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BFD Expert Voices - Retail Deals

BFD Expert Voices

The NRF Retail's Big Show returned IRL after two years, and much of the talk centered around retailers investing in technology to bolster the frontline workforce, Kim writes.

Why it matters: Labor issues remain top of mind, as retailers still face difficulties recruiting, training and retaining talent.

Details: Technology can help restaurants facing staff retention issues and increased complexity of running restaurants, says Vikram Badhwar, the director of restaurant technology at KFC U.K. and Ireland.

“We have to remain competitive, we have to continue to invest in the consumer-facing digital piece, and evolve that space. But actually, this year especially, we're investing five times more in the restaurant back-of-house space, in the restaurant tech space, than we were last year,” he says, adding that this is so that they can make it simpler to run a restaurant.

Meanwhile, technology spend has become a focal point for grocers as well.

CEO Jason Buechel says Whole Foods is investing in technology that supports its workers, such as refining the way it orders products, and helping plan when it comes to out-of-stocks. 

“Ultimately, that's another area where there's a win-win. It's great for the team members because they can focus on sort of their craft and their trade. And it's great for our customers because they're going to get more time and attention,” he says.

Yes, but: There’s also a shift from last year, where retailers that have moved to the cloud and invested in digitalization are now looking for more use cases.

“Those that are in the cloud are now able to use AI and ML and apply it to some really new areas,” Amy Eschliman, managing director of Google Cloud retail industry solutions, tells Kimberly in New York.

There’s “an openness to using it in more spots in the business,” especially in their stores, she adds. “You're seeing stores become a data stream as well, and being able to apply AI and ML use cases.”

Regarding the worker experience, “we definitely hear from our retailers that it's becoming a priority,” Eschliman says.

Eschliman says retailers are looking to attract great associates, but they're also examining how can they make their lives easier while they’re working and how can they make the job enjoyable.

The intrigue: It’s difficult to control the cost of eggs, rent or utilities, and the only lever they can pull is with labor costs, Grubbrr CEO Sam Zietz tells Kimberly in New York. 

His company, which runs self-ordering systems and kiosk software platforms, helps move people from behind the counter, where they do mindless tasks like placing an order, to the front where they can give customers a better experience and be more interactive. 

Businesses are faced with opening for limited hours or simply shutting down.

He expects wider adoption of technologies this year, because “they don't have a choice. They're either going to have to close their doors, or they're going to have to evolve.”

1 big thing: Tech dominates NRF chatter

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Trian Fund Management, the activist hedge fund led by Nelson Peltz, said it will not seek to take Wendy's (Nasdaq: WEN) private, Dan Primack and Richard write.

Why it's the BFD: At the counter, this reflects how Wendy's has grown revenue, made C-suite changes, announced a share buyback and increased its dividend. In the kitchen, it's about Peltz turning his attention to a much more lucrative target in Disney.

Backstory: Trian has been involved with Wendy's for over a decade, with it and Peltz currently holding a 19.35% ownership stake. Last May, the firm said it was considering a takeover bid, either alone or with a third party.

The bottom line: Fast food gets more attractive to private equity in tough economic environments. Expect buyout firms to keep one eye on the burger-flipper's reorg and another on macro numbers, to see if there's a match. Note that Roark bought Arby's from Wendy's in 2011. 

💭 Richard's thought bubble: Even at a premium to its current valuation, Wendy's might still be a bargain for the likes of Roark and its portfolio company Inspire Brands.

By the numbers: Wendy's current enterprise value based on current market cap, long-term debt, and cash and cash equivalents at the end of the third quarter is about $7 billion.

That would equate to a multiple of about 14x adjusted EBITDA of nearly $500 million.

By contrast, Inspire Brands, which is controlled by PE firm Roark Capital Group, shelled out 23x EBITDA to acquire Dunkin' in late 2020, according to reports.

Yes, but: Debt is not only harder to come by, but it's also more expensive. 

2. The BFD: Trian changes Wendy's order

Illustration of a double cheeseburger being eaten in reverse. 

🤝 M&A Goldman Sachs partner Cosmo Roe sees luxury beauty brands primed for M&A, in a Bloomberg interview. 

As we reported throughout 2022, luxury’s strength has been an outlier in the broad retail deal world, and at least one dealmaker says it’s not done yet.

3. Retail therapy

Illustration of two speech bubbles in the shape of shopping bags.

• Locad, an Indian provider of cross-border e-commerce logistics software, raised $11m in new series A funding. Reefknot Investments led, and was joined by Access Ventures, JG Summit and WTI, and insiders Sequoia India, Surge, Febe Ventures and Antler. https://axios.link/3WkT8NQ

• Syky raised a $9.5m Series A led by Seven Seven Six. Brevan Howard Digital, Leadout Capital, First Light Capital and Polygon Ventures Group also participated in the round. https://axios.link/3QIPGLU 

• The Edit LDN, a London-based sneaker resale marketplace, raised $4.8m in seed funding led by Regah Ventures.  www.theeditldn.com

• Whirlpool (NYSE: WHR) agreed to divest most of its EMEA businesses via transactions with Turkish home appliance rival Arcelik. https://axios.link/3iHIWkH 

4. Retail transactions

• Christine Valmy Inc., a Pine Brook, New Jersey-based creator of clean skin care products hired Robert Olich as chief financial officer, Steve Earl as head of manufacturing & operations, and Vicky Nimmolrat as director of human resources & compliance. https://www.christinevalmy.com/

• Ideal Image, the Tampa, Fla.-based aesthetics chain majority owned by PE firm L Catterton, has named Sharon Leite CEO effective Jan. 9. She succeeds David Prokupek, who remains an adviser. https://axios.link/3ZEw7IC

5. It's Personnel

Welcome back, Retail readers. Happy Tuesday! 

🧠 Kim spent her weekend at the NRF Retail's Big Show in New York. She drops some of the knowledge gained below. 

🍜 What we're eating: Richard tried the Thai restaurant Tong last night, and recommends the Gai Tod, crispy fried chicken, and the Pad See Ew, with thin serrated strips of beef.

✏️ Big thanks to editor George Moriarty and copy editor Mickey Meece for today's edits.

January 17, 2023

1 big thing: Tech dominates NRF chatter