Retailers who evolve in changing economy are winners

15 Jul '14

4 min read

Upswing in Housing Market Will Play a Role: Big box home hard goods players and home furnishings are doing well as the real estate market has improved. New households being created has also helped home furnishing stores.

Retail Is Still Appealing to Private Equity: Private equity (PE) firms still like retail because it’s scalable and has quick growth potential. If a PE firm can identify a new retail concept that has been developed by a family or a privately held group of original owners, it can bring its resources and experience to the business. PE firms can help identify new locations, professionalize sourcing, product and inventory management, and can help implement multi-channel delivery and customer mining on the ecommerce side.

M&A Activity for Retailers Slowly Picking Up: M&A activity in the first quarter was down relative to last year. However, there’s a reasonable amount of activity right now in the marketplace that should continue to pick up.

Private Equity Selling to Other Private Equity Firms: The market may begin seeing some sales of private equity-owned companies to other PE firms as they look to cash out for their investors. This is a lingering result of the recession, when many PE firms bought companies and were forced to hold onto them a little longer than they would have otherwise liked to.

Potential Increase in Activist Investing in Public Retailers: We have seen private equity and other funds take material positions in public held retailers that may have lost their way, which may lead to imposing their influence and/or taking these entities private.

Post-Great Recession Deal Structures Emphasize Liquidity: Companies want to make sure that they have a lot of availability on their revolving credit facilities so they do not get caught in a liquidity crunch. Many companies found themselves in trouble when the recession hit, and were holding too much debt and had limited liquidity. Nonetheless, leverage multiples are creeping up on better retailers.

Emphasis on Staying Relevant to the Consumer: Retailers want to make sure the customer keeps coming through the door and are utilizing digital, ecommerce and social media strategies to do so. These strategies help companies stay relevant and stay in front of their customer.

CIT Corporate Finance

More Apparel/Garments News - United States Of America...