2023 was a relatively quiet year for mergers & acquisitions (M&A) across all industries. Overall, activity fell roughly 20% against 2022, which was already down 30% from 2021. Increased interest rates caused financing of deals to become more expensive than ever while perceived values, due to the stock market’s hot streak, remained a hot point of contention for buyers and sellers.  Looking ahead for the retail industry, sales are projected to end up 3.2% for 2023. Slower growth has contributed to the lack of M&A activity across the industry, however, with the prediction of lower rates in 2024, some companies may hold off on acquisition activity for now.  What was clear from the deals made and announced in 2023 was a common theme to increase efficiencies and market share. We also saw a surge of creative ways to continue to differentiate through partnerships and asset acquisitions. After examining recent deals in the last year, we’ve highlighted four themes within the retail industry. Below, we outline 2024 M&A deal trends in retail as we move forward into this year.

• Luxury Retail Consolidation to Fuel Growth
• Convenience Stores Lead in M&A Activity Volume within Retail Industry
• Large-scale Grocery Mergers Impact Customers
• Retailers Opt for Partnerships to Expand Reach

2024 M&A Trends in Retail 

Trend 1: Luxury Retail Consolidation to Fuel Growth 

The luxury retail market has been on the rise over the last few years with an expected growth of 8%-10% coming out of 2023 to reach $1.65 trillion globally. This impressive growth is expected to slow a bit to 4% heading into 2024 as global economic uncertainties continue to rise. In 2023, we saw several luxury-focused acquisitions that have helped luxury brands grow their portfolios to reach new customers while realizing savings and synergies across businesses.  

[April 2023]: L’Oreal Announces Acquisition of Aēsop 

L’Oreal continues to build out its luxury segment, or Luxe Division, with the $2.5 billion addition of Aēsop. The Aēsop brand is rooted in sustainable ingredients and vegan formulations. With the acquisition, L’Oreal hopes to scale the brand to a much wider level, including growth within China and globally around the world to help it become another “Billionaire Brand” within its portfolio. 

[July & October 2023]: Kering Completes Acquisitions of Creed & Purchase of 30% Stake in Valentino 

Luxury conglomerate Kering, owner of brands such as Gucci, Saint Laurent, Bottega Veneta, and more, completed the $3.8 billion acquisition of House Creed, a luxury fragrance company. This acquisition taps into Kering’s desire to continue to grow its Kering Beauté division. On top of this acquisition, Kering also purchased a 30% stake in Valentino for $1.87 billion with an option to purchase remaining shares by 2028. This move also serves as a strategic opportunity to work more with the current Valentino owner, Qatari investment fund Mayhoola. 

[August 2023]: Tapestry Inc. to Acquire Capri Holdings 

Tapestry Inc., known for its brands Coach, Kate Spade, and Stuart Weitzman, will acquire Capri Holdings, known for its brands Versace, Jimmy Choo, and Michael Kors, for $8.5 billion. This acquisition will bring two luxury powerhouses together that generated over $12 billion in revenue last year combined. This acquisition will also allow the companies to realize around $200 million in run-rate synergies over the next three years.  

Trend 2: Convenience Stores Lead in M&A Activity Volume within Retail Industry 

Coming out of the pandemic, travel has continued to boom as consumers return to a more normal life. With travel becoming a focus again, airline prices have surged +25% over the last couple of years. This has led to an increase in road-tripping and car travel as a less expensive alternative. Also, with more companies enforcing return-to-office, commuters are on the rise. Both scenarios have led to increased traffic and usage of convenience stores and gas stations. This year, we saw several large chains combine to conquer this large consumer base and expect to see this tactic utilized across more retail sectors in the year to come.  

[February 2023]: BP Acquires TravelCenters of America (TA)  

BP oil is aggressively re-entering the retail sector after pulling back expansion in favor of franchises in the early 2000s. This $1.3 Billion deal will push expand BP into roughly 280 TravelCenters of America sites across over 40 states. This expansion is also tapping into TA’s fast growing EV network, which directly supports BP’s strategy to “transition growth engines,” including alternative fuel options like EV, bioenergy, renewables, and hydrogen. 

[April 2023]: Maverik Acquires Kum & Go 

Maverik and Kum & Go are both staple convenient stores in the Midwest and Rocky Mountain regions. To continue to expand its regional base, Maverik acquired Kum & Go’s 400 stores, growing their overall fleet to 800 stores in 20 states for an undisclosed amount. This acquisition also included Solar Transport, a tank truck carrier service, to streamline Maverik’s supply chain operations as well.  

[July 2023]: RaceTrac Acquires Gulf Oil LLC 

While not an acquisition aimed exclusively at customer-facing store fronts, RaceTrac’s purchase of Gulf Oil for an undisclosed amount shows how operation expansions can help to fuel greater growth in the marketplace. This deal positioned RaceTrac to take over Gulf Oil’s retail locations along the Massachusetts turnpike as well as its exclusive distribution and licensing agreements. This move helps to streamline RaceTrac’s operating efficiencies in a competitive market.  

