Sycamore Seeks $4 Billion for Retail Buyout Fund

Updated on
  • Retail-focused firm bought Staples for $6.9 billion last month
  • Fund would be 60% bigger than predecessor if target is reached

Sycamore Partners is betting on the ailing retail sector at a time when other investors are shying away.

The buyout firm, which bought Staples Inc. last month, is trying to raise $4 billion for its biggest fund yet, two people with knowledge of the matter said. It’s planning to finish raising the money in January, one of the people said.

The people asked not to be identified because the process is private. A representative of New York-based Sycamore declined to comment.

Same-store sales at clothing and accessory retailers have dropped during most months since mid-2015, according to Bloomberg Intelligence analyst Poonam Goyal, citing figures from First Data Corp. Online shopping and consumers’ preference for experiences over apparel have taken a bite out of demand, Goyal said.

That’s pushed retailers into a wave of bankruptcies this year, including Toys “R” Us Inc., Gymboree Corp., Rue21 Inc., Payless Inc. and Limited Stores Co.

If its target is reached, Sycamore Partners III would be 60 percent bigger than the firm’s prior fund, which secured $2.5 billion in 2014. That pool, which counts prominent university endowments and public and corporate pensions as investors, had a negative 3.4 percent return as of the end of 2016, according to data compiled by Bloomberg. That ranks it in the third quartile of similar funds, the data show.

Sycamore’s first fund, a $1 billion pool, had a 58 percent annualized return through 2016, ranking in the top quartile.

Founded by Stefan Kaluzny and Peter Morrow in 2011, Sycamore is invested in fashion retailers Nine West, Talbots and Coldwater Creek, as well as department-store chain Belk and others.

CNBC earlier reported that Sycamore is raising its largest fund yet.

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