnold, the billionaire philanthropist taking on the parole system with Jay-Z and Meek Mill

Join the conversation about this story »

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GOLDMAN SACHS: Buy these 12 stocks to keep crushing the market as profit margins shrink

Sun, 02/23/2020 - 10:13am  |  Clusterstock

  • David Kostin, the chief US equity strategist at Goldman Sachs, says an elite handful of companies with high, steady profit margins will likely outperform the market in the months ahead.
  • He says the combination of rising wages and high costs will keep profits under pressure for at least the rest of the year — and that comes after a year of already-weakened margins.
  • The stocks on his list have posted much bigger margins in the last year and haven't suffered a decline in margins at any time in the last two years.
  • Visit Business Insider's homepage for more stories.

A surprise can be a welcome distraction, and David Kostin — the chief US equity strategist for Goldman Sachs — says a little bit of good news over the last few weeks may have papered over a lot of worry.

Fourth-quarter earnings were better than expected overall, and that's helped stocks set new records in spite of the spreading Wuhan coronavirus epidemic, the unsettled Democratic presidential primaries, and other sources of uncertainty.

Kostin argues that a surprisingly low tax rate helped corporate America beat expectations. But he also thinks the cheeriness that inspired may not last. That's because company profit margins look week, and that creates a significant threat to earnings, the main source of fuel for the stock market.

"Margins contracted in every sector in the S&P 500 and declined in aggregate for the fourth consecutive quarter," he wrote in a note to clients. "Margins remain a key risk to the earnings outlook."

A tight labor market with rising wages, along with other costs for companies, mean that's going to continue to be an issue for the rest of this year, in Kostin's view. He says there's little room for improvement for now.

"The margin outlook is likely to remain challenging unless companies are able to raise prices to pass through costs or the labor market cools," he wrote.

Read more: MORGAN STANLEY: Buy these 25 non-Tesla stocks to cash in on the electric-car revolution

Adding to that risk, according to Kostin, is that investors were more likely than usual to dump stocks that missed earnings expectations in the fourth quarter.

So he's pulled together a list of the companies that are best protected from that earnings risk. As a group, Kostin writes that they have lot of pricing power, and companies with that power generally outperform when investors think margins are coming under threat.

Each of these 12 stocks have stronger gross margins than other companies in their respective sectors, and those margins have not fallen during the past two years, giving them a track record of stability. They're arranged from lowest to highest based on how much their margins expanded over the past year.

SEE ALSO: Matthew Dent grew his fund's assets by 27% in just one year. He breaks down which company is the 'next Berkshire Hathaway' — and shares 4 other top stock picks.

12. VeriSign

Ticker: VRSN

Sector: Information technology

Market cap: $24.5 billion

Average 5-year gross margin: 83%

1-year gross margin change: 395 basis points

Source: Goldman Sachs



11. Hasbro

Ticker: HAS

Sector: Consumer discretionary

Market cap: $13.3 billion

Average 5-year gross margin: 52%

1-year gross margin change: 444 basis points

Source: Goldman Sachs



10. W.R. Grace

Ticker: GRA

Sector: Materials

Market cap: $4.1 billion

Average 5-year gross margin: 40%

1-year gross margin change: 467 basis points

Source: Goldman Sachs



9. Williams

Ticker: WMB

Sector: Energy

Market cap: $25.9 billion

Average 5-year gross margin: 30%

1-year gross margin change: 487 basis points

Source: Goldman Sachs



8. Cadence Design Systems

Ticker: CDNS

Sector: Information technology

Market cap: $22 billion

Average 5-year gross margin: 86%

1-year gross margin change: 487 basis points

Source: Goldman Sachs



7. Citrix Systems

Ticker: CTXS

Sector: Information technology

Market cap: $15.1 billion

Average 5-year gross margin: 84%

1-year gross margin change: 586 basis points

Source: Goldman Sachs



6. AbbVie

Ticker: ABBV

Sector: Healthcare

Market cap: $139 billion

Average 5-year gross margin: 78%

1-year gross margin change: 606 basis points

Source: Goldman Sachs



5. Bio-Rad Laboratories

Ticker: BIO

Sector: Healthcare

Market cap: $12.1 billion

Average 5-year gross margin: 55%

1-year gross margin change: 684 basis points

Source: Goldman Sachs



4. Pegasystems

Ticker: PEGA

Sector: Information technology

Market cap: $7.8 billion

Average 5-year gross margin: 67%

1-year gross margin change: 774 basis points

Source: Goldman Sachs



3. Johnson & Johnson

Ticker: JNJ

Sector: Healthcare

Market cap: $391.7 billion

Average 5-year gross margin: 69%

1-year gross margin change: 785 basis points

Source: Goldman Sachs



2. Seattle Genetics

Ticker: SGEN

Sector: Healthcare

Market cap: $20.8 billion

Average 5-year gross margin: 90%

1-year gross margin change: 803 basis points

Source: Goldman Sachs



2. Seattle Genetics

Ticker: QGEN

Sector: Healthcare

Market cap: $8.5 billion

Average 5-year gross margin: 63%

1-year gross margin change: 1,078 basis points

Source: Goldman Sachs



The CEO of $2.75 billion GitLab explains what the company has to do to maintain its culture of radical transparency after it goes public this year

Sun, 02/23/2020 - 9:45am  |  Clusterstock

  • Back in 2015, GitLab set a very specific goal: It would go public in November 2020. Now worth $2.75 billion, GitLab is still on target — though GitLab CEO Sid Sijbrandij says that it "might be sooner, and it might be later" depending on market conditions.
  • Sijbrandij says that to get there, the company needs to build a more "predictable" business and make itself more transparent to would-be investors.
  • In the past year, GitLab nearly tripled in size, but has also undergone some internal turmoil as employees and executives depart under unusual circumstances.
  • GitLab also faces intense competition from GitHub, which is backed by Microsoft's vast resources.
  • Visit Business Insider's homepage for more stories.

Back in 2015, developer startup GitLab called its shot: It would go public in November 2020.

As that date draws closer, the startup has built itself up to a $2.75 billion valuation, and closed a $268 million funding round in September. In January of this year, GitLab also announced that it had surpassed $100 million in annual recurring revenue. And the all-remote company hit 1,100 employees, almost tripling from 400 a year ago.

Despite all these changes, GitLab CEO Sid Sijbrandij says the company is still on track to go public this year — though it may or may not be right at its original planned date of November 18th. He notes that the company is "not beholden to that date," and that market conditions might forcing plans to change.

"It might be sooner, and it might be later," Sijbrandij told Business Insider. "The date we set is an ambition."

The timing is for a few reasons, Sijbrandij said. In 2015, when it set the goal, the company took its first venture capital, and Sijbrandij said that it wanted to show investors a return on the investment sooner rather than later. Secondly, that same year is when it started issuing stock options to early employees, with a four-year vesting period.

In other words, employees and investors alike are primed and ready for the chance to cash out on their GitLab shares. "We want to make sure that pretty soon afterwards, there was liquidity," Sijbrandij said.

Previously, Sijbrandij told Business Insider that the company is leaning towards a direct listing, but he now says that it could still go the more traditional IPO route. 

Either way, Sijbrandij says, the company has some work to do in order to make its very startup-like business and working style more palatable to Wall Street investors — especially as the rising competitive threat from the Microsoft-owned GitHub only grows.

"Reviewing all the aspects of our business is a lot of work," Sijbrandij said. "I expect a lot of discussions about transparency and combine that with making sure the investors have the right information to base our decisions."

