Here are highlights from our Q1 2011 Active Insights Quarterly report.
We provide research coverage and/or market-making for 31 active lifestyle companies, including these action sports and outdoor companies: Deckers Outdoor, Big 5 Sporting Goods, Dick’s Sporting Goods, Lululemon Athletica, Nike, Urban Outfitters, Pacific Sunwear, VF Corporation, Columbia Sportswear, Volcom, Quiksilver and Zumiez.
Public Company Market Commentary
Stock prices in the active lifestyle composite increased 23% over the 12-month period ending 3-31-11 and valuations remained strong at around 8.9x Total Enterprise Value / EBITDA.
Large Cap Stocks Break from the Pack
Stock prices of companies with market caps over $2B grew 45.1% for the 12-month period ending 3-31-11, substantially exceeding the performance of the sub-$2B market cap companies and the broader market.
Positive Indicators
In March 2011, unemployment dropped to 8.8% and consumer confidence remained 20%+ higher than the 3-year average.
Consumers Grapple with Higher Costs
CPI increased at a 6% annualized rate in February 2011, which was driven largely by increasing food and energy costs. Increasing input costs for materials (such as cotton) and labor are looming.
NRF Expects 4.0% increase in 2011
The National Retail Federation (“NRF”) expects retail sales growth in 2011 (excludes auto, gas, and restaurant) to be higher than both 2010 growth and the 10-year average retail growth of 3.1% and 3.7%, respectively.
Compression in Multiples
EBITDA multiples are down 9% from a year ago, as EBITDA growth has outpaced share prices.
M&A Activity Continues in 2011
Active Lifestyle M&A activity remained healthy in Q1 2011, although the number of transactions decreased from Q1 2010. Notable deals in Q1 2011 include:
- Mar. 15: GSI Commerce (GSIC) acquires Football Fanatics, a provider of online team and league-licensed merchandise, for $277M
- Mar. 2: Weyco Group (WEYS) acquires The Combs Company, a manufacturer of boots and shoes, for $43M
- Feb. 17: Brown Shoe Co. (BWS) acquires American Sporting Goods Corporation, a footwear manufacturer, for $151M
- Feb. 8: DSW (DSW) agrees to merge with Retail Ventures (RVI), its largest shareholder
D.A. Davidson publishes this commentary to provide industry decision makers with relevant economic and market information in an accessible format. Please notify us if you would like additional information or if we can be of assistance with helping you raise capital or assisting in mergers or acquisitions.
Please contact us if you would like a full copy of the 6-page report.
Sam Orme is a Principal in Investment Banking for D.A. Davidson & Co. He has extensive experience working on a variety of investment banking transactions including mergers and acquisitions, public offerings, and private equity transactions. Companies he has worked with include American Sporting Goods, Volcom, Leatherman, Nautilus, PayPal.com, Ask.com, E*Trade.com, Teva/Ugg, Crocs, Cargill, Corporate Express, and Mitsui, as well as numerous financial buyout groups.
