Despite the increase of e-commerce, brick-and-mortar retail ain’t dead

By Patrick Crocker, MHT Partners

It’s a well-worn expression amongst investors on Wall Street that e-commerce retailing, controlled by Amazon, is killing brick-and-mortar stores.While that holds true for some merchants, a more detailed examination suggests that the rumors of the death of stores might be premature.From huge Walmart to discount rate chain Dollar General, numerous well-run merchants are not just enduring the challenge from Amazon but arereally thriving.For example, in 2013, Walmart had 4,005 shops. That number was 4,761 shops this year– a boost of 19 percent

. In the exact same period, Dollar General’s store numbers rose 38 percent to 15,509 from 11,215. For any PE investor taking the contrarian view that physical retail is not going away, the opportunity is compelling.Whether it’s House Product, where customers discover top-brand furnishings for deal prices, or cosmetics-and-beauty store Ulta, individuals are still out in their local areas spending their hard-earned cash.Indeed, information on five leading retailers shows that over the past five years, overall shop count has increased more than 30 percent, a compound annual growth rate of 5.4 percent.Walmart, the world’s biggest merchant, has actually enjoyed 15 consecutive quarters of positive same-store sales development, with the strongest durations throughout the previous 18 months.Countering that narrative are media headlines that frequently inform us of the difficult times facing retailers.As 24/7 Wall Street composes, “In exactly what many have actually dubbed the ‘retail apocalypse,

‘brick-and-mortar retailers across the United States have been forced to minimize their footprint in order to preserve profitability

in Amazon Go stores. More proof of the resilience of retail is seen in the mall industry, where Brookfield Property Management bought General Development Residences for$9.25 billion. And while Warby Parker got its start offering eyeglasses online in 2010, it prepares to have 100 physical stores open by this year’s end. CNBC writes that after many digital-first sellers established themselves online, they are now “looking for out the finest real estate after establishing relationships with top U.S. shopping center and shopping center owners.”From a financial investment perspective, costs in current M&A activity recommend that investors’enthusiasm might have swung too much in favor of pure e-commerce financial investments at the cost of old-fashioned retailing.Unilever paid $1 billion for Dollar Shave Club, a five-year old e-commerce company, and PetSmart purchased online pet grocery store for$3.35 billion, the biggest purchase of a strictly e-commerce company.Private equity financiers are purchasing pure online merchants, often paying high costs, as much as 5x annual income or more, to beat other bidders.Meanwhile, a large community of companies sell into brick-and-mortar merchants, lots of

of which can be purchased for more standard Ebitda multiples. For any PE investor, this is favorable news.If retail is proving durable, financiers ought to not be too stunned. After all, the sector has endured many previous periods of disruption. Local corner shops were interfered with by department shops, which in turn were disrupted by malls.Department stores and malls were then disrupted twice, initially by catalogs and then by discount department stores. The current disturbance from e-commerce is no more likely to kill the retailer than earlier waves were.The British nobleman Baron Rothschild, who benefited in the panic that followed the Fight of Waterloo versus Napoleon, created the expression” Buy when there’s blood in the streets, even if the blood is your very own.”When it pertains to investing in brick-and-mortar selling, this might be among those times.Patrick Crocker is a co-founder and handling director of MHT Partners, the nationwide middle-market financial investment bank locateded in Dallas. He can be reached at and +1 415-446-9436. Do you want unique news and analysis about private equity offers, fundraising, top-quartile managers and more? Get your FREE trial to Buyouts!.?.!! Or subscribe now!.?.