Transparency

A big part of the company's IPO prep is around its much-prized culture of transparency, Sijbrandij says.

GitLab has always prided itself on making all information available to parties inside and outside the company — its IPO plans were in a public document for anybody to view, from the moment they were made. Similarly, the company publishes certain information about its revenue, employment stats, and even the employee handbook, where anybody can see.

Sijbrandij says that if GitLab wants to keep up that transparency after IPO, it will have to get a lot more diligent about making sure that any information it does share publicly is up to Wall Street standards. And once it's subject to SEC scrutiny, it will also have to come up with a plan for quickly correcting any mistakes in public documents.

"One of the things that will be different from other companies is we're a much more transparent company than most," Sijbrandij said. "Being a public company means you're sharing more with the world...We want to keep saying a lot and keep sharing a lot, but whenever there is an inaccuracy, we're much better at addressing that inaccuracy."

A 'predictable' business

Sijbrandij also says GitLab is working to make sure business becomes "predictable," even as its revenue grows. As a public company, Wall Street will be keeping extremely close tabs on the company, and Sijbrandij says GitLab needs to "manage expectations accordingly."

"If you're a public company, investors don't just want to see growth," Sijbrandij said. "We have to rely on meeting the predictions that you gave off. At GitLab, we're good at growing fast, but in the past, we had one quarter that was good, one quarter that was not as good, and the next quarter was even better."

A big bar to that predictability has been hiring, Sijbrandij says. There have been quarters where the company simply didn't have enough headcount to keep pace with growth, holding it back from reaching higher highs, he said. It's something the company has gotten better at over time, he says. 

"It's hard to keep hiring the exact high amount of people while having a super high bar," Sijbrandij said.

Sijbrandij also says GitLab has a "high-margin business," which will help as it prepares to go public. He expects that in the long term, GitLab will show "high profitability."

Executive changes

Another step towards the IPO has been some new executive hires.

In January, it hired Michelle Hodges as vice president of global channels and Robin Schulman as chief legal officer. Sijbrandij said that hiring a chief legal officer was "a really important goal" as GitLab gets closer to becoming a public company.

However, the appointment of Schulman to the role follows a period of upheaval at the company. Schulman's predecessor as the company's top lawyer, vice president of legal Jamie Hurewitz, was fired from GitLab in January, as Bloomberg reported at the time.

The Register reported that her termination was linked to Hurewitz's support for Candice Ciresi, GitLab's former director of risk and global compliance, who resigned over claims that the company is 'engaging in discriminatory and retaliatory behavior' after proposing a ban on hiring in China and Russia.

In a broader sense, the Register report indicates that the company has seen some executive turnover, linked to concerns among GitLab's female employees of unfair treatment, unequal pay, or limited advancement opportunities at the company.

A company spokesperson says that "diversity and inclusion is a core GitLab value," and that "because we value the privacy of our current and former employees, we do not discuss personnel issues publicly."

Market timing

In the run-up to IPO, Sijbrandij says he's also keeping an eye on murmurs about a possible economic downturn. He says that GitLab would have some advantages in such a situation — the company's technology helps developers be more productive, if nothing else — such a downturn would certainly impact the company.

"If you Google GitLab's biggest risks, an economic downturn is one of the biggest things we list," Sijbrandij said. "On one hand, it won't hurt so much because GitLab is not only a way to increase revenue for companies but also a way to save money...What you do see in an economic downturn is that decisions are delayed and the sales cycle gets longer."

If GitLab were to go public, it would also be in a market climate that hasn't always been kind to high-flying startups Companies like Uber, Lyft, and Casper have hit turbulence since their own recent IPOs.

Bigger goals ahead

Right now, one of GitLab's biggest competitors is GitHub, which is now owned by Microsoft. To compete with GitHub and its very deep-pocketed owner, Sijbrandij says GitLab needs to make sure that it uses its biggest advantage as a smaller company and move faster.

"Every month we're shipping a new version that has 50 significant features," Sijbrandij said. "We want to keep innovating faster than the rest of the industry. If you're going to base your whole company on one DevOps platform, it better be the best and most complete platform."

It's also important to note that the November 2020 wasn't the end of GitLab's plans for the company. By November 2023, it plans to hit a billion dollars of revenue, to be cash flow positive, and for its employees to have a high satisfaction rate about working at the company — among other milestones.

In the interim, Sijbrandij says, he's gratified that the company has seen the growth that it has.

"We're excited that customers are trusting us and investing in GitLab," Sijbrandij said. "We're excited that we've been able to grow at a really rapid pace last year."

Do you work at GitLab? Got a tip? Contact this reporter via email at rmchan@businessinsider.com, Signal at 646.376.6106, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Leaked memo: A key Google Cloud president is leaving his role amid a reorganization that will see 'a small number' of positions eliminated

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Namibia first African country to export red meat to hungry U.S. market

Sat, 02/22/2020 - 6:22pm  |  Timbuktu Chronicles
Reuters reports:
Namibia became the first African country to export red meat to the United States after it sent 25 tonnes of beef to Philadelphia, following two decades of haggling over safety regulations and logistics.

The arid southern African nation, known for free-range, hormone-free beef, is set to export 860 tonnes of various beef cuts in 2020 to the United States, rising to 5,000 tonnes by 2025...[more]

Future of Fintech: Funding's New Guard

Sat, 02/22/2020 - 4:04pm  |  Clusterstock

Over the last decade, fintech has established itself as a fundamental part of the world’s financial services ecosystem.

Today, fintech financing is surging across the globe, despite major banks remaining cautious about acquisitions.

Instead, three emerging trends are fueling the current fintech boom: new geographical fintech centers, more late-stage mega-rounds, and the rise of fintech-focused venture firms.

In the Future of Fintech: Funding’s New Guard slide deck, Business Insider Intelligence explores how these three key trends are driving a surge in funding.

This exclusive slide deck can be yours for FREE today.

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Warren Buffett just became the longest-serving CEO of an S&P company. Take a look inside his incredible life and career.

Sat, 02/22/2020 - 3:05pm  |  Clusterstock

  • Leslie Wexner, the CEO and founder of Victoria's Secret's parent company L Brands, recently announced that he would be stepping down after 57 years on the job. He had the longest tenure amongst any current CEO of an S&P company.
  • With Wexner's departure, Warren Buffett is now the longest-tenured CEO in the S&P 500. He's been the CEO of Berkshire Hathaway for 50 years.
  • The distinction is particularly impressive given that the average tenure of a CEO was reported to be five years between 2015 and 2017. 
  • Buffett's current net worth is estimated at $90 billion, according to Forbes.
  • Take a look inside Buffett's incredible life and how he got to where he is today.
  • Visit Business Insider's homepage for more stories.

SEE ALSO: Warren Buffett just announced he's donating $3.6 billion in Berkshire Hathaway shares to 5 foundations. Here's how the notoriously frugal billionaire spends his $87.3 billion fortune

In February 2020, Warren Buffett became the longest-tenured CEO of an S&P 500 company. With a net worth of $90 billion, he is also one of the richest people in the world, something he had been working towards for much of his almost-90-year life.

Buffett gained the title after Les Wexner, 82, of L Brands, the parent company of Victoria's Secret, stepped down as CEO. Wexner had held the position for 57 years.

Sycamore Partners had recently acquired a majority of Victoria's Secret stocks. Wexner and disgraced financier Jeffrey Epstein reportedly had a close relationship, attracting controversy in the months preceding his resignation.

