Trend of EV/EBITDA multiples in the Retail sector

Source: BZM analysis based on S&P Capital IQ data.
Average monthly market cap in bn €, from 31/07/2018 to 30/11/2021; monthly measurements.

The graph shows Enterprise Value (EV) on next twelve months (NTM) EBITDA market multiples of two pools of companies operating in the online and physical (offline) retail business respectively. The two analysed panels include companies listed in the U.S., Canada, and Europe, classified as either online or offline retailers according to their reference sectors, as per Prof. Aswath Damodaran’s work (January 5, 2020). The data refer to the period July 2018 – November 2021, which allows to detect the trend of such multiple before and after the outbreak of the Covid-19 pandemic.

Looking at the trend of EV/EBITDA multiple over the last three years, it can be seen how retailers operating exclusively online have higher multiples on average than offline retailers (average delta of +2.8x), despite the higher volatility.The advent of the Covid-19 pandemic caused a sudden and general decline in prices for all market participants.  This negative impact can also be observed on retailers, both online and offline, as showed by the decrease of the multiple, which reached a minimum in March 2020 (following the first lockdown of business activities). Retailers in both online and offline sales channels reported a decrease in EV/EBITDA multiple of about 14% compared to February 2020: on March 31, 2020 online retailers achieved a multiple of about 9.7x, while offline retailers reported a multiple of 7.6x. The highly expansive policies by central banks, the recovery plans put in place by many States, and the subsequent advent of Covid-19 vaccines contributed to a v-shaped price recovery between February and June 2020. Online retailers showed an increase in EV/EBITDA multiple of +36% in June compared to the lower peak in March, slightly above the +32% achieved by offline retailers in the same period.

In the long term it is expected that the difference between online and offline retailers’ EV/EBITDA multiple will most likely decrease due to a growing mingling between the two sales channels. In that direction, it is already evident a general trend among traditional offline retailers, such as Walmart, Sainsbury’s and Tesco, moving towards the online channel with the aim of reaching an increasingly vast market.