The retail apocalypse is driving a $175 million business at Lazard

AP

Investment bank Lazard is having a record-breaking 2017, despite choppy waters in the mergers and acquisitions market. 

The firm on Tuesday announced record first-half revenues of $1.35 billion, soaring past analyst expectations.

The bulk of Lazard's business comes from asset management and its M&A and advisory business, which pulled in $585 million and $571 million during the first half, respectively. 

But don't overlook the company's restructuring business. The unit is experiencing a resurgence amid the ongoing retail apocalypse, with revenues growing 53% to $176 million in the first half.

The business, which offers advisory services to troubled companies looking to overhaul or clean up their capital structure, has drawn business from a spate of new retail clients over the past year, helping recharge a business that had steadily declined post-financial crisis.

Restructuring brought in a massive $376 million in annual revenues for Lazard amid a turbulent recession in 2009, a figure that has steadily dropped each year after as the economy has improved, reaching a low of $106 million in 2015. 

But the revenues nearly doubled in 2016 to $202 million, primarily stemming from new business from hard-hit oil and gas companies.

Lazard is blazing past that 2016 mark, thanks in part to the unfolding demise of retail. 

"We're seeing a massive amount of disruption in the retail space," Lazard CEO Kenneth Jacobs said during the second-quarter earnings call Thursday. "The theme is really disruption from technology."

Jacobs specifically singled out retail behemoths Amazon and Walmart, which continue to confound traditional stores — especially department stores and supermarkets — with their e-commerce dominance. 

Amazon's $13.7 billion deal for Whole Foods has had a ripple effect across sectors, forcing CEOs across corporate America to wonder whether they are Amazon proof.

Among the clients Lazard is advising on restructuring this year: toy-makers Gymboree and Toys "R" Us, clothing store J. Crew, shoe shop Nine West, and German outdoor apparel company Jack Wolfskin. 

Lazard competitor Ken Moelis, CEO of Moelis & Co., hit on the same theme during an earnings call earlier this week.

"There's a fundamental need to rationalize that people want to get larger to fight online, to fight Amazon in retail specifically," Moelis told investors Monday.

Moelis said that there would be both acquisitions and restructuring activity in the retail sector, though he said he didn't think advising on restructuring in the retail sector would be as big an opportunity as advising on similar work in the energy sector.

Looking forward, Jacobs said the company would also have its eyes on real estate, which could suffer the aftershocks of retailers shutting down.

"As the fortunes of retail change, so does the value of the underlying real estate," Jacobs said. 

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