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David Jasmund

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Industry Trends

Pandemic Caused Consumer Trends Likely to Remain

Several consumer trends caused by the pandemic are likely to have some degree of permanence post-pandemic. One of the most significant changes has been the explosion of e-commerce driven by safety concerns and convenience. Same-day grocery delivery is becoming much more popular with consumers while retailers charge premiums for any items ordered. The industry is also seeing a change in purchase patterns. For example, health and wellness purchases were quite popular before the pandemic, but there has been a shift towards comfort foods and premium products.1

Amazon Labor Practices Under Scrutiny

A recent bill signed by the California Governor prohibits Amazon and other companies from enforcing productivity quotas and penalties that affect employees' health and safety. The California Retailers Association, which Amazon is a member of, opposes the law, stating that it would exacerbate supply-chain issues. Amazon plans to implement brick and mortar department stores in 2022 to enable customers to try on their private-label apparel in technology-fueled dressing rooms to increase revenues. The fitting rooms will have touch screens and the potential for other forms of automation or AI in the future.2

E-commerce May Surpass Traditional Retail for Home Furnishing Sales

Chairish, the leading online marketplace for new, used, unique, and vintage home furnishings, recently released their 2021 Home Furnishings Resale Report. Circular business models have increased in popularity as consumer demand for used and refurbished products surges, creating demand for resale home furnishings. Drivers of this trend include consumer awareness of the environmental benefits of buying pre-owned items, supply chain issues slowing the manufacturing and delivery of new home goods, and a renewed interest in home décor.3

COVID-19 Delta Variant Causes Consumer Confidence to Plummet to 10-Year Low

In August, the University of Michigan’s gauge of consumer sentiment index was roughly at a 10-year low at 70.3. It has only slightly rebounded since then, with a preliminary September reading of 71.0. Economists polled by the Wall Street Journal anticipated 72.0, one point higher than the index showed. Consumers seem pessimistic about their economic prospects due to economic anxiety caused by the delta variant, and they anticipate rising prices in the near future. Consumer perceptions of the home, automobile, and long-lasting home goods markets were close to an all-time low.4

The Cost of Online Shopping to Increase as Shipping Rates Go Up

Online shopping is likely to get more expensive for consumers and businesses. FedEx and UPS, two of the world’s biggest shipping providers, will hike rates in 2022. The increase could cause e-commerce goods to become more expensive and require buyers to pay more for shipped goods. FedEx said most of its shipping rates would climb by an average of 5.9%, while UPS has requested a temporary rate increase for the holiday season in 2021. Customers shifting their buying habits to e-commerce during the pandemic and the effects of inflation have caused a spike in prices. Annual increases in shipping rates are typically capped around 4.9%. Carriers believe they hold more pricing power and that they have the leverage to hike prices in 2022.5

Large Luxury Brands Predicted To Continue Outperforming

Major luxury brands are predicted to keep performing well driven by a massive shift to online consumption, and the continuous rise of a global upper- and middle-class. Larger brands keep increasing their market share versus smaller brands, indicating late-stage sector consolidation for the luxury goods industry. Multiple acquisitions in the luxury brands sector occurred over the past few months, such as Louis Vuitton acquisition of Tiffany & Co. for $15.8 billion at the start of this year. Investors anticipate more M&A activity in the luxury goods sector, with smaller companies gaining an advantage as the sector’s dominant companies look to acquire them.6 7

Automakers Forced to Slow or Stop Car Production

Car prices have been pushed to record highs in both the new and used markets due to a global microchip shortage preventing automobile manufacturers from producing enough cars to meet demand. The pandemic initially forced chip suppliers to stop production,. As the pandemic subsided, suppliers were overwhelmed with consumer demand for cars. The crisis is predicted to ease around 2023, according to Kazunori Ito, head of equity research for Morningstar.8

Theme Parks Recover After COVID-19

Theme parks suffered due to the pandemic’s lockdowns but are now enjoying higher pricing power as they recover. Many parks took advantage of the pandemic to make improvements to the park, which have the potential to increase the industry's profitability. Companies have been identifying efficiencies, updating rides, and improving experiences during the downtime, which will hopefully drive larger returns. Only SeaWorld has managed to recover to a pre-pandemic valuation so far. The industry and its investors expect significant gains since most theme parks are already seeing near pre-pandemic attendance and revenues.9

