The current economic slowdown (don’t say recession) is affecting all capital expenditures and investments across the board. This slowdown was brought on by the credit crunch caused by the sub prime debacle that has rippled and continues to ripple through the economy. On the consumer side, big box retailers such as Wal-Mart, Target, and Sears will be looking to realign their assets and use this time to close any underperforming stores while consolidating their offerings for greater efficiency. Growth is no longer the driver, bottom line is paramount for these retailers. When private equity funds are no longer investing in growth they typically turn to specialty retail or may invest in distressed or turn around situations.
The current economic climate does not rule out or even slow down investment in the consumer products space. Private equity and venture capital managers will just become much more selective. However, investment may slow down in specific sectors within the consumer spending industry such as furniture retailers and manufacturers or any industries directly affected by the real estate downturn. Another casualty of the economic slowdown are retailers who sell seasonal items or disposable income “non-essential” items such as the Sharper Image and Lillian Vernon, both of which have filed for Chapter 11 bankruptcy.
The retailing space always has lots of action whether times are good or bad. Private Equity will be looking very hard at this space because of the bargains to be had in some companies over zealousness to expand. Foreign retailers will also be looking at some key acquisitions in the
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