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    Consumer Discretionary Q3 2020

    Q3-2020-Consumer-Discretionary

    Industry Trends

    Nike’s Online Business Continues to Thrive

    As COVID forces businesses to transition online, Nike has proven to be a strong online retail competitor. This quarter, Nike exceeded its yearly goal of having 30% of their revenue from online sales. Nike’s achievement is likely due to its uncomplicated pick-up service and the growing demand for workout apparel. Increasing stock prices reflect Nike’s success.1

    Tupperware Slowly Recovering from Financial Issues

    Tupperware Brands Corp. manufactures food containers, cosmetics, and other personal care items. COVID-19 has hindered the company’s primary sales strategy: house parties. Consequently, Tupperware’s sales have dropped significantly. The company has responded by reducing inventory, laying off employees, and innovating new ways to sell its products.2

    Starbucks Continues to Power Through the Pandemic

    Despite restaurant restrictions, Starbucks continues to thrive. From an easier online rewards program to an efficient curbside pick-up, Starbucks has proven to be an adaptable brand. This success is reflected in their growing stock price, rising by 3.85% this quarter. Starbucks is projected to grow as more workers return to the office, and kids return to school.3

    Malls are Growing Obsolete

    With the rise of e-commerce, the popularity of malls has diminished. Coresight Research estimates that 25% of America’s malls will close within the next three to five years. The pandemic has put tenants in a difficult position, causing them to ask for rent reductions or not pay rent at all. These difficulties may eventually lead to store closures, emptying the mall of its tenants.4

    Luxury Resale Rising in Popularity

    Boomers who declutter their closets and young adults who purchase discounted luxury goods rely on luxury consignment to fulfill their needs. The luxury consignment market is expected to be worth $51 billion by 2023. Moreover, popular online retailers like The RealReal, Poshmark, and ThredUp have made reselling luxury goods easier than ever.5

    Costco Remains a Strong Retailer Throughout the Pandemic

    Costco did not quickly adapt to the pandemic, limiting its online service and in-store pickup. Despite this, their sales rose by 12.5%. The retailer’s success is likely due to its abundant supply of food, sanitation, and nonessential goods like home workout equipment. Costco’s diverse and plentiful inventory can address the needs of any consumer.6

    Largest Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Caesars Entertainment Corporation
    • Eldorado Resorts, Inc.
    • $18,840.44
    • Zoox Inc.
    • Amazon.com, Inc.
    • $1,300.00
    • Substantially All Assets of Park Place Dealerships
    • Asbury Automotive Group, LLC
    • $735.00
    • Davos Brands LLC
    • Diageo plc
    • $610.00
    • Brake Parts Inc.
    • First Brands Group, LLC
    • $510.00
    • Baptist Health Hardin
    • Baptist Healthcare System, Inc.
    • $361.40
    • Substantially All The Global Business Operations of Brooks Brothers Group, Inc.
    • Authentic Brands Group LLC; SPARC Group LLC
    • $325.00
    • PersonalizationMall.com, LLC
    • 800-Flowers, Inc.
    • $245.00
    • Casino KC and Casino Vicksburg
    • Twin River Worldwide Holdings, Inc.
    • $230.00
    • Substantially All Assets Of Americas Business Operations Of Exide Technologies, LLC
    • Atlas Holdings LLC
    • $178.60

     

    Source S&P Capital IQ as of 10/5/2020 and PCE Proprietary Data

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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. Thomas, Lauren. “Nike's Online Business Is Booming - 'Digital Is Here to Stay,' CEO Says.” CNBC, CNBC, 23 Sept. 2020.
    2. Maidenberg, Micah, and Becky Yerak. “Tupperware Shares Surge as Company Pushes Turnaround Effort.” The Wall Street Journal, Dow Jones & Company, 29 July 2020.
    3. Levisohn, Ben. “Starbucks Stock Is Getting a Post-Covid Jolt.” MarketWatch, Barrons, 29 Aug. 2020.
    4. Thomas, Lauren. “25% Of U.S. Malls Are Expected to Shut within 5 Years. Giving Them a New Life Won't Be Easy.” CNBC, CNBC, 27 Aug. 2020.
    5. Rosenbaum, Eric, and Susan Caminiti. “Coronavirus and Luxury Retail: Shopping for Used Hermes, Cartier in Covid Era.” CNBC, CNBC, 20 Sept. 2020.
    6. Cheng, Andria. “Costco Earnings Show It Is Still In A Retail League Of Its Own.” Forbes, Forbes Magazine, 25 Sept. 2020.

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