Brooks Brothers Files for Bankruptcy
As of the drafting of this quarterly industry report, 202-year-old clothier, Brooks Brothers, filed for Chapter 11 due to a combination of the Coronavirus and a shift to casual dress codes. Brooks Brothers is the most recent of many U.S. retail stores who have filed for bankruptcy since March. Despite the pandemic's effects, Brooks Brothers experienced a decrease in the sale of suits and other formal attire before the economic fallout. The shift to online shopping also played a role, with roughly 25% of Brook's Brothers 2019 sales coming from e-commerce.1
May Retail Sales Show a Record Increase Following April’s Decline
In April, retail sales experienced a 16.4% decline from the prior month, the most significant decrease in the sector's history. Sales bounced back in May, with an 18% increase from April's numbers. Despite the rebound, total sales in the second quarter have fallen by a combined 10.5% compared to the prior year. Clothing retailers' sales experienced a 63% decline year-over-year, despite sales tripling from April to May. Similar effects can be seen across department stores, home furnishings sellers, restaurants, and electronics retailers.2
Streaming Services Thrive while Stay at Home Orders Persist
Streaming services continue to see significant growth as stay-at-home orders continue through quarter 2. Disney's streaming platform, Disney+, has increased from 33.5 million subscribers to over 50 million since March 28. In April, Netflix also reported 15.77 million global subscriber additions. Competition has continued to grow between subscription streaming platforms due to the spike in demand. The significant growth in streaming platforms is expected to slow as shelter-in-place orders begin to lift.3
Softening Restrictions and Seasonal Consumer Demand Increases Revenues for Certain Discretionary Categories in May
Consumer confidence in retail shopping safety is steadily gaining traction. More than two-thirds of consumers report that they would be comfortable with shopping once stay-at-home orders are relaxed. Although the retail landscape has changed considerably, current and seasonal needs still play a role in consumer behavior. Kids' apparel, underwear, sleepwear, and shorts all achieved year-over-year dollar growth in May, and swimwear gained momentum with week-over-week gains in early June. Seasonal impact contributed significantly in categories such as men's fragrance and fashion watches, where week-over-week increases were leading up to Father's Day.4
The Leisure and Hospitality Rehire Workers after Significant Layoffs
The U.S. leisure and hospitality industry experienced a net addition of more than 1.2 million jobs in May and 1.5 million workers in June. The most significant one-month increase in the sector's history comes after the loss of 7.7 million jobs, 47% of total positions, in April. Most of May's employment gains were in food service, as employers added back around 1.37 million jobs. Retail netted 367,000 new hires in May and 740,000 new hires in June, as companies continue to rehire a fraction of the laid-off workers from previous months. The overall employment in the sector remains 3.1 million jobs below February levels.5 6
U.S. Vehicle Sales Rebound from April Lows
U.S. Vehicle sales increased by 39.9% month-over-month in May and 5.7% from May to June. Sales volume year-over-year for June is down 26.9% compared to the year prior, with sales across all automobile brands still significantly lower on a year-ago basis. While still at depressed levels, vehicle sales are rebounding faster than initially thought from their April lows. Along with the reopening of many car dealerships, incentive offers and low-interest rates also aid in the industry's continued bounce back.7
New Consumer Perspective Increasing Demand for Retail Automation
Though retail automation was on the rise before COVID-19, a new consumer perspective on retail stores has resulted in a demand for "low touch" shopping experiences. A recent advancement in the industry, currently in testing, is a 3D body scanning technology to determine fitting sizes for clothing. Technologies that limit consumers' physical contact with the merchandise in stores are expected to fuel an anticipated compounded annual growth of 11% in the retail automation market up to 2024.8
Nevada Casinos Report High Revenues for June
With Nevada casinos reopening on June 4, casinos experienced high revenues despite social distancing implementations. The month of June reported higher sales on a year-over-year basis despite the limitations in capacity and three fewer days to bring in revenue, according to the CEO of Circa Resort & Casino and The D Hotel & Casino in Las Vegas. Other casinos likely experienced a similar trend as pent-up demand for casinos persisted through June.9
Hotels Introduce Digitized Operations
Hotels have introduced a large-scale adoption of digital and scheduling initiatives to conform to social distancing procedures. Some hotel adoptions include scheduling all mealtimes, pre-reserving pool chairs and gym sessions, luggage handling services, and shifting to an all-inclusive pricing model. The long-term outlook of these new hotel initiatives associated with cleanliness is expected to fade with time. In contrast, new implementations that prevent costumers from waiting in line are expected to outlast the pandemic.10
Largest Transactions Closed
- Real Estate Assets of Tropicana Las Vegas Hotel and Casino
- Gaming and Leisure Properties, Inc.
- 3Sixty Duty Free
- Hotel Shilla Co.,Ltd
- The Hutton Hotel
- Geolo Capital LP; BentallGreenOak; Flank Management LP
- Pet Cremation Business of Matthews International Corporation
- Undisclosed Buyer
- OrgHarvest, Inc.
- First Seed Farms, Inc.
- Krystal Company
- Fortress Investment Group LLC; Golden Child Holdings
- Substantially all the Assets of Olivet Memorial Park and Olivet Funeral and Cremation Services
- Cypress Lawn Cemetery Association
- The Courtyard by Marriott Boynton Beach
- Boynton Property Holdings, LLC
- Decor Intermediate Holdings LLC
- Undisclosed Buyer
- 114,000 Residential Alarm Monitoring Contracts of Protect America, Inc.
- Monitronics International, Inc.
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.
EBIT - Earnings Before Interest and Taxes