April 10, 2019
Fred’s, Inc. has hired financial advisor Malfitano Partners, as the Company looks to turn around its declining top line, and possibly close a number of underperforming stores. Malfitano Partners recently worked as an adviser in Toys “R” Us’ bankruptcy. The Company is also meeting with liquidation firms to assist with possible store closures. The sources indicate there are no firm plans to close a specific number of stores at this time. Meanwhile, the Company announced that Nathaniel Klein, who was appointed COO on February 2, has left the Company. Since Heath Freemen, the President of Alden Global Capital, the Company’s largest shareholder, became chairman, there have been numerous executive changes, including appointing Joseph Anto, interim CEO, and previously a SVP at another Alden Capital company, as CEO last February.
The confirmation hearing in the Specialty Retail Shops Holding Corp., DIP case scheduled for April 18 was continued to May 8. Numerous creditors have filed objections to the confirmation of the plan; the Official Committee of Unsecured Creditors has recommended creditors vote against the plan. The Debtors filed the motion to continue the hearing to allow additional time to negotiate resolutions of Plan-related disputes with the various creditors and stakeholders, including the Creditors’ Committee, the Credit Agreement Primary Agent, and the Term B-1 Agent. A significant number of creditors have filed with the Court requesting payment of their administrative expenses, and filed objections to Shopko’s Chapter 11 Plan. McKesson, the debtor’s prepetition pharmacy supplier, has commented that the case is “massively administratively insolvent, conservatively estimated at around $30 million.”
Unrelated to Shopko’s bankruptcy case, a pair of New York real estate investment firms have partnered to form a new real estate platform called Heartland Hill Properties that will buy a portfolio of 79 current and soon-to-be former Shopko store properties. The properties include at least 14 Wisconsin locations, as well as the Company’s headquarters and optical lab in Green Bay. The properties were all purchased from an affiliate of Credit Suisse, the lender to Shopko’s landlord, Spirit MTA REIT, who took control of the properties when Shopko stopped paying rent. Included in the portfolio are Shopko and Shopko Hometown retail locations that range in size from 17,000 square feet to 127,000 square feet.
Rouses Markets confirmed that it has acquired a 32-acre property in Schriever, LA and will move its headquarters and build its first distribution center on the property. The site apparently has an existing 310,000 square-foot facility, and initial renovations are expected to cost about $1.0 million, to be completed in time for occupation in January 2020. The Company did not comment on its current supply relationship with Associated Wholesale Grocers. In other news, it was confirmed that Jeff Sherman is no longer CFO. His replacement was not announced.
According to published reports, Hy-Vee has begun leasing its Aisles Online Click-and-Collect Lockers to local businesses. Last week, it began operating the pickup lockers, which hold e-commerce orders for next-day pickup, at the employee parking lot of the Avera McKennan Hospital & University Health Center in Sioux Falls, SD. This is the third locker installation Hy-Vee has placed at a non-store location. Another opened at St. Luke’s Hospital in Cedar Rapids, IA in February. Hy-Vee’s Aisles Online Click-and-Collect Lockers are also offered at select stores and at the Company’s new Fast & Fresh and HealthMarket locations. In other news, Hy-Vee plans to begin alcohol delivery in Omaha and Lincoln, NE, a service it does not currently offer through its Aisles Online grocery delivery service. Before the opening of a new fulfillment center in Sarpy County in June, Hy-Vee is hoping to agree to guidelines with the Nebraska Liquor Control Commission to allow alcohol delivery. It is legal in Nebraska but not widely offered, according to local reports. The new facility will centralize the grocery delivery process with All Aisles Online orders processed at the fulfillment center and then delivered by workers at the facility, removing individual store employees from the chain. Hy-Vee opened a similar fulfillment center in Des Moines, IA about two years ago, which also delivers alcohol.
Sears announced it will open three small-sized stores, called “Sears Home & Life,” in May, with locations in Anchorage, AK; Layette, LA; and Overland Park, KS. The stores will range in size from 10,000– 15,000 square feet, with the footprint primarily driven by the needs of the local community and space availability. Sears Home & Life will be dedicated to four categories: major appliances, with Kenmore and other top brands displayed in kitchen and laundry vignettes; small kitchen appliances; mattresses; and connected home products. Consumers will also be able to learn how to set up a smart home with appliances that are compatible with Alexa and Google+. Sears described the merchandise assortment as reflecting its “power categories where Sears has real strength.” The new format will also feature a Sears Home Services area that will offer appliance repair, replacement parts and accessories. Experts will be available for consultation on home improvement needs.
Click here for more information on the new "Sears Home & Life" stores.
CEC Entertainment, Inc. (subsidiary of Queso Holdings, owned by private equity firm Apollo Global Management) announced that it will merge with a publicly traded special-purpose acquisition company, Leo Holdings Corporation (Leo). The merged Company will be named “Chuck E. Cheese Brands” and will begin trading on the New York Stock Exchange under the ticker symbol “CEC” at the end of the second quarter of calendar 2019. The board of Queso Holdings and Leo Holdings unanimously approved the transaction, with Apollo maintaining a 51% ownership of the new entity post-closing.
Since Dollar Tree acquired Family Dollar it has closed 195 struggling Family Dollar stores. The Company has now made plans to close an additional 390 Family Dollar stores this year in its effort at a turnaround.
Click here to request an updated list of the store closings.
According to published reports, George Michel, CEO of Friendly's Ice Cream, LLC sent a letter to franchisees on Monday indicating the Company has closed 23 corporate-owned restaurants, effective immediately. Click here for a list of closings. The closed locations include restaurants in upstate New York, Massachusetts, Connecticut, New Hampshire and Maine. As a result of the closures, Friendly’s now has 77 corporate-owned restaurants and 97 franchisee-owned restaurants. In the letter, Mr. Michel also reportedly stated that the Company is accelerating efforts to reinvigorate its brand, as it faces “shifting demographics and consumer preferences, increased competition and rising costs.” Mr. Michel said the Company plans to refresh its menu, focus on delivery and catering options and improve the overall experience for customers. Friendly’s emerged from bankruptcy in 2012 and is owned by Sun Capital.
Trader Joe’s recently opened a store in Gilbert, AZ, the Company’s 10th in the Valley. Other locations are in Phoenix, Glendale, Mesa, Scottsdale, Surprise and Tempe.
This week, grocery cooperative Allegiance Retail Services and member owner PSK Supermarkets plans to open the first new Pathmark since A&P liquidated in 2015. The 49,000 square-foot store is located in central Brooklyn, NY, at the site of a former Pathmark.
On April 5, Ahold Delhaize’s Giant Food Stores (Carlisle, PA) opened six new stores in four states, growing its total store count to 178. Five of the stores, which are former Shop ‘n Save locations Giant acquired earlier this year, are branded Martin’s Food Markets and are located in Smithsburg, MD; Greencastle, PA; Berryville, VA; Hedgesville, WV; and Martinsburg, WV. Additionally, Giant constructed a new store in Warrington, PA, to replace a nearby store. Click here to request a copy of Ahold Delhaize's recent store openings.
Buehler’s Fresh Foods recently opened its Massillon Liquor Agency adjacent to a store in Massillon, OH. The Massillon Liquor Agency will be the first store in Ohio to fully implement the new Ohio Liquor OHLQ brand system, designed to create a distinctive look and feel; it was chosen to replace the generic “State Liquor” branding that now is used in most Ohio agencies. Buehler’s Massillon offers more than 500 beers and 1,000 wines. Buehler’s Fresh Foods operates 13 supermarkets in Ohio.
Sprouts Farmers Market plans to open 13 stores during the second half of 2019, including five in Florida, four in California, one each in Maryland, North Carolina, and Arizona, and its first store in Virginia. By the end of the year, Sprouts will operate 340 stores in 22 states. Click here for a list of the Company’s planned new locations.
Stater Bros. Markets will open a new store in Ladera Ranch, CA, its 32nd store in Orange County. The 48,000 squarefoot location will undergo a major remodel later this summer. The Company currently operates 172 supermarkets.
Golub Corporation will convert two Price Chopper stores in the Albany, NY-area to its Market 32 format this year. The stores will remain open during the process. Once the conversions are completed, Golub will operate 22 Market 32 stores and 112 Price Chopper units. While the Company had said when it first launched its Market 32 initiative in 2014 that it planned to renovate and rebrand nearly all its Price Chopper stores into Market 32 stores over an eight to nine-year period, more than four years into the initiative the pace is much slower than expected.
Winn-Dixie recently reopened its store in Marathon, FL. The Florida Keys store was destroyed by Hurricane Irma in September 2017.
On April 6, QuikTrip opened its 800th convenience store, located in San Antonio, TX. The Company has added more than 100 new units over the past five years. QuikTrip currently operates stores in 11 states.
Marcus Theatres, a division of The Marcus Corporation, is planning to expand the Movie Tavern brand it just acquired in February 2019. Movie Tavern by Marcus will replace the previously announced BistroPlex opening in Brookfield, WI in October 2019. The market (within the Milwaukee metro area) already includes a Majestic Cinema, a Ridge Cinema and a BistroPlex all within 11 miles, so this would be the fourth Marcus-owned theatre to open in the area. Movie Tavern is a dine-in movie theatre chain with 22 locations in nine Southeastern states. This will be the first Movie Tavern in the Midwest.
Duluth Holdings announced plans to open 15 stores this year, growing from 46 stores at the end of 2018 to 61 stores at the end of 2019. The Company opened its first physical store in 2010. Fiscal 2018 sales increased 20.5% to $568.1 million. However, the Company experienced challenges with “systems implementation and late deliveries of product” during the fourth quarter. CEO Stephanie Pugliese said, “We had inventory that was misaligned to the timing of sales and not distributed optimally throughout the network. This affected store productivity and added extra cost throughout the system, and some of our high-demand products didn’t hit the market in time to reap the full benefit of the holiday season.”
New Sears (Transform Holdco LLC) – Special Analysis
New Sears is facing many of the same obstacles as Sears Holdings had previously: a broken business model, incapable of competing with encroaching online players, and a store base in significant disrepair.
Our Sister Company released a Special Analysis on New Sears, which includes a close look at the Company’s scaled-down operations, new debt structure, trade support, along with a future outlook analysis.
GPS Hospitality is acquiring 75 Pizza Hut restaurants in Georgia, Alabama, Kentucky and Tennessee from Yum! Brands. GPS will open a new division, as it sees opportunities for future growth within Yum! Brands and expects to reach 500 restaurants across the country this year.
On April 4, The Children’s Place completed the acquisition of certain intellectual property and related assets of Gymboree Group, DIP for $76.0 million in cash. The assets include the worldwide rights to the names Gymboree and Crazy 8, as well as trademarks, domain names, design rights, and customer databases. The sale transaction was approved by the U.S. Bankruptcy Court for the Eastern District of Virginia on March 4.
This information contained in this newsletter is compiled from sources which Market Service Inc. does not control and unless indicated is not verified. Its contents are not to be divulged. Market Service Inc., its principals and writers do not guarantee the accuracy, completeness or timeliness of the information provided nor do they assume responsibility for failure to report any matter omitted or withheld because of their negligence.