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Joe Anto

E: janto@pcecompanies.com

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Industry Trends

US Consumer Spending Stalls in May; Inflation Holds Mixed Outlook

U.S. consumer spending in May showed only a marginal increase of 0.1%, with a decline in purchases of durable goods, including light trucks, amid higher borrowing costs, hinting at a slower economy in the second quarter. However, the report by the Commerce Department also revealed that annual inflation rose at its slowest pace in over two years. Despite this, the underlying price pressures remain significant, making it likely that the Federal Reserve will continue raising interest rates in July. Economists suggest that lower-income households impacted by the end of the student loan relief plan may face further financial pressure.1

Summer Blues for Back-to-School Retailers Amid Price-Conscientious Consumers

Major retailers, including Walmart, Foot Locker, and Marks & Spencer, gear up for a challenging back-to-school shopping season as inflation remains high. Shoppers are becoming more selective with spending on discretionary items like clothing and sneakers. Retailers are adapting by offering lower-priced school supplies and promotional discounts to drive demand. Moody's predicts uneven operating profit growth for global retail and apparel companies, while big-box retailers are expected to benefit from falling production costs. Amid economic uncertainties, retailers will need to find a way to attract cautious, price-sensitive consumers.2

Inflation at 4% Annual Rate, Lowest in Two Years

The consumer price index (CPI) indicates a 4% annual rise in inflation for May 2023, the lowest in two years. Core CPI, excluding food and energy, increased by 0.4% and 5.3%, respectively. The numbers matched consensus estimates, leading to a 100% probability that the Federal Reserve will not raise interest rates in the near term. Despite the positive trend, shelter prices and transportation services continue to pose challenges for consumers. Overall, the report may offer the Federal Reserve breathing room before considering further rate hikes.3

Consumer Confidence Soars to Highest Level Since Start of 2022

U.S. consumer confidence improved substantially in June, reaching its highest level since January 2022. The Consumer Confidence Index® rose to 109.7, up from 102.5 in May, indicating brighter current conditions and a surge in expectations. Younger consumers and those with incomes over $35,000 showed the greatest confidence. Although expectations of a recession remain, fewer consumers anticipate it in the next 12 months. The positive outlook includes optimism about family finances and declining inflation expectations. However, there is a slowdown in plans to purchase autos, homes, and travel domestically.4

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • WPF Holdings, Inc.
  • WPF Holdings, Inc.
  • $4,863.56
  • TravelCenters of America Inc.
  • BP Products North America Inc.
  • $3,581.13
  • IMG Academy, LLC
  • BPEA EQT; Nord Anglia Education, Inc.
  • $1,100.00
  • Ruth's Hospitality Group, Inc.
  • Darden Restaurants, Inc.
  • $965.97
  • JW Marriott San Antonio Hill Country Resort & Spa
  • Ryman Hospitality Properties, Inc.
  • $800.00
  • Nautilus Hotel
  • Service Properties Trust
  • $165.40
  • Claremont Club & Spa
  • Ohana Real Estate Investors LLC
  • $163.30
  • JW Marriott Tucson Starr Pass Resort & Spa
  • Southwest Value Partners Enterprise, LLC
  • $110.00
  • Nugget Casino Resort
  • Century Casinos, Inc.
  • $100.00
  • Mandarin Oriental (New York), Inc.
  • Reliance Industrial Investments and Holdings Limited
  • $98.15

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • The Williamsburg Hotel
  • Quadrum Global
  • $96.00
  • 192-key St. Regis Chicago
  • Gencom Group; Magellan Development Group, LLC; GD Holdings LLC
  • $76.00
  • The Hilton Granite Park
  • Driftwood Capital
  • $56.80
  • Residence Inn Scottsdale North
  • GIC Private Limited; Summit Hotel Properties, Inc.
  • $29.00
  • Home2 Suites by Hilton Colorado Springs South Hotel
  • ARA US Hospitality Trust
  • $29.00

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Kimpton Hotel Monaco Seattle
  • InnVest Hotels LP
  • $63.30
  • Certain assets of VKGS LLC
  • Everi Holdings Inc.
  • $59.00
  • The Four Points by Sheraton San Rafael Marin County Hotel
  • Equinox Hotels Pty. Limited; Urban Green Investments
  • $38.00
  • PetCareRx, Inc.
  • PetMed Express, Inc.
  • $36.00
  • Golf Course at the Palm Beach Polo Golf & Country Club
  • Wellington Cypress Golf, LLC
  • $35.00
  • Hotel Vintage Park
  • Pacifica Hotel Company
  • $33.70
  • Otto's BMW/Otto's Mini
  • Piazza Auto Group
  • $30.70
  • Belami, Inc.
  • SKYX Platforms Corp.
  • $25.28
  • Marriott Saddle Brook
  • Victory International (USA), LLC
  • $16.80
  • Substantially All the Assets of Bolta US Ltd.
  • SMP Automotive Systems Alabama Inc.
  • $16.00

 

Source S&P Capital IQ as of 7/7/2023 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. Lucia Mutikani. “US Consumer Spending Hits Speed Bump; Inflation Picture Mixed” Reuters, June 30, 2023.
  2. 2. Katherine Masters. “Retailers Battle for Uncertain Back-to-School Demand After ‘Volatile’ Quarter” Reuters, June 5, 2023.
  3. 3. Jeff Cox. “Inflation Rose at a 4% Annual Rate in May, the Lowest in 2 Years” Reuters, June 13, 2023.
  4. 4. The Conference Board. “US Consumer Confidence Improved Substantially in June” The Conference Board, June 27, 2023.
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