Buffett has led Berkshire Hathaway for 50 years and amassed a massive fortune starting with business ventures in his teen years. 



Buffett was born in 1930 in Omaha, Nebraska.

The "Oracle of Omaha" was born to Howard and Leila Buffett. His father was a four-term US congressman from Nebraska and a stockbroker.



While most kids were playing stickball out in the street, Buffett was rubbing elbows with Wall Street's most powerful players from an early age.

At age 10, Buffett had his "road to Damascus" moment, on Wall Street.

During a visit to New York City, Buffett and his father joined At Mol, a Dutchman who was a member of the New York Stock Exchange, for lunch.

"After lunch, a guy came along with a tray that had all these different kinds of tobacco leaves on it," Buffett recalled. "He made a cigar for Mr. Mol, who picked out the leaves he wanted. And I thought this is it. It can't get any better than this. A custom-made cigar."

It was at that moment Buffett realized he would dedicate his life to making money.



Buffett caught the investing bug early. When he was 11 years old he purchased his first stock.

He bought three shares of Cities Services Preferred at $38 per share. The young Buffett held on to them despite a quick price drop, to $27 per share, but sold them as soon as they reached $40.

Buffett's small profit could have been tremendous if he had waited it out a little longer, as the price of Cities Services Preferred's stock ultimately soared to nearly $200 per share.

The experience imparted an important financial lesson, which has informed his investment decisions to this day: Buy and hold.



Buffett's hustle game was strong as a youth. While he was a high-school student he and a friend operated a lucrative pinball business. He also took on odd jobs like delivering newspapers and washing cars.

When Buffett was in high school he pitched the following business scheme to his friend Don Danley after he purchased a $25 used pinball machine:

"I bought this old pinball machine for 25 bucks, and we can have a partnership. Your part of the deal is to fix it up. And lookit, we'll tell Frank Erico, the barber, 'We represent Wilson's Coin-Operated Machine Company, and we have a proposition from Mr. Wilson. It's at no risk to you. Let's put this nickel machine in the back, Mr. Erico, and your customers can play while they wait. And we'll split the money."

The duo struck a deal with Erico and the machine was an immediate hit, raking in $4 bucks on the first night.

Rather than spending their earnings, the young partners reinvested it in more machines.

In a couple of months, Buffett was a pinball kingpin with several machines operating at barbershops across his town. Buffett sold the business for over $1,000 after a year.

In addition to the pinball business, Buffett undertook a number of odd business ventures during his childhood such as delivering newspapers, selling gum and soda, and washing cars.



Through his various business endeavors, Buffett amassed a small fortune by the time he was 16. In fact, he was so successful that he was reluctant to go to college.

He accumulated so much money as a teenager that he didn't see the point in accepting his offer of admission from the prestigious Wharton School of Business at the University of Pennsylvania.

But he ultimately gave in to the will of his father and went off to college, only to return to Nebraska two years later, at which point he attended the University of Nebraska.

 



After completing his undergraduate studies, Buffett moved to New York to attend Columbia's School of Business, where he met his mentor and future employer Benjamin Graham.

The catalyst for Buffett's decision to move to the Big Apple was a well-known Wall Street book titled, "The Intelligent Investor." Buffett, an avid reader, said he first picked up the book when he was 19, and its philosophy of "value investing" changed his life

The author of the book, Benjamin Graham, went on to become Buffett's professor at Columbia Business School. After he earned his master's degree in 1951, Buffett moved back to work for Buffett-Falk & Co., his father's brokerage firm in Omaha.

 



Buffett married his wife Susan Thompson in 1952. The two had an open marriage that lasted until her death in 2004.

In 1952, Buffett married Susan "Susie" Thompson. The couple had three children: Susan, Howard, and Peter.

Warren and Susie had a complicated relationship, to say the least. Although they remained married until Susan's death in 2004, they didn't live together for more than half of their marriage.

Susan Buffett left her husband when she was 45. She remained married, to Warren, but lived in San Francisco. The two remained close and spoke frequently on the phone and even went on vacations together. Ultimately it was Susie who set Warren up with Astrid Menks, a waitress who moved in with Buffett and then married him after Susie died.

 



Buffett moved back to New York City in 1954 after accepting a job with Benjamin Graham.

Graham offered Buffett a job in New York City so the family packed their bags and moved there from Omaha, Nebraska in 1954. Buffett worked for his mentor for two years as an analyst at Graham-Newman Corp., where he made $12,000 a year.

 



In 1956, Buffet started his own investment firm Buffett Partnership Limited, which ran for 13 years.

In the years that the firm was active, it generated over a hundred million in assets. The initial investment in the firm was a little over $100,000.

 



In 1969, Buffett closed the partnership and took on a leadership role with Berkshire Hathaway, a position he holds to this day.

Buffett started buying up shares of Berkshire Hathaway, a textile manufacturing firm, during the early 1960s and ultimately took complete control of the business.

The firm now offers investment services and is valued at $516 billion.



Throughout the early '80s, Buffett steadily grew his multimillion-dollar net worth and became a billionaire in 1986.

In 1982, Buffett's net worth stood at $376 million. It increased to $620 million in 1983.

And in 1986, at 56, Buffett became a billionaire, despite his humble $50,000 salary from Berkshire Hathaway.



Buffett bought over $1 billion in Coca-Cola stocks between 1988 and 1994.

Berkshire Hathaway currently owns about 10% of Coca-Cola, which amounts to $22 billion. Buffett is said to drink five cans of Coke a day, after having spent his early years drinking Pepsi.



In 2008, Buffett became the richest person in the world.

Forbes named Buffett as the richest person in the world in March 2008 with an estimated wealth of $65 billion. He dethroned Bill Gates who had held that spot for 13 years. Gates ranked third behind Buffett and Mexican billionaire Carlos Helu.

Gates regained his spot as the richest person the following year. Forbes currently ranks Jeff Bezos at the top of the list.



In 2010, Buffett and Bill Gates created the Giving Pledge, a group of some of the richest people in the world who have made a commitment to donate a majority of their wealth to charity.

Buffett's frugality is a trademark of his "brand." The 89-year uses a flip phone and prefers to travel on public transportation. This does not mean Buffett is a stingy miser.

In 2019, he beat his own personal philanthropic record by donating $3.6 billion worth of Berkshire Hathaway stocks to five charities, including The Bill and Melinda Gates Foundation. 

In addition, Buffett and fellow billionaire Bill Gates agreed to donate at least half of their fortunes to charity when they created and signed the Giving Pledge.

Since 2010, over 150 people have made the pledge, including Facebook's Mark Zuckerberg.



Buffett was presented with the Presidential Medal of Freedom by President Obama in 2011 for his commitment to philanthropy.

The group honored that year also included cellist Yo-Yo Ma and Maya Angelou. President Obama called the recipients "some of the most extraordinary people in America and around the world."



In 2018, Buffett tried to invest in Uber but was unsuccessful. He was also outbid for an energy company in 2017.

Buffett's recent dealmaking efforts have run into a few roadblocks. He was outbid for the energy company Oncor in 2017. The Buffett-backed conglomerate Kraft Heinz called off plans to merge with Unilever, a deal valued at $143 billion. Buffett tried and failed to invest $3 billion in Uber, in 2018.

In his company's annual letter in 2018, Buffett lamented the fact that high stock valuations derailed nearly every investment idea the firm had in 2017.

