Www.thefoodpartners.com P RESENTED BY T HE F OOD P ARTNERS Industry Overview September 2015.
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Transcript of Www.thefoodpartners.com P RESENTED BY T HE F OOD P ARTNERS Industry Overview September 2015.
www.thefoodpartners.com
PRESENTED BY THE FOOD PARTNERS
Industry Overview
September 2015
CONFIDENTIAL INFORMATION
Industry Overview
2
Improving Underlying Fundamentals
• The worldwide economy is improving very slowly • The world political affairs are a mess – the potential of a major
shock wave awaits us every day• The runway to economic recovery continues to be lengthened –
lower interest rates facilitate borrowing to make acquisitions• Equity markets have stabilized with occasional high volatility
becoming the new normal• The presidential election will at least provide comedy but no real
change
Year to Date 2015
• The market landscape for many retailers is unbalanced based a number of factors:
Competitive openings from limited assortment formats, alternative formats and Walmart Neighborhood markets are radically alternating specific markets
Social media and home delivery are the rage but not for all The health and wellness trend continues to drive quality, fresh,
natural and organic at an accelerated pace across all demographics – there is a demand for “Good Food” – the question is whether you can satisfy the needs of your customer base by selectively adding new products on the shelf
Retailers that became less relevant to their customers continued to lose sales at an accelerated rate – A&P is the poster child
• Non-viable store closings accelerated during the year compared to last year
• 1 to 5 store grocery store operators are quietly exiting the market
Current Status of the Industry
CONFIDENTIAL INFORMATION
Industry Overview
3
EBITDA Margins of Public Retailers
10.8%
9.8% 9.3%
8.4% 8.2%
6.3% 6.1% 5.8% 5.5% 5.2% 5.0% 4.3% 4.2%
3.0%
1.3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Fresh Market Publix Whole Foods Sprout's NaturalGrocers
Ingles Ahold Delhaize Weis Tops Kroger Smart & Final Village Roundy's Fairway
5.8% 5.7%5.1%
4.3% 4.1%3.5%
2.5% 2.2%1.6% 1.4%
0.0%
(1.0%)(1.8%)
(3.9%)
(5.3%)(6.0%)
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
NaturalGrocers
Kroger Sprout's Weis Publix Smart & Final Delhaize Whole Foods Ingles Tops Village Fresh Market Ahold Roundy's Fairway
Comparable Store Sales of Public Retailers
- Source: Capital IQ, company filings- As of 9/1/2015- Comparable store sales for latest quarter over quarter
CONFIDENTIAL INFORMATION
Industry Overview
4
Historical Stock Price and Enterprise Value to EBITDA of Public Retailers
- Source: Capital IQ- As of 9/1/2015 and 9/1/2014[1] 20 day average
Non- Large Cap Small Cap Specialty Traded
Smart Fresh Natural Whole Ahold Delhaize Kroger Fairway Ingles Roundy's & Final Weis Village Market Grocers Sprout's Foods Publix
9/1/2015
Closing Price [1] $19.74 $89.53 $36.62 $2.28 $51.54 $2.39 $16.43 $41.89 $28.18 $25.55 $24.33 $20.94 $33.26 $20.00
Enterprise Value / EBITDA 7.3x 7.0x 8.7x n/a 8.1x 6.0x 10.6x 6.6x 5.8x 6.1x 11.7x 12.5x 8.0x 4.6x
9/1/2014
Closing Price [1] $17.19 $68.39 $25.05 $4.92 $24.93 $3.86 n/ a $43.01 $22.07 $31.31 $19.10 $30.55 $38.46 $14.75
Enterprise Value / EBITDA 5.5x 5.3x 7.5x n/a 6.9x 7.5x n/a 6.9x 5.4x 8.8x 11.2x 21.1x 10.1x 3.8x
Year-Over-Year Change
Closing Price [1] 14.8% 30.9% 46.2% n/ a 106.8% (38.2%) n/ a (2.6%) 27.7% (18.4%) 27.4% (31.5%) (13.5%) 35.6%
Enterprise Value / EBITDA 31.9% 30.9% 15.4% n/a 18.6% (20.7%) n/a (4.3%) 8.8% (30.4%) 4.6% (41.0%) (21.4%) 23.1%
CONFIDENTIAL INFORMATION
Industry Overview
5
Financial Performance of Public Retailers
• Traditional supermarket formats without a differentiated market strategy are struggling – negative store comps for the last three years is a clear sign that sales will continue to decline at an accelerating rate
• Retailers that are adopting to the “New World Order” are attempting to balance the needs of their existing customers that do not want change with their customers that demand “Good Food” or they will look elsewhere
• A combination of gross margin compression and operating expenses increasing is raising the bar from $4 to $5 of sales per square foot per week as a benchmark to test if a store is viable.
• For many, operating a 60,000 to 65,000 square foot store has become challenging in markets with a full complement of retail formats.
