April 17, 2019
AggData Announces Enhancements to its North American Store-Level Geocodes
AggData is pleased to announce the release of manually verified “rooftop-accurate” geocodes for four million U.S. and Canadian locations, delivering unmatched precision in spatial analyses and data modeling.
As the volatile retail landscape continues to shift, the need for accurate store-level data is more critical than ever. AggData’s geocoding process pinpoints the exact site, not the general geographic area, producing unparalleled accuracy in proximity analyses, void analyses, data models and geospatial analytics. Rather than relying on third-party software, crowdsourced information, or having clients manually correct geocodes themselves, AggData’s proprietary method implements a multi-step process that yields the most accurate data for each location.
Commenting on enhancements to AggData’s North American geocodes, Lawrence Sarf, CEO of Market Service Inc. dba AggData, stated, “Big data is revolutionizing the way we analyze the retail industry, and location data fuels virtually every analytics engine. But the old saying ‘Garbage in, garbage out’ is more meaningful than ever, when inaccurate or imprecise GIS data is used in analysis. With this in mind, we have taken our industry-leading location data to a whole new level with the addition of roof-top accuracy on millions of retail locations.”
Today, Walmart Inc. announced the pricing of three new bonds totaling $4.00 billion. The Company indicated proceeds will be used for general corporate purposes, including refinancing maturing debt. There are two issues maturing in October 2019, totaling $1.50 billion. Earlier in the year, Walmart paid off $300.0 million in maturing obligations. The new issues raise debt to about $59.04 billion, but debt to TTM EBITDA stays flat at an estimated 1.8x, similar to where it ended fiscal 2019. Liquidity remains strong, with $7.70 billion in cash and full availability on its $15.00 billion revolver.
In other news, Walmart plans to invest a total of $833.8 million in new store construction and/or improvements across six states in 2019. That amount includes $265.0 million for remodeling 54 stores in Texas; $173.0 million for opening one new store and remodeling 33 stores in Florida; $145.0 million for opening one new store and remodeling 20 stores in California; $96.1 million for remodeling 19 stores in Indiana; $83.0 million for remodeling 15 stores in Pennsylvania; and $71.8 million for remodeling 14 stores in Arizona. In each of these states the Company will also be expanding customer-focused innovations including grocery pickup, grocery delivery, Walmart pickup towers, FAST unloaders, and autonomous shelf scanners and floor scrubbers. Click here to request a list of future Walmart openings/closings.
A recently published report indicated that Amazon’s Whole Foods could be interested in filling as many as 100 old Sears/Kmart stores, based on demographics and no existing Whole Foods within a three-mile radius. According to the report, Sears has about 480 locations still open, 80 of which will be closing. It also has about 430 locations “available” for new uses, including 260 of which are in the process of closing, and 170 vacant. While Sears has been closing stores for years, the underlying real estate is considered some of the best in the country. We mentioned back when Amazon acquired Whole Foods in June 2017 that compared to the nearly $30.0 million per store Amazon paid for Whole Foods, a look at the Kmart footprint with its nationwide presence, solid locations in major population centers and at roughly 95,000 square feet on average, would make great business hubs for Amazon at a severely discounted price to Whole Foods stores. Sears locations are 95,800 square feet on average.
Meanwhile, Whole Foods opened its 500th store, a 70,000 square-foot flagship in the Midtown neighborhood of Atlanta. The four-level store features four fast-casual eateries, including a rooftop venue, and more than 1,500 local items from 250 suppliers.
On April 8, 2019 we reported that Sears Hometown and Outlet Stores, Inc. (the Company) rejected a proposal from Transform Holdco LLC (aka New Sears) to acquire all of the outstanding shares of its common stock not already owned by ESL Investments, Inc. (ESL), for a purchase price of $2.25 per share. Both Sears Hometown and Transform Holdco are controlled by ESL Investments, Inc., which owns 58.8% of Sears Hometown’s common stock. The Company’s Hometown and Outlet segments operated 632 and 129 stores, respectively, as of the end of the fiscal 2018 third quarter. On March 29, 2019, we reported that the Company closed, or started the closure, of 105 stores in the Hometown segment(click here to request a list of closings).
Sears is also in the process of opening new Sears Home & Life stores, click here for more information.
On Monday, ESL changed the Company’s bylaws and replaced two of the Company’s Board members with individuals that it hopes will "consider additional paths forward" for the Company. This occurred after the Company proposed a transaction price of $9.50 per share, and the Board communicated to ESL that, absent a transaction, it was likely to meet to consider liquidating the Hometown segment. In a letter to the Company’s Board and shareholders this morning, ESL said it strongly disagrees with liquidating the Hometown business, because “such a decision would significantly diminish the Company’s value and create significant risk should the Outlet segment’s recent one-year profit performance prove ephemeral.” This occurred after the Company proposed a transaction price of $9.50 per share, and the Board communicated to ESL that, absent a transaction, it was likely to meet to consider liquidating the Hometown segment yesterday.