The requirement of a sensible purchase price "proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high. Indeed, the price seemed almost irrelevant to an army of optimistic purchasers," he said. 



In 2018, Buffet promoted two vice-chairs to Berkshire Hathaway's board. This fueled speculation that the two men might potentially succeed him one day.

In January 2018, Buffett promoted two senior executives — Greg Abel and Ajit Jain — to Berkshire's board of directors.

Abel was appointed as Berkshire's vice chairman for non-insurance business operations, and Jain as vice chairman, insurance operations. Buffett described the appointments as "part of a movement toward succession," providing the clearest hint of the pool of candidates he's considering to replace himself.  

Abel and Jain each made $18 million in 2018 after they were appointed to the board.

 

This post was originally authored by Frank Chaparro.



4 ways to spend $100 today to be richer by this time next year

Sat, 02/22/2020 - 3:02pm  |  Clusterstock

 
  • A growing net worth is a good sign of financial progress, and it might not be as hard to accomplish as you think.  
  • Automatically putting money in a high-yield savings account, increasing your retirement contribution, and opening a brokerage account can all boost your wealth.
  • By making smart choices with even small amounts of money you have today, you'll set yourself up for big changes over the long term.
  • Read more personal finance coverage.

If you're starting 2020 with high hopes for your money, consider this: Building wealth is about making incremental progress, day after day, year after year.

Big wins — like getting a raise — are wonderful, but small wins — like choosing the right investment or savings account — are even better, because you have total control. The seemingly tiny habits you start and decisions you make today determine where you'll be in the future.

With just $100, you can set yourself on a path to a rich life almost instantly. Here are a few ideas to get started increasing your net worth:

1. A high-yield savings account

A good savings account can do much more for your wealth than you may realize. Even though interest rates are down compared to early 2019, a high-yield savings account can still help you earn up to 20 times more on your cash than a traditional savings account. That means you could earn hundreds of dollars in interest for simply storing your money in the right place, completely risk-free.

Now, just opening a new savings account won't make you rich. You need to save regularly to meaningfully boost your wealth. Consider an account like CIT Bank's Savings Builder, which helps create momentum by rewarding you with its top APY if you set up an auto-deposit each month.

2. A meeting with a financial planner

Most fee-only certified financial planners charge between $100 to $300 for a one-time session, but many offer an initial no-cost consultation. Whether you meet once or set up an ongoing engagement, you'll be able to get specific guidance on any aspect of your financial situation, including budgeting, retirement, investing, education planning, and estate planning.

According to a Northwestern Mutual survey, people who work with a financial adviser are more likely to know how to balance spending now and saving for later; set specific goals and feel confident that they will achieve those goals; and have a plan in place to weather economic ups and downs.

SmartAsset's free tool can help find a financial planner near you »

3. An increase to your retirement contribution

Retirement may be decades away for you, but the best time to start building a nest egg is today. Whether you contribute to an employer-sponsored retirement plan like a 401(k) or tax-advantaged Roth IRA at a robo-adviser or brokerage, increasing your monthly or per-paycheck savings by $100 can have a big impact.

Of course, there's no guarantee your investments will gain value in the short term. It's nearly impossible to predict where the market will be a year from now, but waiting on the sidelines until the "right" time is a mistake none of us can afford to make. As long as you're thoughtful about your asset allocation, risk tolerance, and time horizon, you don't have anything to worry about.

4. An investment in a brokerage account

If you have money you want to grow for goals that are closer than your golden years and you've paid off any high-interest debt, it could be a good time to invest in the stock market.

Despite popular belief, you don't need a ton of money to get started. For beginners, an online investing app like Betterment can keep your costs low and guide you toward investments that match your risk tolerance and your goals.

Again, there's no telling whether your investments will gain or lose value over the next year, but if you don't invest at all, increasing your net worth is going to be a far more difficult task.

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30 Big Tech Predictions for 2020

Sat, 02/22/2020 - 1:25pm  |  Clusterstock

Digital transformation has just begun.

Not a single industry is safe from the unstoppable wave of digitization that is sweeping through finance, retail, healthcare, and more.

In 2020, we expect to see even more transformative developments that will change our businesses, careers, and lives.

To help you stay ahead of the curve, Business Insider Intelligence has put together a list of 30 Big Tech Predictions for 2020 across Banking, Connectivity & Tech, Digital Media, Payments & Commerce, Fintech, and Digital Health.

This exclusive report can be yours for FREE today.

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Bloomberg's 'tax on the very rich' isn't actually a wealth tax like the ones Warren and Sanders have proposed. Here's how they compare.

Sat, 02/22/2020 - 1:00pm  |  Clusterstock

  • Billionaires have become central to the Democratic primary race — thanks to both their donations and their taxes.
  • A wealth tax, like the ones proposed by presidential candidates Sen. Elizabeth Warren and Sen. Bernie Sanders, would make ultra-wealthy Americans pay the federal government a small percentage of their net worth each year.
  • Former New York City Mayor Mike Bloomberg proposed a 'surtax' on ultra-wealthy Americans' income that would leave their net worth alone and would bring in much less revenue, but is more feasible than Warren and Sanders' plans.
  • Despite popular support, any bill for a wealth tax would have to overcome opposition in both Houses of Congress, the White House, and the Supreme Court before becoming law.
  • Visit Business Insider's homepage for more stories.

A majority of the American public, a group of ultra-wealthy Americans, and a handful of presidential candidates agree that the US needs a wealth tax to help close the growing wealth gap

But few people agree on how just how much that tax should be, or how it should be administered.

Three Democratic presidential candidates, Sen. Elizabeth Warren, Sen. Bernie Sanders, and former New York City Mayor Mike Bloomberg, have released their own proposals on how to raise taxes on the ultra-wealthy, and questioned the other candidates' commitment to ending wealth inequality, because they have yet to do so.

Before Sanders unveiled his plan in September, Warren's plan was the most commonly cited example of a radical wealth tax. Now, though, Sanders' "Tax on Extreme Wealth" makes Warren's "Ultra-Millionaire Tax" "look moderate," NPR's Greg Rosalsky wrote. Last week, Bloomberg released his own "New Tax on the Very Rich" proposal for an income-based tax on ultra-wealthy Americans. The catch is that Bloomberg's proposal isn't a tax on wealth at all; it's a surtax on income.

Sanders and Warren both propose instituting a wealth tax, but their plans have some key differences. 

As shown in the chart above, Sanders' plan proposes taxing Americans who have lower net worths than Warren's plan does. The endpoints of Sanders' tax brackets overlap, so for the purposes of this chart, Business Insider rounded to the nearest decimal based on standard tax policy. A married couple with a collective net worth above $32 million would have to pay a wealth tax under Sanders' plan, while couples worth less than $50 million would be exempt from Warren's tax.

The richest Americans — those with a net worth above $10 billion — would also pay 8% in taxes more Sanders' plan, substantially more than the 3% proposed by Warren.

The difference between the two plans is perhaps best illustrated by how much their respective authors say they would raise. Warren's campaign estimates that her wealth tax would raise $2.75 trillion in 10 years, while Sanders' campaign estimates that his tax would raise $4.35 trillion during the same time period.

Bloomberg says he also wants to raise billionaires' taxes — but has a very different idea of how to do it.

The former New York City mayor's tax plan includes raising the tax rate for the highest-earning Americans from 37% to 39.6%, according to his campaign website. That was the tax rate before Trump's unpopular Tax Cuts and Jobs Act took effect in 2018. Bloomberg also proposed adding an additional 5% "surtax" on incomes of more than $5 million a year, according to his campaign website.

The former mayor's plan would likely be easier turn into law than Warren and Sanders' proposals since it is "essentially just adding a higher tax bracket," CBS News' Stephen Gandel reported. Bloomberg's proposal would also be significantly easier for the IRS to enforce since it would eliminate the need to appraise assets such as yachts and fine art. 

Any true wealth tax proposal would face substantial headwinds before becoming law, Business Insider reported. The constitutionality of such a tax would likely end up debated in front of the Supreme Court, according to former Department of Justice tax attorney James Mann, who is now a tax partner at law firm Greenspoon Marder. The revenue raised by a potential wealth tax would likely be much lower than its advocates expect because of tax evasion, Mann told Business Insider.

Bloomberg's proposal does trade feasibility for earning potential, however. The "surtax" would net the federal government about $4 billion a year, or $40 billion over a decade, CBS News estimates. The billionaire says on his campaign website that he would spend the funds on rebuilding infrastructure, improving public education, and widening access to health care if elected, but he would have far less to work with than Warren's $2.75 trillion and Sanders' $4.35 trillion over the same time period.

"Mike recognizes the urgent need to address economic inequality in the United States, and as your piece notes, a wealth tax faces significant challenges — and may not work," a spokesperson for Bloomberg's campaign said in a statement to Business Insider. "Mike's plans tackle worsening inequality immediately, using both existing and innovative tools." Bloomberg's proposal for a financial transaction tax would also raise more tax revenue from the wealthy, according to the spokesperson.

Bloomberg himself would pay an additional $1.2 billion in taxes every year on his proposal, according to CBS News, but he could hold on to his existing $62 billion fortune tax-free. 

Wealth accumulation in the US would look a lot different under a wealth tax 

A study by The University of California at Berkeley's Emmanuel Saez and Gabriel Zucma, published in the Brookings Papers on Economic Activity, found that if a moderate wealth tax had been introduced in 1982, Jeff Bezos' fortune would be half what it was in 2018. Bill Gates, meanwhile, would be $61 billion less rich.

While no such study has been done on Sanders' proposal, NPR's Greg Rosalsky reported that it "wouldn't just slow the growth of wealth at the top. It would essentially stop it."

SEE ALSO: Here's how much money America's 10 wealthiest people would have if the US had a moderate wealth tax

DON'T MISS: Mayor Pete's awkward embrace of billionaires isn't a moral disagreement with Bernie Sanders, it's a campaign strategy

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Here are the biggest takeaways from Warren Buffett’s annual letter

Sat, 02/22/2020 - 12:05pm  |  Clusterstock

  • Warren Buffett, the chairman and CEO of Berkshire Hathaway, released his annual letter to shareholders on Saturday alongside the company's fourth quarter 2019 earnings report. 
  • In the letter, Buffett discussed share buybacks, his death, and Berkshire Hathaway's acquisition strategy going forward. 
  • Here are the biggest takeaways from the letter. 
  • Read more on Business Insider. 

It's an exciting day for Berkshire Hathaway shareholders and the broader investment community: Warren Buffett has released his annual letter to shareholders alongside the company's fourth-quarter earnings report. 

The letter, which Buffett has penned for decades, gives a glimpse into company operations, performance, and strategy, as well as an inside look into what the "Oracle of Omaha '' has been thinking about in the past year. 

This year's letter was 14 pages long and boasted quotes from economists such as Edgar Lawrence Smith and John Maynard Keynes. In it, Buffett lamented about the "fickle stock market," "rare" opportunities for buying companies, and the role of boards of directors. He also discussed some plans for his and vice chair Charlie Munger's death, and gave a hint about succession plans. 

Buffett also exhibited his usual flourish for humor and wisdom in the letter. In discussing the attributes of a board of directors, he wrote, "if I were ever scheduled to appear on Dancing With the Stars, I would immediately seek refuge in the Witness Protection Program."

He continued: "We are all duds at one thing or another. For most of us, the list is long. The important point to recognize is that if you are Bobby Fischer, you must play only chess for money."

In 2019, Berkshire Hathaway stock posted its worst underperformance of the broader market in a decade, and have gained 1.1% this year through Friday's close. Buffett again failed to make a major acquisition for Berkshire Hathaway. In the absence of a large company purchase, Berkshire Hathaway bought back a record $2.2 billion of its stock in the fourth quarter. Over the entire year, the company spent $5 billion on repurchasing its own stock. 

The company posted net earnings of $29.2 billion in the year, up from a loss of $25.4 billion a year earlier when the company had to take a major write-down on its investment in Kraft Heinz Co. Operating earnings fell 23% in 2019 to $4.4 billion. Berkshire Hathaway's record cash pile was $128 billion at the end of 2019, down only slightly from $128.2 billion at the end of the third quarter. 

Here are the main takeaways from Warren Buffett's annual letter to Berkshire Hathaway shareholders.

Accounting rules

The first letter of Buffett's report was dominated by his thoughts on GAAP accounting rules. In 2019, the company earned $81.4 billion, broken down into $24 billion of operating earnings, $3.7 billion of realized capital gains and a $53.7 billion gain from an increase in the amount of net unrealized capital gains that exist in the stocks we hold. Each of those components of earnings is stated on an after-tax basis.

The $53.7 billion gain comes from the GAAP accounting rule that went in place last year. 

"As we stated in last year's letter, neither Charlie Munger, my partner in managing Berkshire, nor I agree with that rule," Buffett wrote. 

He continued: "The adoption of the rule by the accounting profession, in fact, was a monumental shift in its own thinking. Before 2018, GAAP insisted – with an exception for companies whose business was to trade securities – that unrealized gains within a portfolio of stocks were never to be included in earnings and unrealized losses were to be included only if they were deemed "other than temporary." Now, Berkshire must enshrine in each quarter's bottom line – a key item of news for many investors, analysts and commentators – every up and down movement of the stocks it owns, however capricious those fluctuations may be."



Stock buybacks

Berkshire Hathaway's annual report, released the same day as the letter, showed that the company repurchased a record $2.2 billion of its own stock at the end of the year, up from $700 million in the previous quarter. That brings the total the company spent on stock buybacks to $5 billion over the year. 

"Over time, we want Berkshire's share gown to go down," Buffett wrote. "If the price-to-value discount (as we estimate it) widens, we will likely become more aggressive in purchasing shares. We will not, however, prop up the stock at any level."

Berkshire Hathaway loosened its rule around share buybacks in 2018 making it easier for Buffett and Munger to authorize buybacks when the repurchase price is "below Berkshire's intrinsic value," according to the company. Still, in previous quarters, analysts thought that the company could've spent more on share buybacks



Boards of directors

Buffett also discussed the compensation and purpose of corporate boards over the last few years, a "hot topic."

"Over the years, many new rules and guidelines pertaining to board composition and duties have come into being. The bedrock challenge for directors, nevertheless, remains constant: Find and retain a talented CEO – possessing integrity, for sure – who will be devoted to the company for his/her business lifetime. Often, that task is hard. When directors get it right, though, they need to do little else. But when they mess it up,......" he wrote. 

He continued: "At Berkshire, we will continue to look for business-savvy directors who are owner-oriented and arrive with a strong specific interest in our company. Thought and principles, not robot-like "process," will guide their actions. In representing your interests, they will, of course, seek managers whose goals include delighting their customers, cherishing their associates and acting as good citizens of both their communities and our country."



