The credit markets may still be tight for those looking for financing, but for anyone not yet ready to jump in, this is the perfect time to do one’s homework.
Chris Sciortino, a director of the investment banking unit of Robert W. Baird, said during a conference call last week that he expects it will be a year or two before the markets begin to loosen up and prospects for mergers and acquisitions start to improve. While there’s not an abundance of capital for investment yet, there’s still plenty of interest in the consumer sector among strategic and private equity firms.
“When [investors] jump in will depend on consumer spending,” he said.
He noted prospective buyers are being conservative because the consumer still seems to be pulling back. Still, investors are watching to determine when is the right time to make investments in the sector.
One key change will be that “more equity will be used in transactions, and less leverage used,” he said, noting the contrast from the past few years when relatively abundant liquidity allowed firms to leverage up on their acquisitions.
Another change is that firms will be focused more on high-quality concepts with prospects for vigorous growth. That’s a change from just before the subprime debacle a year ago when the “strength of the debt market” drove firms to consider even acquisitions where there was great cash flow and modest growth, but poor execution.
As the concerns over consumer spending grew, the pipeline for initial public offerings also shut down, Sciortino said. However, he expects the IPO market for the consumer sector to come back as well, once the current cycle reverses.
Many private equity firms “use the public market as a liquidity event for their portfolio,” he explained.
Metropark USA Inc., the lifestyle retailer founded in 2004 by chairman Orval Madden, who also founded teen retailer Hot Topic Inc. in 1988, is looking to go public in 2008.
“Our speculation is that’s a possibility, [but] by no means do we expect [an IPO] will be easy to get done in what we’re seeing in the environment today,” Sciortino said of the proposed timing for the Metropark IPO.
The director said it is “highly likely” the market will see other IPO filings once there is a positive change in the momentum in consumer trends. He noted specifically that high-growth retailers, or those that indicate earnings growth of 20 percent or more, will get rewarded by their ability to access the IPO market, giving their owners a measurement of liquidity for those businesses.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews