January 22, 2020
Bose announced plans to close all of its 119 retail locations in North America, Europe, Japan and Australia over the coming months (click here to request a list). Approximately 130 stores in China and the United Arab Emirates will remain open, along with additional stores in India, Southeast Asia, and South Korea. Bose indicated that it is pulling back on its brick-and-mortar presence since its products are “increasingly purchased through e-commerce.” Colette Burke, VP of global sales, stated, “Originally, our retail stores gave people a way to experience, test, and talk to us about multi-component, CD and DVD-based home entertainment systems. At the time, it was a radical idea, but we focused on what our customers needed, and where they needed it, and we’re doing the same thing now.”
J.C. Penney announced it will close six stores by April 24 and shut down a call center in Lenexa, KS, as part of its annual review of operations. Affected stores are located in Missoula, MT; Myrtle Beach, SC; Akron, OH; Raleigh, NC; Tulsa, OK; and Valley Stream, NY. Although the Lenexa call center is closing, J.C. Penney will maintain its Lenexa distribution center, which supplies stores and ships online orders. That facility is one of the chain’s three largest distribution centers, each of which are about two million square feet. A year ago, the Company had announced the closure of 18 department stores and nine furniture units. Over the past decade, J.C. Penney’s store base has shrunk 24% to 840 (including the six set to close). It also operates 11 distribution centers, six of which are owned and five are leased. The Company will report fiscal 2019 results in late February. Click here to request a list of future store closings.
Reports indicate that Schurman Retail Group is shutting down the retail arm of stationery retailer Papyrus, and has hired liquidation firm Gordon Brothers to assist with the going-out-of-business sales at roughly 260 stores (store closings map below). The Company cited “current challenges of the retail industry” and said that it had been working to revitalize the business for months. It was not immediately clear whether the Company would file for bankruptcy or if the e-commerce site or wholesale business would be affected. Schurman Retail Group also owns Carlton Cards, Paper Thread and American Greetings. Click here to request a list of closings.
Gap Inc. is no longer considering the spin-off of Old Navy into a standalone public company, given the cost and complexity of the split and the Company's poor performance in recent quarters. The Company is also making changes to its management team, including the departure of Gap brand CEO, Neil Fiske. He will be replaced by Mark Breitbard, currently President and CEO of Banana Republic. The Company also updated its fiscal 2019 outlook; it now expects comps and total sales to be at the higher end of prior guidance of down mid-single digits and down low single digits, respectively. Improved promotional levels during the holiday, especially at Old Navy, are boosting EPS, now expected to be above the higher end of its $1.70 – $1.75 guidance. Click here to request a list of future openings and closings.
For the November/December holiday period, Kohl’s same-store sales dropped 0.2%, leading many to question whether its tie-in with Amazon is working. In July 2019, the Company began accepting returns for Amazon customers at all Kohl’s stores. Kohl’s had said ahead of the 2019 holiday season that a nationwide rollout of the Amazon returns service was going to boost sales. Some say it is benefiting Amazon more than it is Kohl’s. In response, CEO Michelle Gass commented, “Amazon is working. This returns program is working. We’re seeing the traffic. We’re getting new customers.”
In other news, Amazon is reportedly opening an 8,040 square-foot store in Washington, D.C. While few details were disclosed, a site plan indicates that the store will sell produce, alcohol, and prepared meals. It also includes an area to park shopping carts and a “speed lane” for people to enter the store with a swipe. Last week, the Company announced it is opening a new pop-up store in one of its Seattle headquarters buildings; the store is described as an expansion of existing retail initiatives and will have a revolving inventory.
Amazon also plans to open a new, one million square-foot distribution center in Newnan, GA (south of Atlanta). No opening date has been set. Amazon is currently building another new fulfillment center on Atlanta’s east side.
Last week, Amazon notified its third-party merchants that they could once again use FedEx’s Ground network to ship orders placed under Amazon’s Prime membership program, nearly a month after imposing a ban on the service. Amazon has said that it banned FedEx Ground because the service was not meeting its standards and now is reversing the decision because FedEx’s service has reached acceptable levels.
Finally, Amazon said it planned to ask a judge to temporarily block Microsoft Corp. from performing any substantial work on a $10.00 billion Pentagon cloud contract until its lawsuit challenging its validity is resolved.
On January 16, Kirkland’s announced the departure of President and COO Michael Cairnes, whose duties will be taken over by Wood Woodward, currently CEO. Given that there is no change to the CEO position, this should not have an impact on the Company's broader strategy to turn around the business. There are plans for further cost reductions at the corporate office and the Company will close 27 stores in early 2020, with the potential for additional closures throughout the year (click here for more information). Mr. Woodward also commented on the Company’s holiday performance, saying, “While the environment remains challenging for home décor retailing, our business overall remains on track with our expectations. Seasonal and e-commerce sales are driving a sequential improvement in the comp trend, and we have managed a better transition to January than in recent periods.”
Golf & Tennis Pro Shop (dba PGA Tour Superstores) announced it will open three new stores this spring in East Hanover, NJ, Palm Beach Gardens, FL and Columbus, OH, and it anticipates opening “additional stores” later in the year. The Company currently operates 41 units in 16 states, and its customer base grew by 500,000 in 2019, bringing its “annual visitors” to approximately eight million per year. Management said it plans to accelerate its growth strategy to expand its brick-and-mortar presence by another 50% over the next three years. Over the past three years, sales have increased 46% and comps have risen 22%. The Company’s brick-and-mortar footprint has expanded 52% and e-commerce comps have risen 91%.
Topgolf Entertainment Group opened a new, 65,000 square-foot location in Germantown, MD on January 17. This is the Company’s second location in Maryland, joining a location in Oxon Hill (National Harbor). The Company plans to open its third Maryland location in Baltimore soon. Topgolf operates nearly 60 locations across the U.S. Click here to request a list of future openings.
Sportsman’s Warehouse announced plans to open new stores in Parker, CO (February 2020), Brentwood, CA (August 2020), and Corona, CA (October 2020). While the Brentwood store expands the Company’s presence in Northern California, the Corona location is the Company’s first in Southern California. Once the stores open, there will be 13 locations in California and seven in Colorado. These are the first announced store openings for 2020, and the Company expects to announce further openings in the near future. Including the three new locations, Sportsman’s will have 107 stores in 27 states.
REI plans to open a new, 23,000 square-foot store in Boca Raton, FL in Fall 2020. This is REI’s third Florida store; there is a location in Jacksonville that opened in 2013 and another in Winter Park, which opened in 2017. The Company plans to add two more stores in Florida, in Gainesville (due to open in spring 2020) and Tampa (opening 2021). REI has 162 stores in 39 states and Washington D.C. Click here to request a list of future openings.
On January 17, 7-Eleven agreed to acquire 7‑Eleven Stores of Central Oklahoma, which includes more than 100 7-Eleven branded locations that have been owned and operating independently for 67 years; terms were not disclosed. All of the stores are located in the greater Oklahoma City metropolitan area. The transaction is expected to close in 60 - 90 days. There are currently more than 9,700 7-Eleven stores in the U.S. and Canada.
Reports indicate Earth Fare has retained restructuring counsel and financial advisors, as it struggles in the saturated natural and organic grocers’ space. Though the Company has announced five store closures in the last few months, including three in Indiana, it has generally been in growth mode in recent years, increasing its count from about 40 in early 2018 to around 55 stores today. Earth Fare is 80% owned by Oak Hill Capital Partners, which acquired its stake from Monitor Capital in April 2012 in a transaction that valued the Company at $300.0 million. At that time, Earth Fare operated 25 stores. The Company maintains a secured borrowing relationship with Fifth Third Bank, secured by substantially all assets. These most recent reports follow Kroger announcing its intention to divest its interest in natural grocer Lucky’s Market, in December 2019. Click here to request more information.
Lucky's Market ("Lucky's") is reportedly closing 20 of its 21 Florida locations as well as its distribution center in Orlando (click here to request a list). The stores are set to close as of February 12, 2020 and we expect the Company is also ceasing development of its 14 "in progress" new stores across the state. Reportedly, the store in Melbourne, FL, will remain open, and though the Company also has a store in Savannah, GA, we estimate the cost to service these two stores, its only remaining east coast locations, is significant and will likely lead to their sale or closing.
Yesterday's news follows Kroger's announcement on December 5, that it had decided to divest its interest in Lucky's. Kroger had originally formed a partnership with Lucky's in April 2016 and was seen as the backer that was enabling its growth including in Florida, where Kroger did not operate any stores. It remains unclear what liability Kroger may have to these store closings. Currently, Lucky's operates 41 stores, closing 20 of these and ceasing development of another 14 could easily create an insurmountable liability for Lucky's without an additional partner.
At its 2020 Investor Day, management at Casey’s General Stores discussed plans to add 350 new convenience stores to its network over the next three years (click here to request a list). According to SVP of Store Development Brian Johnson, there are “significant infill opportunities, particularly in midsize and suburban markets, to augment [its] outward expansion. Over the past 10 years, Casey’s has built or acquired 750 stores, and replaced or remodeled an additional 700 existing stores. Mr. Johnson indicated that newly constructed Casey’s locations perform well and provide growth in both sales and profitability. Mr. Johnson also said Casey’s is reorganizing its development team to have a dedicated M&A group that will focus solely on smaller acquisitions. “There are a lot of targets out there. We have identified over 400 single-store operators in our area and there are approximately 2,500 stores that are in chains of 100 or less.” Casey’s partnered with Tango Analytics to launch a predictive modeling tool next month that will help in site selection. The Company plans to target markets with 10,000 to 100,000 people. “These are not new markets for us…. However, we have historically selected these locations on a one-off basis. With the help of our network planning tool, we now plan to select and build more sites at the same time in these larger communities.” Casey’s third distribution center, currently under construction in Joplin, MO, will open up new territories in the Southwest, and will alleviate pressure from its Ankeny, IA and Terre Haute, IN facilities.
K-VA-T Food Stores will open a new Food City in Etowah, TN. The 41,100 square-foot supermarket will replace the smaller store in that location (which closed on January 8) being constructed on the same site. The new store, expected to be complete by late summer, will include an in-store bakery/deli with a food bar, a large café seating area, a pizzeria, full-service meat and seafood departments, and expanded grocery, frozen food, and produce sections.
Save Mart closed its FoodMaxx in Bakersfield, CA on Friday due to underperformance. The location was the first store the Company opened under the discount format, in 1986. Save Mart sold the lease to another operator, who assumed control of the property. The Company now operates 52 FoodMaxx stores in California.
Weis Markets will close its store in Fredericksburg, VA on February 13. It is the second Weis to close in the area since the Company bought 38 Food Lion locations in Virginia, Maryland and Delaware in 2016 from Delhaize Group; the Weis store at 736 Warrenton Road shut down in November 2018. Following the closing, Weis Markets will have one store in Culpeper, one in Fredericksburg, three in Stafford and five in Spotsylvania. The Company faces increased competition from ecommerce options and dollar stores; additionally, Weis has made little or no financial investment in its Virginia stores, most of which lack pharmacies and have smaller deli, meat and bakery departments compared to those of competitors Giant Food, Publix and Wegmans.
On February 4, Starbucks Canada plans to open a pickup-only location in downtown Toronto, Canada. Less than 1,000 square feet, the location is smaller than most Starbucks stores and does not offer seating. It caters to customers who order ahead on the Company’s app. Starbucks piloted the concept in Seattle, WA and opened the first location in New York City in November.
Walmart opened a 201,000 square-foot facility in Thomasville, GA last week. The facility, under construction since August 2018 and operated by FPL Foods, distributes Angus beef cuts, such as steaks and roasts, from the Company’s new beef supply chain to 500 Walmart stores in the Southeast, including in Georgia, Alabama and Florida.
In other news, Walmart’s chief merchandising officer, Steve Bratspies, is leaving and will be replaced by Scott McCall. Mr. McCall has been with the Company for 25 years, most recently leading the entertainment, toys and seasonal categories. Additionally, Dacona Smith was named COO of Walmart U.S.; he previously was COO at Sam’s Club, replaced by Lance de la Rosa, most recently SVP of the East division.
On January 16, Payless ShoeSource emerged from Chapter 11 bankruptcy protection, and it has named a new executive management team led by CEO Jared Margolis. Additionally, management plans to institute an omnichannel distribution channel strategy, targeting both new and existing markets. Payless has an existing global retail footprint spanning Latin America, Southeast Asia, and the Middle East. The Company and its franchisees own and operate more than 710 brick and mortar stores in more than 30 countries. Management said it plans to “reinvigorate Latin America, its largest business unit” and it will also relaunch its U.S. e-commerce site and open stores in the U.S., but no details were provided. Payless’ retail operations outside of North America, including its Company-owned stores in Latin America, are separate legal entities and were not included in the bankruptcy filing.
On January 10, mattress retailer Casper filed a document with the SEC for an initial public offering on the NYSE under the symbol CSPR. The price range has yet to be determined. Casper reported $312.3 million in revenue for the nine months ended September 2019, up 20% from the prior year period, and $67.4 million in losses, a 4.9% increase from last year. The Company spent $423.0 million in marketing expenses between 2016 through 2019.
Tailored Brands announced the sale of Joseph Abboud (J.A.), its men’s suit brand, to WHP Global for $115.0 million. The decision to sell the trademark was strategic, as proceeds will be used to pay down debt and improve operations. WHP Global, known for acquiring and reviving brands, also owns women’s apparel line Anne Klein. Tailored Brands will retain exclusive rights to sell Joseph Abboud in its stores, allowing the Company to maintain its private label and expand gross margin. The deal is expected to close by the end of March 2020.
Last week, Target announced sales for the November/December holiday period, with comps coming in at a positive but disappointing 1.4%. Key merchandise categories including toys (flat), electronics (down more than 6%), and home goods (down 1%) reported flat or negative comps for the period; these categories account for a higher portion of sales during the holidays. Other product categories such as apparel, beauty, and food, were up mid-single digits.
The Company adjusted its fourth quarter guidance and now expects comps to be similar to the 1.4% reported for the holidays, down from the prior estimate of up 3% to 4%. Target maintained its fourth quarter and full-year adjusted EPS estimates at $1.54 – $1.74, and $6.25 – $6.45, respectively. On the news, the Company’s stock price fell more than 6%.
On the heels of the disappointing holiday results, Target announced executive changes. The Company promoted Mark Schindele to EVP and chief stores officer, succeeding Janna Potts, who is retiring but will serve in an advisory role until May 1. Mr. Schindele previously served as SVP of properties. The Company also formalized a dual leadership structure for its merchandising organization to reflect the size, scale and complexity of its multi-category commercial businesses and operations. Christina Hennington and Jill Sando, who will remain in chief merchandising officer roles, will work closely with Stephanie Lundquist, EVP and president of food and beverage, to develop and execute a unified merchandising strategy. Click here to request a list of future openings.