Acquisitions

Buffett did not make a major acquisition in 2019, marking the third year in a row since Berkshire Hathaway has completed a company purchase. In this year's annual letter, he spelled out his three criteria for buying companies for shareholders and investors. 

"First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Finally, they must be available at a sensible price," he wrote. 

He continued: "When we spot such businesses, our preference would be to buy 100% of them. But the opportunities to make major acquisitions possessing our required attributes are rare. Far more often, a fickle stock market serves up opportunities for us to buy large, but non-controlling, positions in publicly-traded companies that meet our standards."

 



Succession plans

In this year's annual letter, Buffett told shareholders that Berkshire Hathaway is "100% prepared" for his death. 

He also wrote that two key executives thought to be in the running to succeed him — Greg Abel and Ajit Jain— will be given more exposure at the company's annual shareholder meeting in Omaha, Nebraska. 

This year, shareholders at the meeting will be able to address questions to Abel and Jain as well as Buffett and Munger, according to the letter. 

"That change makes great sense. They are outstanding individuals, both as managers and as human beings, and you should hear more from them."

Buffett has been the CEO and chairman of Berkshire Hathaway since 1970. This week, Buffett became the longest-tenured CEO in the S&P 500 when Les Wexner at L brands stepped down. 

 



Market performance

Buffett wrote that stocks will likely outperform bonds long-term, especially if interest rates and corporate taxes remain low. 

"What we can say is that if something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments," he wrote. 

He continued: "That rosy prediction comes with a warning: Anything can happen to stock prices tomorrow. Occasionally, there will be major drops in the market, perhaps of 50% magnitude or even greater," he said.

Buffett added that equities are "the much better long-term choice for the individual who does not use borrowed money and who can control his or her emotions. Others? Beware!"



Politics

Buffett notably did not discuss politics in this year's shareholder letter, a departure from last year's letter where he spoke about how bipartisanship has spurred prosperity in the US.

Buffett campaigned for Hillary Clinton in 2016 and wrote in 2013 that he voted for Barack Obama. While he has not yet endorsed a candidate for the November 2020 election, he told CNBC in early 2019 that he would support Mike Bloomberg for president.

 



3 things to consider when you're deciding which savings account to open

Sat, 02/22/2020 - 11:35am  |  Clusterstock

  • When shopping for a new savings account, look for a high-yield savings account that helps your money grow. It's the same as a traditional savings account, but offers interest on your cash. 
  • Find a bank account that's fee-free, easy to use, and offers a high interest rate — or, even better, all three. 
  • See Business Insider's rankings of the best high-yield savings accounts in 2020 »

In the market for a savings account? Three main considerations can help you decide which one you should open: a convenient experience, fee-free banking, and the ability to earn interest on your money.

The best savings account is usually one that accrues interest. There's really no reason not to opt for a high-yield savings account over a traditional savings account. After all, there's virtually no difference between the two, other than the fact that one helps you grow your money by earning a small amount of interest. About 75% of Americans don't yet have a high yield savings account, and that means they're leaving free money on the table.

To choose the one that's right for you, consider what you really want out of your savings account. Do you need ATM access or a good mobile app experience? Or, can't stand paying maintenance fees? Each bank's account has different strong points. Here are three important factors for choosing a high-yield savings account:

1. A great online app experience and convenient access

What does convenience mean to you, when it comes to a savings account? Is it a friendly app? The ability to use the ATM down the street? An account at the bank you've patronized for years — or one at an entirely different bank, to make your money harder to access (and therefore spend) on a whim?

Most high-yield savings accounts are through online-only banks and apps. That means that a good experience on the web and on mobile are critical. To make the most of your account, you'll want to choose one that's convenient for you.

  • Online-only bank Ally does this well, thanks to its easy-to-navigate online platform.
  • Although its account is technically a cash account, banking service Wealthfront also has a good mobile and online experience, and took the "best overall" spot in Business Insider's high-yield savings account list for 2020.
  • Synchrony Bank is also notable for the convenience factor. It doesn't charge any ATM fees on its end, and gives a $5 reimbursement each month for any fees charged by the ATM companies. Many high-yield savings accounts don't offer ATM access at all.

Get the details »

2. Fee-free saving with no maintenance fees

The point of a high-yield savings account is to be earning money, not spending it on fees. Luckily, there are many options that can help your money grow each month without a fee. None of the accounts included in this article have monthly fees. That said, these three banks are some of the best for fee-free saving. 

  • Wealthfront's high-yield cash account is another trusted choice for fee-free saving, and also offers a consistently competitive rate.  
  • Ally Bank is another safe bet for fee-free saving, with no monthly maintenance fees and no minimum deposit to start your account. It's very transparent about fees on its website, too. 
  • The CIT Bank Savings Builder account has no monthly maintenance fees or any other fees. The only fee it charges is for wire transfers.

Get the details »

3. A high interest rate

You want your money to earn as much as possible, and choosing an account with the high interest rate can help you do that. Because high-yield savings accounts aren't invested, they usually earn between 1.5% and 2% interest — not enough to make you rich, but considerably more than the typical savings account.

It's worth noting that interest rates can change, so it's not worth basing your decision solely on the interest rate. But if you're deciding between accounts that are convenient and fee-free, you'll want to take a look at the interest rates to break a tie.

  • Brio Bank took the top spot on our high-yield savings account list for interest rate. 
  • Investing app Betterment also tends to maintain high interest rates, and is usually neck-in-neck with close competitor Wealthfront. 
  • That said, Wealthfront's high-yield savings account is a close third and offers consistently high rates. 

Get the details »

Join the conversation about this story »

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'I like being in the trenches': Fastly CEO steps down after disappointing market debuts, citing his 'true strengths and passions' as a developer instead of company leader (FSLY)

Sat, 02/22/2020 - 11:25am  |  Clusterstock

Fastly CEO Artur Bergman is stepping down, the internet infrastructure company announced Thursday.

In a blog post announcing the news, Bergman said he would instead assume the role of chief architect and executive chairperson. Current Fastly president Joshua Bixby will replace Bergman as the company's CEO.

"At my core, I am a developer," Bergman wrote in an email to Fastly employees. "While I will always cherish the time I have spent leading Fastly, my true strengths and passions lie in building the architecture and innovation, including our compute platform. I like being in the trenches, solving the most complex problems for our customers, and ultimately providing them with a better experience at the edge."

Bergman founded Fastly in 2011, and the company went public in April. Although it didn't have the starpower of Uber or Slack at the time of its debut, Fastly was among the handful of enterprise software companies that performed better on public markets than its consumer-facing cohort members. However, the company has struggled to meet expectations in the year since, and growth has plateaued in recent months. Like several other newly public tech companies, Fastly has struggled to reach profitability even after its IPO.

The company sells security and content delivery tools to other large companies. In its filing ahead of going public, Fastly said some of its customers include The New York Times, Alaska Airlines, Spotify, and Microsoft's Github. However, it doesn't charge these customers a subscription for its services and instead only charges customers based on how much they use its product. The revenue model has been a sticking point for public and private investors looking for a more reliable revenue stream.

Fastly's stock, traded under the stock ticker "FSLY" on the New York Stock Exchange, was off roughly 10% on market close Friday on the news of the leadership shakeup. 

