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Joe Anto

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Industry Trends

High-Performing Retailers Adapt to Combat Inflationary Pressure

Consumer concerns regarding the high price of goods catalyzed retailers and consumer packaged goods (CPG) companies to adjust their strategies to woo back customers. Companies in the industry prioritized private brand offerings, increased package sizes, marketed the cost-effectiveness of certain brands, and implemented deep discount promotions to lure value-conscientious consumers. High-performing retailers raised their everyday prices less than competitors while carrying greater inventories of quality merchandise. An Advantage Solutions report revealed industry insiders remain cautiously optimistic about the industry’s outlook.1

Cautious Consumers Remain a Bridge Too Far for Struggling Retailers

Retailers in the U.K. and U.S. faced challenges during the first quarter as consumers prioritized essentials over discretionary spending. Despite aggressive discounts, struggling brands were unable to overcome a trifecta of lackluster consumer confidence, supply chain disruptions, and heightened interest rates. High-yield bond defaults surge, signaling financial distress in the retail sector, prompting restructurings from Joann and Big Lots.2

This Silent Slowdown Could Threaten Economic Growth

Consumer spending was a stalwart of economic growth for the past three years, yet cracks in the consumer spending armor are beginning to show. Recent retail sales show sluggish growth, with January's downturn worse than anticipated. The robust job market and rising wages benefited college educated consumers, while employment for those without a college degree slowed considerably. Consumer spending decelerated as lower and middle-income households, facing higher interest rates and energy costs, prioritized services over goods. Even high-income consumers are grappling with paycheck-to-paycheck living as rising inflation and housing costs exacerbate financial strains, affecting spending habits.3

FTC Jitters Postpones Marriage of Two Grocery Giants

The Federal Trade Commission (FTC) halted the merger of Kroger and Albertsons, alleging anticompetitive concerns. Kroger’s $24.6 billion deal, announced in October 2022, would create a grocery behemoth with 5,000 stores. Kroger planned to divest stores, distribution centers, and offices to C&S Wholesale Grocers, as well as investing $1,8 billion to reduce prices and enhance the customer experience to alley regulatory scrutiny and legal challenges. Bob Ferguson, Washington State Attorney General, filed a lawsuit to block the merger, stating the divestiture plan is inadequate, and the merger threatens to create a near monopoly in the grocery sector, impacting millions of consumers and tens of thousands of employees. 4

March Consumer Confidence: Stable Present, Cloudy Future

The Conference Board's March 2024 Consumer Confidence Index remained stable at 104.7 while the Present Index rose slightly, depicting positive business and labor conditions sentiment. However, the Expectations Index dropped significantly, indicating concerns about future wages, business, and labor markets. Consumer sentiment varied by age, with participants aged 55+ more confident compared to younger participants. Consumers remain worried about food and gas price increases, further hampering their non-discretionary spending. 5

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Pilot Travel Centers LLC
  • Berkshire Hathaway Inc.
  • $2,600.00
  • Rover Group, Inc.
  • Blackstone Management Partners L.L.C.
  • $2,355.78
  • Bluegreen Vacations Holding Corporation
  • Hilton Grand Vacations Inc.
  • $2,304.52
  • Chico's FAS, Inc.
  • Sycamore Partners Management, L.P.
  • $1,540.56
  • Sportech, Inc.
  • Patrick Industries, Inc.
  • $315.00
  • The Carlstar Group LLC
  • Titan International, Inc.
  • $296.19
  • Golden Route Operations LLC
  • J&J Ventures Gaming, LLC
  • $251.00
  • Wyndham Boston Beacon Hill
  • RLJ Lodging Trust
  • $125.00
  • AC Hotel by Marriott Washington DC Convention Center
  • Apple Hospitality REIT, Inc.
  • $116.80
  • Residence Inn by Marriott (Manhattan Beach, CA)
  • Land and Houses U.S.A., Inc.
  • $68.00

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Le Meridien Philadelphia
  • Certares Management LLC
  • $32.71
  • Retail Store Networks, Inc.
  • Tiny Ltd.
  • $9.25
  • Innovative Learning Concepts, Inc.
  • Leeds Equity Advisors LLC
  • n/a
  • Baseline Fitness, LLC
  • Mayfair Capital Partners
  • n/a
  • Yachtsman Resort Hotel
  • Hybridge Capital Management, LLC
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Rogan Shoes, Incorporated
  • Shoe Carnival, Inc. (NasdaqGS:SCVL)
  • $50.00
  • Barsala
  • Caliza LLC
  • $30.00
  • Operational Assets of Marley Spoon Inc.
  • FreshRealm, Inc.
  • $24.00
  • Koch Industries, Inc.
  • Hillman Solutions Corp. (NasdaqGM:HLMN)
  • $23.96
  • Residence Inn by Marriott Philadelphia Langhorne
  • Baywood Hotels, Inc.
  • $22.10
  • Notre Dame Catholic High School, Inc.
  • Sacred Heart University
  • $15.00
  • Assets of Premergy, Inc
  • Innovative Holdings Alliance, Inc. (OTCPK:IHAI)
  • $13.50
  • Don Allen Auto Service, Inc.
  • Penske Automotive Group, Inc. (NYSE:PAG)
  • $12.34
  • Herbal Brands, Inc.
  • KAC Investments LLC
  • $8.02
  • Hyatt Place Pittsburgh Airport
  • Bacall Companies LLC
  • $7.70

 

Source S&P Capital IQ as of 4/16/2024 and PCE Proprietary Data

PCE Transactions

Contacts

Joe Anto

Orlando Office

407-621-2141 |

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Eric Zaleski

Chicago Office

847-239-2466 |

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Kyle Wishing

Atlanta Office

404-994-4186 |

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Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

  1. 1. Blanchard, Jill. “Inflation-Weary Shoppers are Key Focus of Retailers and CPG Companies.” Advantage Solutions, March 5, 2024.
  2. 2. PYMNTS. “Retailers Struggle Amid More Cautious Consumer Spending.” PYMNTS, March 24, 2024.
  3. 3. Brown, Courtenay. “Unstoppable shopping slows, and that could be a problem for the economy.” Axios, March 15, 2024.
  4. 4. Ryan Beckman “Kroger, Albertsons and C&S Statement on Merger Timeline to Close.” PRNewswire, January 15, 2024.
  5. 5. Peterson, Dana. “US Consumer Confidence Little Changed in March.” Deloitte Insights, March 26, 2024.
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