ASHEVILLE, N.C. —Outlook Leadership Conference (OLC) speakers provided a look at the state of the U.S. economy from several angles. Here’s a glimpse at some of their insights.
Short and Not-So-Sweet
Inflation is weighing heavily on consumers, according to economist David Nelson, founder and president of Bellingham, Wash.-based Study Groups. Dealing with inflation is viewed as the top priority that consumers want Congress and the president to deal with.
Eighty-three percent of Americans describe the current economic situation as “poor” or “not so good,” Nelson said.
How is that affecting consumer’s purchasing choices?
Nearly half of consumers said that because of rising prices on everyday necessities, they were switching to cheaper alternatives, Nelson said, citing a survey released in July by the National Retail Federation (NRF).
Nelson also addressed a question on many people minds: Is the United States in a recession? Not yet, he said, but “a modest one” is likely. “The forecast and outlook isn’t all that bad.”
Urge to Merge
Need evidence the merger-and-acquisition (M&A) market in c-stores remains strong? Representatives from Raymond James Financial, St. Petersburg, Fla., offered five positive indicators:
Industry Dynamics: Ongoing consolidation in a fragmented industry, driven by benefits of scale in the face of demand headwinds and operational challenges.
Equity and M&A Market Multiples: Despite recent pullback in public-equity market valuation multiples for c-store operators, mergers-and-acquisitions multiples remain at cyclical and historical highs.
Demand for Quality Assets: Necessity to achieve scale and challenges to generate organic growth heightened demand for quality retail assets.
Supply of Quality Businesses: Buyers willing to pay a premium for quality businesses of scale in strategic markets (such opportunities are extremely limited).
Lending Environment: Debt capital remains readily available on relatively attractive terms. While interest rates are rising, they remain historically low.
Pump It Up
“Obviously, the price of oil this year has been volatile like no year before,” said Patrick DeHaan, head of petroleum analysis for Boston-based GasBuddy, during his general session talk.
In a rapid-fire presentation about what’s behind the volatility, De Haan pointed to OPEC, the war in Ukraine, a loss of U.S. refining capacity and other global trends as the main culprits behind the volatile price of oil this year. De Haan speculated that there is a risk that margins could be squeezed as the United States enters hurricane season.
“There’s no normal anymore,” he said.