Chapter 15 - The Consumer & Retail Special

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The Consumer & Retail Special

From FMCG to Luxury - Business Models, Metrics & Valuation Cram Sheet - Coming Soon Available on launch day CHAPTER OVERVIEW

The Retail Landscape

What This Chapter Covers: The Consumer & Retail sector as understood by London investment banking teams. Fast-moving consumer goods (FMCG/CPG), luxury goods, apparel & fashion, food & beverage, restaurants & QSR, e-commerce & DTC, grocery retail, and specialty retail. Key metrics, valuation frameworks, diligence red flags, and sector-specific acquisition dynamics. Why It Matters: Consumer-facing businesses dominate deal flow. Vast majority of portfolio companies have some consumer exposure. Understanding brand power, inventory management, like-for-like growth, and customer acquisition fundamentals is core to any retail IB analyst's toolkit. Design: This chapter provides deep technical reference material suitable for interview prep, sell-side diligence, and M&A modelling. Dense beats covering metrics, sub-sector profiles, valuation frameworks, and red flags. PART I - FOUNDATIONS CORE METRICS

Consumer & Retail Metrics I

Like-for-Like (LFL) / Same-Store Sales Growth (SSSG) Revenue growth from stores open 12+ months. Strips out new store openings and closures. The single most important metric in retail. Formula: (Current Period LFL Sales − Prior Period LFL Sales) / Prior Period × 100%. Positive LFL signals genuine organic demand expansion, not just store count growth. Revenue per Square Foot/Metre Total revenue / total selling space. Benchmark of space productivity. Luxury: £2,000-5,000/sqft. Grocery: £800-1,200/sqft. Apparel: £300-600/sqft. Higher is always better (same revenue in less space = higher-quality location or brand power). Gross Margin (Revenue − COGS) / Revenue. Varies dramatically by sub-sector. FMCG: 40-60%. Luxury: 65-75%. Grocery: 25-30%. Fast fashion: 50-55%. Absolute level and trend matter equally. Margin expansion signals pricing power or operational leverage; compression signals competitive pressure or cost inflation. EBITDA Margin Operating profit before depreciation & amortization. Sub-sector variation is extreme. Luxury: 25-35%. FMCG: 15-25%. Grocery: 3-7%. Restaurants: 15-25%. EBITDA is preferred over EBIT because it neutralizes capex intensity and lease accounting distortions (though IFRS 16 has changed this). Inventory Turnover COGS / Average Inventory. Higher = more efficient. Grocery: 12-20x (rapid turnover, perishables). Apparel: 4-6x (seasonal, trend-driven). Luxury: 1.5-3x (intentionally low to maintain scarcity narrative). Watch for deterioration as early warning sign. Inventory Days 365 / Inventory Turnover. Days of stock on hand. Same insights as turnover but more intuitive. Rising inventory days without revenue growth is a red flag (forced markdowns coming). ADVANCED METRICS