Trend 3: Large-scale Grocery Mergers Impact Customers 

Rising costs have continued to put pressure on shoppers with grocery inflation rising 10.4% in 2023. As a result, grocers are continuing to find strategic ways to win customers over and gain their business. Staying competitive with pricing alone is not feasible given that cost of goods and labor continue to rise as well. As a result, 2023 saw a mix of large grocers combing to increase market share while smaller grocers combined to increase efficiencies.  

[August 2023]: Aldi to Acquire Winn-Dixie & Harvey’s Supermarket 

As part of Aldi’s 2023 expansion goals to have over 2,400 U.S. retail locations by the end of the year, the grocery chain acquired, for an undisclosed amount, around 400 Winn-Dixie and Harvey’s Supermarket locations across the Southeast. This acquisition allows Aldi to tap further into this region to utilize its expanding distribution system, which recently opened a location in Alabama. Aldi’s goal is to continue to provide affordable grocery options to shoppers across a region where they previously have not had as much representation.  

[Throughout 2023]: Regional Chains Combine for Efficiencies  

Across the U.S., several regional and specialty grocers completed mergers and acquisitions in an effort to streamline efficiencies and drive value for their customers. In April, Midwest chain Corborns acquired 11 Sullivans locations in the greater Chicago area. This increased their total store count to 77. In June, Heritage Grocers Group purchased 28 El Rancho Supermercado stores across Texas and Kansas. This acquisition combined the well-known chain with two other key players in the Hispanic grocery market: Cardenas Market & Tony’s Fresh Market.  

[Ongoing]: Kroger & Albertson’s Merger Forges On 

The $24.6 billion Kroger & Albertson’s merger has been on the table since October 2022. This “megamerger” has faced a continuous uphill battle from regulators over concerns on how this will negatively impact consumers and workers across the nation. If combined, the merger would represent nearly 5,000 stores across the U.S., which would rival Walmart’s roughly 4,600 U.S. locations. Albertson’s and Kroger argue that this merger would allow them to have more combined bargaining power, which would allow lower prices to be passed to shoppers. U.S. regulators, however, fear this merger will decrease competition, hurt unionized workers, and have a major impact on other industries, such as online delivery, pharmacy, and digital advertising.  

Trend 4: Retailers Opt for Partnerships to Expand Reach  

While overall M&A activity slowed in 2023, there was a continued rise in partnerships across the retail landscape. Partnerships have proven to be a great way to expand your audience and expertise without the high expenses of buying out a company. With interest rates at recent highs and funding harder to secure, partnerships have been seen as a lucrative way to continue to diversify and expand businesses across different retail sectors.  

[August 2023]: Shein & Forever 21 Partner for Distribution 

Shein and Forever 21’s owner, Sparc Group, came to an agreement to allow distribution of each other’s brands through both digital and retail channels. This deal gave Shein 1/3 interest of Sparc Group while also making Sparc Group a minority shareholder for Shein. This partnership allows for expanded distribution to a wider customer base that favor the fast-fashion goods both retailers sell. This partnership will also allow Shein to test in-store presence in the U.S. in a bigger way than they previously have before.  

[September 2023]: Target Partners with Kendra Scott 

Just in time for the holiday season, Target and Kendra Scott announced a collaboration to offer more affordable jewelry and accessories in a select set of stores and online. This partnership is not just for the holidays either – it’s expected to span for multiple seasons with a refresh of the collection. The partnership is seen as a great opportunity for Kendra Scott to gain exposure to a wider customer base while also offering a newer price point for entry into its brand. Both brands are also heavy involved in their communities and see this as a way to continue to highlight their efforts of “making great design accessible to all.” 

[September 2023]: Lululemon & Peloton Announce Partnership 

One of the leading retailers in athletic apparel, Lululemon, announced a five-year strategic partnership with home-fitness front-runner Peloton to bring together two of the biggest names in fitness. The new partnership allows Lululemon to become the primary athletic apparel partner for Peloton and for Peloton to become the exclusive fitness content provider for Peloton. This partnership is a great way to leverage a common customer base while also expanding to like-minded consumers who might not be as familiar with one of the brands.  

Looking Ahead: 2024 M&A Trends in Retail 

Although 2023 was a slower year overall for retail M&A activity, many transactions occurred that could have a large impact on the retail industry as a whole going forward. With large consolidations within convenience, and still some pending within grocery, we can expect to see customers be more aware of pricing and where they are spending their income. It will be important for retailers to ensure they are transparent with how their M&A activity is really helping impact consumers in a positive way instead of stifling competition.  

Another promising event on the horizon is the possibility of interest rates falling in the second half of 2024. With this in mind, we can expect to see a series of new deals emerge as the cost to borrow comes down. This could set off a chain reaction from companies that have been more reserved over the last few years. It could lead to deals that span further across the different sectors of retail.  

No matter what M&A activity your company is considering, the Clarkston team is here to support you. Our team of M&A experts can help guide you through everything from initial business planning to diligence and beyond. Contact our team today to get started.