Retail IPOs Set to Improve?
Just this week, the National Retail Federation raised its 2016 retail sales forecast to a year-over-year increase of 3.4 percent from the previous forecast of 3.1 percent growth, influenced by expectations that consumer spending will remain solid throughout the end of the year. Additionally, the NRF expects online and other non-store sales to increase between 7 percent and 10 percent year-over-year, up from the previous forecast increase of 6 percent to 9 percent. Will this positive sentiment also bleed into the retail IPO market?
There is a lot of room for improvement, as the number of IPOs on U.S. exchanges across all sectors is down by approximately 60 percent year-over-year, according to the 2016 BDO IPO Halftime Report
. And in terms of retail industry performance, in the past 12 months, there have been just six consumer discretionary IPOs and five IPOs of consumer staples, as reported by Renaissance Capital
. When compared to the 54 healthcare debuts in the past year, and considering that the retail sector boasted three of the biggest IPOs last year, the consumer IPO market is lagging behind.
However, IPO activity picked up in the second quarter, which saw four consumer goods companies make their public debuts. SiteOne Landscape Supply, which went public in May, currently sits at nearly double its offering price. And in mid-July, PE-backed AdvancePierre Foods priced in the middle of its range, commanding a market value of $1.7 billion.
This resurgence of activity bodes well for the future: The BDO IPO Halftime Report found that one-third (34 percent) of bankers predict the pace of U.S. IPO activity will increase in the second half of 2016. With clothing retailer J.Jill
and dcor superstore At Home
preparing for IPOs, as well as the 2015 delays
of Albertsons and Neiman Marcus, the retail IPO market may see enough activity to meet this prediction.
Some retailers may be concerned about wading the IPO waters in the wake of Brexit. But while the markets remain volatile, there is little expectation that the UK’s “divorce” from the EU will impact IPO activity, at least in the short-term.
Retailers may be watching the economic conditions of the market and weighing their options as to whether or not an IPO may be the right move for them. It’s important for retailers in this position to consider the long-term effects of going public, rather than just the immediate benefits that may occur. For more information on the IPO market across industries, view the full 2016 BDO IPO Halftime Report here
As we move into the second half of the year, what are your expectations for IPO activity in the retail industry?
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