Navigating the Storm: Opportunities for Restructuring in Retail

Brandon Mavleos, Sr. Director, Product Marketing - Investment Banking

A confluence of long-term trends was already disrupting Retail & Consumer companies. Now, the sector finds itself at the center of market volatility as global brands, SMEs, and consumers alike learn how to navigate this tricky environment. With customers staying at home and not spending, declining foot traffic is already putting pressure on many businesses across the sector. Store closings, employee work-from-home policies, city-wide lockdowns, disruptions in global supply chains, and cancellations of live events are only some of the problems Retail CEOs face as they realign their business operations.  

The market downturn comes at an already difficult time for the Retail sector, which had twenty-three Chapter 11 filings in 2019* (US), 43 filing for administration (UK) in 2019 and nine already in 2020 (at end-Feb)**, and eight that failed in Singapore alone in 2019. Consumer shifts away from brick-and-mortar shopping continue to draw casualties as many retailers, notably apparel companies, continue to struggle assimilating to e-commerce.  

Despite these headwinds, however, there are still considerable opportunities across Retail: 

• More companies are refining online delivery channels and other e-commerce services, capitalizing on the infrastructure they've built in recent years to transform with changing consumer preferences. Those that have set themselves up with an excellent online shopping experience may be able to hedge losses from decreased foot traffic. 
• Consumers are increasingly loyal to brands they love, and retailers who focus on creating a holistic customer experience have a better shot at succeeding. Notable companies that invest in brand equity remain attractive opportunities for investors (For example, see Tiffany's 2019 acquisition by LVMH).  
  
• Access to capital via Asset-Backed Lending continues to be a popular investment vehicle in the Retail sector, giving companies that are looking to restructure more opportunities to take advantage of flexible payment terms.

Responding with Foresight and Intentional Action

As tempting as it may be to bunker down and wait out the storm, industry analysts who have navigated past disruptions in this sector caution that now is not the time for paralysis. Rather, the current market volatility calls for cool-headed evaluation of broader business strategy. In particular, many companies may find the current moment a perfect time to restructure the business or accelerate restructuring plans that were already in place. It may well be time to divest underperforming assets or wind them down while awaiting better times. There may be opportunities to refinance debt with loan tranches that are secured differently, or to renegotiate repayment.  

In all cases, technology can provide powerful capabilities to help dealmakers execute these strategies. Consider the Datasite virtual deal room platform and industry support, which have been streamlining retail restructuring for decades. The automated categorization and redaction capabilities of Datasite Prepare, for example, provide core capabilities to simplify exit preparation. Datasite Diligence provides flexible permissions to automate many due diligence processes and allow internal and external stakeholders to participate with confidence. For companies prospecting market interest, Datasite Outreach automates manual tasks across this exercise, allowing stakeholders to perform tasks in minutes that used to take hours or days.  

Whichever strategy you pursue to navigate the volatility that analysts expect to persist in this sector in the near term, Datasite can help you pursue it more easily, with less risk.   

*Source: CNBC 
** Source: Centre for Retail Research