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • At Home Group Inc.
  • Hellman & Friedman LLC
  • $4,364.66
  • Diamond Resorts International, Inc.
  • Hilton Grand Vacations Inc.
  • $3,392.66
  • Core-Mark Holding Company, Inc.
  • Performance Food Group Company
  • $2,737.53
  • Walden e-Learning, LLC
  • Adtalem Global Education Inc.
  • $1,480.00
  • Eurostar, Inc.
  • Foot Locker Retail, Inc.
  • $750.00
  • C&W Motors, Inc./ Metro Motorcycle, Inc./ Tucson Motorcycles, Inc./ Tucson Motorsports, Inc.
  • RumbleON, Inc.
  • $627.55
  • Clever, Inc.
  • Kahoot! ASA
  • $500.00
  • Global Franchise Group, LLC
  • FAT Brands Inc.
  • $443.49
  • Carlisle Brake & Friction, Inc.
  • CentroMotion
  • $375.00
  • Dayton Parts, LLC
  • Dorman Products, Inc.
  • $338.00

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • The Woodlands Resort/The Westin at The Woodlands/Embassy Suites by Hilton
  • Lowe Enterprises, Inc.
  • $252.00
  • 22 Golf Clubs
  • Spirit Realty Capital, Inc.
  • $230.80
  • Le Meridien San Francisco
  • KHP Capital Partners
  • $221.50
  • Portfolio of 20 Select Service US Hotels
  • Värde Partners, Inc.; Flynn Properties, Inc.
  • $211.00
  • Baker's Cay Resort Key Largo, Curio Collection by Hilton
  • Host Hotels & Resorts, Inc.
  • $200.00

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Rasmussen College, Inc.
  • American Public Education, Inc.
  • $329.00
  • J. Alexander's Holdings, Inc.
  • SPB Hospitality LLC
  • $313.48
  • Operations of Caesars Southern Indiana
  • Eastern Band Of Cherokee Indians
  • $250.00
  • Sheraton Midtown Atlanta at Colony Square
  • Schulte Hospitality Group, Inc.
  • $160.00
  • Higher Education Business of EverFi, Inc.
  • Vector-Solutions.com, Inc.
  • $100.00

 

Source S&P Capital IQ as of 10/6/2021 and PCE Proprietary Data

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PCE Transactions

Contacts

Contacts

Joe Anto

Orlando Office

407-621-2141 |

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David Jasmund

Orlando Office

407-621-2111 |

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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. Atchley, Charlotte. “Pandemic-induced consumer trends are here to stay.” Food Business News, Sosland Publishing Company, 17 Sept. 2021.
  2. Bacani, Emmanuel Louis. “Facebook names new tech chief; Calif. bill takes aim at Amazon labor practices.” S&P Capital IQ, S&P Global Market Intelligence, 23 Sept. 2021.
  3. Benson, Robert. “New Report Sees Home Furnishings Recommerce Eclipsing Traditional Retail.” Sustainable Brands, Sustainable Life Media, Inc., 22 Sept. 2021.
  4. Halaschak, Zachary. “Consumer confidence lags amid delta variant spread.” Washington Examiner, Verizon Media, 17 Sept. 2021.
  5. Russo, Anthony. “AISLE BE DAMNED Online shopping to get more expensive as FedEx and UPS hike shipping rates.” The U.S. Sun, THE SUN, US, INC., 21 Sept. 2021.
  6. Socha, Miles. “Why Scale Matters in Luxury Goods.” Women’s Wear Daily, Verizon Media, 2 Sept. 2021.
  7. Clark, Evan. “Luxury Acquisitions Just Beginning as Big Players Consolidate: HSBC.” Women’s Wear Daily, Verizon Media, 26 Apr. 2021.
  8. Tucker, Sean. “Microchip Shortage Update: Car Inventories Could Stay Low All Next Year.” Kelley Blue Book, Kelley Blue Book Co.®, Inc., 30 Aug. 2021.
  9. Williams, Joseph. “Regional theme parks bounce back from COVID closures, enjoy higher pricing power.” S&P Capital IQ, S&P Global Market Intelligence, 20 Sept. 2021.
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