Consumer & Retail Q3 2022

Industry Trends

Increased Consumer Spending, Despite Descreased Discretionary Spending

Consumer spending increased by 0.4% in August after falling 0.2% the month before. Services increased by 0.8%, with housing and utilities, transportation, and healthcare sustaining the highest growth. Spending on goods dropped 0.5%, driven mainly by a 42% drop in gas spending and rising interest rates slowing demand for home goods. Recreational goods and services spending fell as high inflation drove consumers to pull back on discretionary spending.¹

U.S. Retail Vacancy Reaches Lowest Level in 15 Years

Despite increasing rents and recession fears, U.S. retail vacancy fell to a 15-year low of 6.1% as online retailers and companies who survived the pandemic seek to accelerate growth, according to a report from real-estate services firm Cushman & Wakefield. With sales growth in physical brick-and-mortar stores outpacing e-commerce this year, per Brookfield Asset Management, companies are turning to physical stores to attract customers, build brand awareness, and boost growth.²

Consumer Sentiment on the Rebound in Q3

The consumer confidence index, which measures consumers’ attitudes, buyer intentions, and consumer expectations for inflation, stock prices, and interest rates, rose for the second consecutive month in September to 108.0 from 103.6 the month prior. The increase, driven by a growing job market, increasing wages, and declining gas prices, follows declines from April through July. Inflation and interest hikes are expected to constrain short-term growth ahead.³

Consumers Increasingly Turning to “Buy Now, Pay Later” Services for Groceries

With many consumers tightening their wallets due to soaring inflation, more Americans are turning to “Buy Now, Pay Later” services to purchase groceries. Pay-later companies, like Zilch and Affirm, allow customers to purchase goods with short-term debt, similar to credit cards, without an extensive credit check. The rapid adoption, primarily driven by younger consumers, has raised concerns of consumers overextending themselves, with the U.S. Consumer Financial Protection Bureau calling for more regulation.⁴

Largest Transactions Closed

Target
Buyer
Value($mm)

Radisson Hospitality, Inc.
Choice Hotels International, Inc.
$673.16
Blue Nile, Inc.
Sterling Jewelers Inc.
$398.20
BBQ Holdings, Inc.
MTY Franchising USA, Inc.
$325.73
Hyatt Regency La Jolla at Aventine
IQHQ, Inc.
$216.30
Auto Glass Company Of Memphis, Inc.
Driven Brands Holdings Inc.
$170.64
Foss Floors
Mohawk Industries, Inc.
$148.00
Tropicana Las Vegas Hotel and Casino, Inc.
Bally's Corporation
$148.00
Mandarin Oriental (Washington, DC), Inc.
Henderson Park Capital Management
$139.00
541-room Hotel Irvine
Hyatt Hotels Corporation
$135.00
Loews Boston Hotel Corporation
Electra America Hospitality Group
$116.65

Other Financial Buyer Transactions Closed

Target
Buyer
Value($mm)

Magneto & Diesel Injector Service, Inc.
Gridiron Capital, LLC
n/a
Bandon Holdings LLC
Sentinel Capital Partners, L.L.C.
n/a
Family Entertainment Group, LLC
H.I.G. Capital, LLC
n/a
El Car Wash, LLC
Warburg Pincus LLC
n/a
BBB Industries, LLC
Clearlake Capital Group, L.P.
n/a

Other Strategic Buyer Transactions Closed

Target
Buyer
Value($mm)

Certain Assets of Enjoy Technology, Inc.
Asurion, LLC
$110.00
Certain Assets and Liabilities of Keke's Breakfast Cafe and Eight Keke's Restaurants
Denny's Corporation
$82.50
Ellis Entertainment, LLC
Churchill Downs Incorporated
$79.00
Broad Arrow Group, Inc.
Hagerty, Inc.
$64.80
Bollinger Motors, Inc.
Mullen Automotive, Inc.
$57.17

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:

Mutikani, Lucia. "U.S. consumer spending rebounds, but high inflation cooling demand." Reuters, 30 September 2022.
King, Kate. "Retail Real Estate Is Enjoying Its Biggest Revival in Years." The Wall Street Journal, 4 October 2022.
"US Consumer Confidence." The Conference Board, 27 September 2022.
Krishna, Priya, "Eat Now, Pay Later: Going Into Debt for Food." The New York Times, 7 September 2022.

Consumer & Retail Q3 2022

Industry Trends

Increased Consumer Spending, Despite Descreased Discretionary Spending

U.S. Retail Vacancy Reaches Lowest Level in 15 Years

Consumer Sentiment on the Rebound in Q3

Consumers Increasingly Turning to “Buy Now, Pay Later” Services for Groceries

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

PCE Transactions

Contacts

Joe Anto

David Jasmund

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Consumer & Retail Q3 2022

Industry Trends

Increased Consumer Spending, Despite Descreased Discretionary Spending

U.S. Retail Vacancy Reaches Lowest Level in 15 Years

Consumer Sentiment on the Rebound in Q3

Consumers Increasingly Turning to “Buy Now, Pay Later” Services for Groceries

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

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PCE Transactions

Contacts

Joe Anto

David Jasmund

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