Toys ‘R’ Us’ Asian business receives multiple bids
The Asian business of Toys “R” Us is generating lots of interest.
The bankrupt retailer, which is the process of liquidating its U.S. operations, has received multiple offers of more than $1 billion for its Asian business, Bloomberg reported. The offers are for the 85% stake Toys “R” Us owns of its Asian unit.
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Another record year for convenience stores as profits, sales edge higher
One of every 30.9 dollars spent in the U.S. in 2017 was spent at a convenience store.
That’s according to new data from the National Association of Convenience Stores, which reported that U.S. convenience stores experienced their 15th straight year of record in-store sales and fourth straight year of $10 billion-plus in pretax profits in 2017. Overall convenience stores sales surged 9.3% to $601.1 billion in 2017, led by a 14.9% increase in fuel sales. Profits were $10.4 billion, up 1.6% increase over 2016.
The sales increase at convenience stores last year was largely because of higher gas prices (up 12.8% to $2.38 in 2017) and a 1.9% increase in gallons sold.
Convenience stores sell an estimated 80% of the fuel purchased in the United States. But while fuel sales account for 61% of sales dollars, fuels margins are relatively slim and fuels only account for 38% of total profit dollars at convenience stores.
In-store sales at c-stores increased 1.7% to a record $237.0 billion.
Foodservice, a broad category that mostly includes prepared food but also commissary foods and hot, cold and frozen dispensed beverages, continues to be a key focus for growth in the convenience store channel.
Foodservice sales overall in 2017 were $53.3 billion, accounting for 22.5% of in-store sales in 2017 and 33.9% of gross profit dollars.
The category also was the biggest differentiator in terms of profits: Top-quartile performers had prepared food sales that were 3.6 times greater than bottom-quartile stores; coffee sales at top performers were 5.2 times greater that than those of the bottom quartile.
The overall merchandise sales groups as a percentage of overall merchandise sales were:
• Tobacco (cigarettes and OTP): 34.1% of in-store sales;• Tobacco (cigarettes and OTP): 34.1% of in-store sales;
• Foodservice (prepared and commissary food; hot, cold and dispensed beverages): 22.5%;
• Packaged beverages (carbonated soft drinks, energy drinks, sports drinks, water, juices and teas): 15.8%;
• Center of the store (salty, candy, packaged sweet snacks and alternative snacks): 9.9%;
• Beer: 8.5% (12.4% for stores selling beer); and
• Other: 9.2%.
Despite record in-store sales, direct store operating expenses — encompassing wages, payroll taxes, healthcare insurance, card fees, utilities, repairs/maintenance and supplies, as well as several other categories including franchise fees and property taxes—outpaced inside gross profit dollars for the second consecutive year. This trend continues to create challenges for convenience retailers as they look to grow their businesses, according to NACS.
Study: Retail M&A activity set to increase in 2018
Look for retail M&A deal volume to increase this year after holding steady in 2017.
That’s according to A.T. Kearney’s 2018 Consumer and Retail M&A Report: Can M&A Reignite Growth in Consumer and Retail? In 2017, not accounting for large deals, M&A deal value was a scant 2% below the previous year, with activity essentially matching the hot market of 2016, the report noted.
But with the completion of several political elections around the world, and both private equity firms and consumer products companies reporting record amounts of cash reserves, the report predicts a rise in global M&A deals.
It also predicts legacy companies increasingly using M&A for growth and innovation, and more outbound deals for the U.S. than there have been, due to rising interest rates.
The A.T. Kearney report is based on interviews with C-level retail executives. Three-quarters of the respondents said they are using M&A to help their companies acquire new capabilities, expand their product portfolios, access new customers, or increase their geographic reach. The market is characterized by optimism from those at the top — for example, 71% of respondents reported that M&A is creating value, up from 48% last year.
“While some key trends in the market will become even more entrenched — such as record-high cash reserves and the continued ease of global trade that M&A represents — others will shift,” said A.T. Kearney Partner Bob Haas, leader of the firm’s global Mergers & Acquisitions Practice and co-author of the report. “Much of the wait-and-see climate we saw in 2017 that has characterized M&A globally has dissipated. At the same time, with interest rates finally on the uptick, we will likely see an increase in U.S. companies making innovative acquisitions to stay relevant.”
See A.T. Kearney’s full 2018 Consumer and Retail M&A Report online here.