• The health care reform has had less impact than expected on benefit costs • Overall, those companies that have momentum and are relevant to their
customers have maintained or increased their cash flow• The biggest challenge today is that a retailer cannot reinvest cash flow that
they pay out as overhead expenses
CONFIDENTIAL INFORMATION
Company Date FiledNo. of Stores
State Filed Status
Haggen 9/ 9/ 2015 164 DE BankruptThe Great Atlantic & Pacific Tea Co. 7/ 19/ 2015 297 NY BankruptDahl's Foods 11/ 10/ 2014 10 IA SoldAssociated Wholesalers 9/ 9/ 2014 n/ a DE SoldFarmers Foods (Highland Springs and Webb) 6/ 2/ 2014 2 VA ClosedC&K Market 11/ 19/ 2013 60 OR EmergedFresh & Easy Neighborhood Market 9/ 30/ 2013 167 DE SoldMidwest Gourmet Foods (Fox & Obel) 9/ 19/ 2013 1 IL UnknownMi Pueblo San Jose 7/ 22/ 2013 21 CA EmergedBelle Foods 7/ 1/ 2013 57 AL SoldPro's Ranch Markets 5/ 29/ 2013 11 CA SoldLiborio Market 4/ 13/ 2012 8 CA LiquidatedMichael’s Fresh Market 12/ 30/ 2011 7 IL UnknownAssociated Grocers of Maine 8/ 26/ 2011 n/ a ME DismissedAzteca Ranch Market 8/ 1/ 2011 n/ a CO LiquidatedMoo & Oink 8/ 24/ 2011 4 IL LiquidatedAndronico's Market 8/ 22/ 2011 7 CA SoldA.G. Ferrari Foods 3/ 30/ 2011 13 CA SoldRizk-Co-Zann Foods Corporation 3/ 10/ 2011 1 PA DismissedThe Great Atlantic & Pacific Tea Co. 12/ 12/ 2010 336 NY EmergedEmpresas Cordero Badillo 11/ 12/ 2010 n/ a PR EmergedGrand Mart International 10/ 19/ 2010 6 MD SoldSupermercado del Pueblo 4/ 1/ 2010 4 NV UnknownStar Food International 1/ 5/ 2010 3 CA Unknown
7
1
6
3 20
2
4
6
8
10
12
14
16
2011 2012 2013 2014 2015
Industry Overview
6
Financial Performance of Public Retailers
• The number of supermarket bankruptcies has remained steady over the past several years
• Since 2010, only 3 companies with over 100 stores (A&P, Fresh & Easy and Haggen) have filed bankruptcy
• Excluding A&P, Fresh & Easy and Haggen, the average chain size is 13 stores
Financial Performance of Public Retailers
CONFIDENTIAL INFORMATION
Industry Overview
7
• The number of total transactions and stores sold have increased since 2009 (even after excluding the Albertson’s and Safeway acquisitions in 2013 and 2014, respectively)
Stores Sold Average Stores per Transaction
Mergers and Acquisitions Portfolio Versus Corporate Transactions
30 3019
4227
9
7 1224
21
20
13
3742 43
63
47
22
0
10
20
30
40
50
60
70
80
90
100
2010 2011 2012 2013 2014 YTD Aug 2015
Portfolio Corporate
1,012671 430
877 1,335
3,400
130
749510
1,889 2,006
3,830
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2010 2011 2012 2013[1] 2014[1] YTD Aug2015[1]
Stores Sold Stores Sold Through Large Transactions[1]
418 12
30 43
174
16 14 200
20
40
60
80
100
120
140
160
180
200
2010 2011 2012 2013[1] 2014[1] YTD Aug2015[1]
Avg. Stores per Trx. Avg. Stores per Trx. (Excl Large Trx)[1]
- Source: Company reports, news articles, The Food Partners- Includes announced but not yet closed transactions[1] Albertson’s, Safeway and Delhaize acquisitions in 2013, 2014 and 2015, respectively
CONFIDENTIAL INFORMATION
Industry Overview
8
Mergers and Acquisitions
Looking Forward at Retail
• The acquisition of Safeway by Albertsons last year has set the stage for the next round of consolidation
• Kroger is hunting in adjacent markets or infilling in existing markets
• Haggen may not survive Select retailers will benefit in markets as stores are closed If is questionable how many stores will be sold as viable locations The FTC may rethink their policies – the events of the last 45 days
has been problematic• There are more retail stores on the market today then in the last
five years if you exclude several large transactions in the recent past
• Consolidation will accelerate over the next 24 months
Looking Forward at Distribution
• Wholesale consolidation will continue C&S acquired Associated Wholesalers C&S acquired Grocers Supply KeHe acquired Nature’s Best
• Unified and Supervalu will not benefit from the divesture of Albertson’s/Safeway divestiture to Haggen
• Too many grocery distribution centers and too much overhead dragging down independent retailers
• Consolidation at wholesale will lag the retail consolidation
The Food Partners, LLC7200 Wisconsin Avenue, Suite 312
Bethesda, MD 20814www.thefoodpartners.com
David W. SchoederPrincipal
(202) [email protected]
Matthew S. MorrisPrincipal
(202) [email protected]
James C. FloydPrincipal
(817) [email protected]
Douglas A. HermanDirector
(202) [email protected]
Carlos A. GarciaDirector
(202) [email protected]
Jesica A. MitchellDirector
(208) [email protected]
Maureen B. BatesOperations
(202) [email protected]