Bixby joined Fastly in 2013 as a senior executive and president from startup incubator Stanley Park Ventures. According to Bergman's note, Bixby has led multiple parts of the business during his tenure, including sales, marketing, corporate development, and engineering. 

"Several years ago, I entrusted him to run the part of the organization that I have the most expertise in – engineering," Bergman wrote. "I have learned that Joshua is open-minded, a creative problem solver, and an innovator at heart. He intuitively understands what type of people, systems, and organization are needed to grow with integrity and humanity."

Bergman recently returned from paternity leave, where he had the ability to rethink his role within the company, he wrote. 

Prior to going public, Fastly had raised $220 million in venture capital from Battery Ventures, ICONIQ Capital, Deutsche Telekom Capital Partners, and others, according to Pitchbook.

Fastly did not immediately respond to Business Insider's request for comment.

Read the full blog post announcing the leadership changes here.

SEE ALSO: Security startup OneTrust is cashing in on the mad dash for data privacy tech with more than $400 million in venture funding in just the last 7 months

Join the conversation about this story »

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Warren Buffett tells Berkshire Hathaway shareholders the company is '100% prepared' for his death

Sat, 02/22/2020 - 10:55am  |  Clusterstock

  • Warren Buffett, the chairman and CEO of Berkshire Hathaway, released his annual letter to shareholders on Saturday.
  • In the letter, Buffett discussed the company's plans for the deaths of himself, 89, and vice chair Charlie Munger, 96. 
  • "Your company is 100% prepared for our departure," Buffett wrote. 
  • The "Oracle of Omaha" also said that investors at the annual shareholder meeting can ask Ajit Jain and Greg Abel —two key executives in the running to succeed Buffett— questions alongside him and Munger. 
  • Read more on Business Insider.

On Saturday, Warren Buffett released his annual letter to shareholders of Berkshire Hathaway, the company he's led for 50 years. 

Investors around the world anxiously await the letter's arrival each year as it gives a glimpse into the mind of Buffett, the famed value-investor and "Oracle of Omaha." 

In this year's letter, Buffett, the longest tenured CEO in the S&P 500, took time to discuss the plans for Berkshire Hathaway upon the deaths of himself, 89, and Charlie Munger, the vice chair of the company, 96. 

"Three decades ago, my Midwestern friend, Joe Rosenfield, then in his 80s, received an irritating letter from his local newspaper. In blunt words, the paper asked for biographical data it planned to use in Joe's obituary. Joe didn't respond. So? A month later, he got a second letter from the paper, this one labeled 'URGENT'," Buffett wrote. 

He continued: "Charlie and I long ago entered the urgent zone. That's not exactly great news for us. But Berkshire shareholders need not worry: Your company is 100% prepared for our departure."

Buffett pointed to Berkshire Hathaway's structure, it's skilled and devoted top managers, and nurturing culture as reasons that he and Munger feel optimistic about the company's future.

The letter also pointed to the two key Berkshire Hathaway executives that are thought to be in the running to succeed Buffet, Greg Abel and Ajit Jain. At this year's annual Berkshire Hathaway meeting, which takes place in Omaha, Nebraska, there will be one important change— shareholders will be able to ask Abel and Jain questions in addition to Buffett and Munger. 

"That change makes great sense. They are outstanding individuals, both as managers and as human beings, and you should hear more from them," Buffett said. 

Join the conversation about this story »

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Bosses frequently slept with subordinates at WeWork

Sat, 02/22/2020 - 10:49am  |  Clusterstock

  • Under Adam Neumann, inter-office relationships at WeWork proliferated, according to a Business Insider investigation.
  • In 2018, a woman on the real estate team sent the company a 50-page letter of wide-ranging allegations about the company's culture, including about relationships between colleagues and between subordinates and their managers.
  • That document, which led to a company investigation, eventually resulted in a more than $2 million settlement. Now, WeWork's new CEO said he's leading a company that doesn't tolerate poor behavior.
  • For Business Insider's full investigation, click here.

Couples at WeWork weren't a human resources problem – they could be celebrated. 

One couple that met at WeWork was presented with a "member for life" keycard for their baby at Summer Camp, WeWork's raucous annual party that ended after 2018. And cofounder Miguel McKelvey met his girlfriend when she was a junior employee at WeWork, though she did not report to him. 

To be sure, many companies allow inter-office relationships, although not typically between managers and subordinates.

In the spring of 2018, a woman who once worked in WeWork's real estate business sent the company a 50-page document alleging drug use, sexual harassment, and pay discrimination. The document, which set out the terms of a threatened lawsuit, was obtained by Business Insider.

WeWork then launched an investigation, which discovered instances of managers sleeping with coworkers and subordinates, echoing an allegation from the document that a senior manager admitted to the woman that he slept "with two direct female subordinates."

Her document also claimed she saw a male executive openly smoking marijuana at the company's Summit – a mandatory all-staff event – in 2016. The executive then allegedly told the woman "'he wanted to have a go" with another female subordinate who was visibly drunk, according to the document.

A former top male manager said that WeWork employees slept together, not just in the real estate team but across the company.

WeWork's new CEO, Sandeep Mathrani, has drawn a line between the WeWork of the past and the company he started leading on Tuesday. In a statement, he said WeWork has "zero tolerance" for violating company policy. 

"It is our highest priority to ensure our employees feel safe and respected, and this starts at the top," he said. "In this new chapter at WeWork we are fully invested in upholding a culture of integrity."

A spokesman for Neumann, who was ousted in September, declined to comment.

For Business Insider's full investigation into how the woman's allegations sparked an investigation and eventually led to a settlement of more than $2 million, read here. 

Have a WeWork tip? Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at mmorris@businessinsider.com, or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.

SEE ALSO: WeWork's US president — and Adam Neumann's friend — will leave days after the firm's new CEO joins

READ MORE: Today's the first day on the job for new WeWork CEO Sandeep Mathrani. Insiders told us why he's the guy to pull off one of the most difficult turnarounds Silicon Valley has ever seen.

DON'T MISS: WeWork's board shakeup sees 3 longtime directors depart. Another is leaving in April, and the company is adding its first female board member.

Join the conversation about this story »

L Brands once owned an arsenal of popular stores, and its downfall is a sign of how far the American mall has fallen

Sat, 02/22/2020 - 10:42am  |  Clusterstock

  • L Brands once dominated the American mall. In its heyday in the 1980s and 1990s, the company owned The Limited, Limited Too, Abercrombie & Fitch, Victoria's Secret, and Express, among others.
  • However, after a series of missteps, the beleaguered company has since sold off nearly all of its brands, including Victoria's Secret on Thursday, leaving just Bath & Body Works as a standalone company.
  • We took a closer look at how the rise and fall of L Brands mirrors the death of the American mall. 
  • Visit Business Insider's homepage for more stories.

If there is one company that best exemplifies the demise of the modern mall, it's L Brands

Over the course of several decades, L Brands evolved from a humble women's clothing store in Columbus, Ohio, into a full-fledged retail behemoth. At its peak in the 1980s and 1990s, L Brands operated several of America's most popular mall brands, including The Limited, Express, Abercrombie & Fitch, Victoria's Secret, and Bath & Body Works, among others. 

Under founder Les Wexner, L Brands seized opportunities for growth through a handful of acquisitions and the development of new brands that diversified its brand portfolio. These additions helped L Brands widen its empire into new areas like sporting goods and luxury, at the now-defunct stores Galyan's Trading Company and Henri Bendel, respectively. 

However, Wexner's propensity to buy up brands, squeeze them for sales, and then sell them at any sign of strife eventually caught up with him. Before long, L Brands seemed to be losing companies from its portfolio almost as quickly as it had added them. Thanks in large part to the 2008 recession, which rocked nearly every sector of the retail industry but particularly mall brands, L Brands began to lose steam that it was never quite able to regain. 

We took a closer look at how the unraveling of L Brands mirrors the death of the American mall by examining the downfall of each of its brands. 

SEE ALSO: The rise and fall of Victoria's Secret, America's biggest lingerie retailer

The Limited

In many ways, the story of The Limited exemplifies the rise and fall of retail in America, from its humble beginnings as a small mom-and-pop shop in Columbus, Ohio, to its rise as a staple of the modern mall and its eventual demise in the early aughts. 

The brainchild of Wexner and the foundation for the entire L Brands company, The Limited opened its doors in 1963, selling an assortment of women's apparel. Over the next several years, Wexner focused on expanding the brand and opening more stores, and by 1976, The Limited operated 100 stores nationally. After a couple of savvy acquisitions, Wexner took his company — then known as The Limited Brands — public in 1982, and before long The Limited was in nearly every mall in America. 

However, The Limited ultimately fell prey to the same challenges facing several of its mall brand peers. Foot traffic plummeted and sales dwindled. Seeking support, in 2007 L Brands sold a majority stake of the company to Sun Capital Partners, a private-equity firm that works with distressed companies.

While this kept the store afloat for several more years, in 2017 The Limited announced it would close all 250 stores nationwide. Today it lives on as a shell of its former self, with a small online store on the Belk department store website. 

 



Express

When Express came on the scene, it became a slightly more fashion-forward sister brand to The Limited. The first Express store opened in 1980 in Chicago's popular Water Tower Place, and within just two years it became a separate division of L Brands. However, despite two decades of solid performance, by the early aughts the brand started to fall out of favor with consumers.

In 2007, following several years of underperformance, Wexner sold a majority of Express to Golden Gate Capital Partners and Express became its own privately held company. Today it continues to struggle in the face of the retail apocalypse, and it recently announced it would close 200 stores by the end of 2022

"Our strategic agenda focuses on growth in the intimate apparel, and personal care and beauty segments of our business," Wexner said in a statement at the time. "The new ownership structure for Express will provide it with the resources, leadership focus and capital to maximize its potential."



Express Men

In an attempt to capitalize on the growing menswear market, Express began adding men's clothing in 1987. It called this collection Structure and eventually spun off the line into its own store in 1989. In 2001, L Brands rebranded the store as Express Men, which had a brief two-year stint in malls around the nation before the Structure line was sold to Sears. 

 



Lane Bryant

In 1982, L Brands acquired the plus-size retailer Lane Bryant, including its 207 brick-and-mortar stores and its mail-order business, Brylane. This kicked off a string of acquisitions for L Brands in the 1980s, as Wexner looked to expand into new sectors. 

L Brands retained full ownership of Lane Bryant until 2001, when it was sold to the Charming Shoppes, though L Brands kept its corporate offices in Columbus, Ohio. In 2012, Lane Bryant was fully sold to Ascena Retail Group during a vital growth period for the plus-size market, paired with mounting discontent over Victoria's Secret's lack of size diversity in its campaigns and runway shows. The inability to capitalize on extended sizes proved to be a blind spot not just for L Brands, but for the entire retail industry.



Victoria's Secret

Also in 1982 — just one month after it filed its initial public offering — L Brands acquired intimate apparel company Victoria's Secret. In the early days, Wexner turned the focus of the company from men to women and focused on a mix of comfort, style, and affordability. 

By the 1990s, the brand was thriving and had become the largest lingerie retailer in the country. It continued to explode in popularity over the course of the decade thanks in large part to the start of the annual Victoria's Secret Fashion Show in 1995, which featured supermodels like Tyra Banks and Heidi Klum. 

Victoria's Secret continued to reign supreme in the lingerie market until 2015, when sales started to slip due to increased competition and lack of innovation in both its products and its brand image. As the rest of the industry began including a wider range of sizes and more inclusive models in marketing, Victoria's Secret continued to feature mostly white, thin women in its catalogs and runway shows. 

By 2020, Victoria's Secret had dug itself a hole it was incapable of crawling out of. On February 20, Wexner announced he would be stepping down as chairman and CEO of L Brands and selling a majority share of the company to Sycamore Partners. 



Henri Bendel

The lone luxury department store of the portfolio, Henri Bendel joined the L Brands family in 1985. The century-old store was known for its high-end accessories and handbags, as well as its signature brown-and-white striped pattern. 

However, in 2018, L Brands announced it would permanently shutter the store in order to focus on its other brands, namely the struggling Victoria's Secret. The closures came amid significant strife for the department store industry at large, affecting companies ranging from Sears and JCPenney to Barneys and Lord & Taylor. 

"We have decided to stop operating Bendel to improve company profitability and focus on our larger brands that have greater growth potential," Wexner told The Wall Street Journal at the time. 



New York & Company

Also in 1985, L Brands acquired Lerner New York, a women's workwear company, eventually rebranding it as New York & Company. In 2002, it became its own company after L Brands sold it to Bear Stearns Merchant Banking. At the time of the sale, it operated 522 stores and brought in $940 million in sales. 



Limited Too

In 1987, the company debuted its spinoff brand for young girls, Limited Too, which grew wildly popular with preteens around the country. At its most successful point, Limited Too operated 600 stores in the US, and in 1999 L Brands spun off the company as part of Tween Brands, Inc. 

However, in the early 2000s, sales began to slow and by 2008, Limited Too announced that it would be shuttering completely. The beleaguered chain was later purchased by the Ascena Retail Company and rebranded as Justice.



Abercrombie & Fitch

As it continued to grow its mall brand empire, L Brands acquired Abercrombie & Fitch in 1988. At the time, the teen retailer included just 25 stores and one catalog. However, in the following years, its presence grew as the store shifted its focus exclusively to teenage clientele. L Brands helped get the ball rolling for Abercrombie's notoriously hyper-sexualized brand identity, a move that ultimately helped grow sales until recent years when the company underwent an extensive overhaul.

In 1996, the company went public and began operating autonomously, but its scantily clad imagery was reminiscent of the challenges that would eventually plague Victoria's Secret. 

 

 



Bath & Body Works

Next, Wexner set his sights on the personal care industry with the launch of Bath & Body Works in 1990. Known for its robust collection of scented soaps, body wash, and candles, the company became one of L Brands' best performing brands, eventually keeping the company afloat as sales at Victoria's Secret began to plummet. 

On February 20, Bath & Body Works became the sole remaining company to be part of L Brands, after Wexner sold a majority share of Victoria's Secret and stepped down from the company. 



Galyan's Trading Company

Looking to diversify its brand assortment, L Brands purchased Galyan's Trading Company in 1995, a venture that would prove to be short-lived. By 1999, L Brands had already sold off its majority shares, and a few years later the name was gone for good when the chain was bought out by Dick's Sporting Goods.

The downfall of Galyan's signaled the start of challenges for the sporting goods market, including the bankruptcy and liquidation of Sports Authority in 2016. 



La Senza

L Brands purchased Canadian lingerie company La Senza in 2006, but by 2013 the market was so saturated — in part due to competition from other L Brands companies, like Victoria's Secret — that it closed two-thirds of the stores. In 2019, L Brands sold off the company to the private-equity firm Regent. 





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