NEW YORK, United States — L Catterton, a private equity firm backed by LVMH that has invested in companies like Peloton and Restoration Hardware, says the jaw-dropping employment growth in the US last month was no fluke, and it expects more gains in June.
Michael Chu, the co-chief executive officer of the $20 billion fund, said based on what he’s seeing on the ground, job growth this month will probably outpace the rise in May when a record 2.5 million workers were added to payrolls.
“When you open up hotels and you open up restaurants, theme parks, etc. then guess what? — you’re bringing back people who were furloughed and let go back onto the market,” he said in an interview. “You’re going to see bigger job growth in June.”
Stocks around the world rallied after the surprise US jobs report last week, though Chu, whose company specializes in consumer brands, said internal data had clearly shown that many employers were re-hiring.
Investments at the Greenwich, Connecticut-based L Catterton run the gamut from condiment-maker Cholula Hot Sauce and auto sales platform Vroom Inc. to pet cuisine brand Just Food For Dogs, and Norwegian Cruise Line Holdings Ltd. The fund is minority owned by LVMH, the Paris-based luxury goods company, and billionaire Bernard Arnault’s investment firm.
Even with Chu’s short-term optimism, he agrees that unemployment will likely stay above pre-recession levels for a while, citing expert forecasts of about 10 percent, down from last month’s rate of 13.3 percent.
Non-grocery retail is expected to drop 20 percent this year, according to Forrester Research, with J.C. Penney Co., Neiman Marcus Group Inc. and Pier 1 Imports Inc. among those filing for bankruptcy. The global personal luxury goods market could contract as much as 35 percent in 2020, Bain & Co. estimated.
“The lower-income consumers are absolutely stressed,” with many people just scraping by, he said. “We don’t think we’re going back to 3.5 percent unemployment tomorrow.”
The recession will also change how L Catterton invests, Chu added. Much also depends on whether America is hit by a second wave of Covid-19 infections. The threat of outbreak means tightly packed malls are likely to be less popular, with open-air and street-front retailers that offer more space on the rise, he said.
“The US is over-retailed by some percentage and all that Covid has done is accelerate the laws of Darwin so there’s been more acceleration of poor retail dying,” he said. “In those physical spaces that those stores vacate will be new retail and new concepts, and that doesn’t have to be product — it can be service-oriented, health and wellness or medical.”
By David Ramli