2015 INSOLVENCY AND RESTRUCTURING FORUMS. Retail insolvency. A practitioner s guide to key issues and challenges

Transcription

1 Retail insolvency A practitioner s guide to key issues and challenges

2 Agenda Introduction Quick overview of retail in Canada So now what do you do with an insolvent retailer? Questions

3 Key retail macro-economic indicators GDP Consumer Confidence CPI Unemployment 1,650,000 1,600, % January month to March % 12 month to March % % March 2015 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Disposable Income Indebtedness Household expenditures 1 Retail Trade 1,140,000 1,120,000 1,100,000 1,080,000 1,060,000 1,040, % QoQ Q Q Q Q Q Q Q Q % Q Credit-market debt including mortgages, consumer credit and non-mortgage loans grew to percent of disposable income, from a revised percent in the third quarter. 990, , , , , , , , , % QoQ Q Q Q Q Q Q Q Q C.A.G.R +3.64% Sources: Statistics Canada, Conference Board of Canada 1 Household final consumption expenditure

4 National projections 3.7% Food services industry revenues grew by an estimated 5.2% in However, sales growth is expected to be much weaker this year, averaging only 3.7%. Food consumption is expected to grow at an industry annual are compound projected to rate increase of 2.51%, by 1.3% and in 2015, its against per capita a 1.6% increase consumption in the Supermarkets by 1.53% and CAGR Grocery between Stores industry the years 2014 and Revenues of the Specialty Food Stores 1.3% 1.4% Household non-durables goods consumption increased by 2.6% in 2014 and is forecasted to grow by only 1.4% in 2015, and 1.8% in Household semi-durables goods Alcoholic drinks value, and volume sales consumption compound annual increased growth by 3.8% rate in 2014 is and is forecasted to to grow be 4.15% by 4.0% and in 2015, 2.27%, and 2.7% in respectively. 4.0% 4.0% Rising new home construction and an increase in consumer renovation projects will cause total Home improvement store industry revenue to increase by 4.0% during Consumer confidence rose throughout 2014 to and again in the first months of 2015 to 108.5, making Canadians more likely to make major purchases. 2.4% A healthy increase of 3.6% in 2014 and 3.0% in 2015 in personal disposable income, is expected to increase consumer spending by 2.3% in 2014 and 2.4% in While online grocery delivery services are gaining popularity, online grocery sales in Canada have ballooned 17% in just the past 12 months to reach $1.85 billion. 17% Sources: Conference Board of Canada, BMI, Forrester, IBIS World

5 National projections 78.9% Canadian online retail sales have grown to C$22.3 billion in 2014 and are expected to reach C$39.9 billion, and account for 9.5% of total retail transactions, by 2019 Alcoholic drinks value, and volume sales compound annual growth rate is forecasted to be 4.15% and 2.27%, respectively between 2014 and % 3.53% Mass Grocery retail sales are expected to rise at an annual compound rate of 3.53%, with Convenience stores sales leading the pack with a 4.91% growth forecast. Total food consumption is expected to increase at a compound anual growth rate of 2.51%, and per-capita consumption by 1.53% CAGR. 2.51% % A strengthening U.S. economy and weaker Canadian dollar are expected to make exports grow by 3.4% CAGR, and imports by 4.3% CAGR between 2014 and The revenues of the Convenience Stores industry are anticipated to grow in the next five years at an average annual rate 0.2% to $8.2b in % 5.4% Food services industry s profits will be little changed at C$1.6 billion this year but will begin to rise again modestly, averaging 5.4% per year between The Specialty Food Stores industry is forecast to increase its share of the retail sector and reach an average annual revenue growth of 1.3% to $2.1B in % Sources: Conference Board of Canada, BMI, Forrester, IBIS World

6 National retail landscape Share of retail sales by provinces (billion CDN) BC 13.1% AB 15.6% Canadian Retail Sales (billion CDN) SK&MB 7.4% 42.6 Territories 0.35% ON 35% QC % QC %Atl Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Source: Statistics Canada 2014

7 Key retail sub-sectors 2014 Retail store sales by selected commodity In m illions $ $ % of total At risk in some geographies At risk in some geographies Food 87, % Beverages 28, % Drugs, Cosmetics, PHC 43, % Hardware and home reno. 24, % New automotive 60, % Used automotive 28, % Auto parts 23, % Auto fuel, oil etc. 59, % Apparel 35, % Furniture & appliances 15, % Sub-total 407, Others (Electronics, Home & Garden, Toys, Media, Tobacco) 99, % Total retail sales 506, % Losing ground to foreigners Heavily affected by digital channels Source: Statistics Canada

8 Atlantic Provinces 7.2 % of Total Canadian Sales Retail Sales 2014 (m CDN) NB 3.5 Real household final consumer expenditures are expected to increase 2.8 per cent in 2015, led by spending in the semi-durable and non-durable categories in NB 2.9 PEI NFL 0.8 NS 4.3 An improved labor market will help stimulate domestic demand. Stronger household final consumption expenditures, especially in the durables category, will benefit provincial retailers in NS. 5 4 NB NFL 3 PEI NS 4.3 Number of Retail Locations (in million) NS NB NFL PEI Retail sales annual growth Outlook Source: Statistics Canada, Conference Board

9 Leading trends affecting retail

10 Learning to retail- speak Financial Same store sales Traffic Closing ratio Sales per square foot 4-wall contribution GROC gross occupation costs Average ticket Inventory turnover Operational Open to buy (OTB) Discount cycle Category planning and assortment Planning and purchasing cycle Product flow Product allocation Replenishment cycle

11 So what do you do with an insolvent retailer? Let s hear from the experts!