The Official Committee of Unsecured Creditors in the Specialty Retail Shops Holding Corp., DIP case, filed a preliminary objection to the sale of the Debtors’ optical business, claiming in the motion the Debtors are asking the Court to “bless a complete release of claims the Debtors hold against their private equity sponsor, Sun Capital Partners, on just eight days’ notice.” The Committee has sought to pursue claims totaling nearly $67.0 million paid by the Debtors to Sun Capital. The Committee objects to the release of claims, but does not object to selling the optical business, which apparently is profitable and has received bids from Sun Capital and Monarch Alternative Capital, the Debtors largest unsecured creditor and landlord. Subsequent to the filing of this objection, reports indicate that Monarch submitted an $8.5 million bid for the optical business. Results from the auction held yesterday have not yet been announced.
The Creditors Committee and Wells Fargo, Wells Fargo Bank, National Association, as the Agent for the Prepetition ABL Lenders, the Prepetition Term Loan B Lenders, and the Prepetition Term Loan B-1 Lenders, have entered a stipulation extending the challenge period for the DIP Final Financing Order from April 12 to April 19. The Committee is investigating certain items that may be the subject of a challenge.
600+ retailers have filed for bankruptcy year to date, including several major national chains. To request the full list of bankruptcies or to sign up for our daily listing of Chapter 11 filings (all industries), click here.
Rite Aid’s stock priced dropped as much as 14% last Thursday, before closing the day at $0.51, down 9.5%. The decline followed the Company reporting fourth quarter fiscal 2019 results where EBITDA fell 13.4% and management provided a soft outlook for 2020. EBITDA and margins were impacted by weak pharmacy reimbursement rates, higher costs as the Company attempts to realign its business to support the smaller store base following last year’s sale of 1,932 stores to Walgreens Boots Alliance (WBA), and lower front-end sales. Guidance for 2020 includes flat to 1% comp growth, with EBITDA flat to falling 11%, due to weaker retail segment performance. The Company expects the challenging environment for retail and pharmacy reimbursement rates to continue, while any benefit from generic efficiencies are not expected to have as much of an impact despite a new supply agreement with McKesson. The Company will also continue to restructure and right size the organization as the TSA with WBA winds down, including reducing managerial layers and consolidating the organization. The Company is targeting annual cost savings of about $55.0 million from the restructuring with approximately $42.0 million to be realized in fiscal year 2020; TSA revenue is expected to be lower by approximately $40.0 million this year. After burning $362.5 million in fiscal 2019, free cash flow in 2020 is expected to be about breakeven, although management is hopeful it may be able to generate some improvement in working capital. The Company also expects to generate $157.0 million in proceeds from the sale of the two remaining distribution centers to WBA. To address the front-end, an issue that CVS Health and WBA are also contending with, Rite Aid is completing a SKU optimization program, while emphasizing health & wellness, private brands and providing new health services, including partnering with local health care providers. The Company also is realigning its leadership structure. As previously disclosed, John Standley plans to step down as CEO; a search for his replacement is ongoing.
In order to regain New York Stock Exchange listing requirements, Rite Aid’s Board approved the implementation of a reverse stock split at a ratio of 1-for-20. Once effective, the reverse stock split will reduce the number of shares of common stock issued and outstanding from approximately 1.08 billion to approximately 54 million. Rite Aid’s common stock will begin trading on a split-adjusted basis on the New York Stock Exchange at the market open on April 22, 2019.
Meanwhile, the Company said it will start selling CBD hemp oil products in 200 of its stores in Oregon and Washington. CBD is the non-psychoactive component of the cannabis plant. At the same time, it said it would stop selling e-cigarettes in its stores nationwide. Removal will take place over the next 90 days. However, Rite Aid will continue to sell traditional cigarettes in contrast to CVS, which has removed tobacco products from its stores and Walgreen, which is testing some tobacco-free stores
In other news, yesterday Rite Aid announced it appointed Elizabeth Burr, who most recently served as chief innovation officer and VP of healthcare trend and innovation at Humana, and Katherine Quinn, who currently serves as vice chairman and chief administrative officer of U.S. Bancorp, to Rite Aid’s board of directors. The appointment of Ms. Burr and Ms. Quinn brings a total of five new independent members to its nine member board in the past year, and the Company’s commitment to refresh its board and reinvigorate its corporate governance practices and policies. Rite Aid also announced that Joseph Anderson, Jr. and Michael Regan, have retired from the board, effective immediately.
After hiring Malfitano Partners as a financial advisor, Freds, Inc. announced on April 11 that it has also engaged PJ Solomon to review strategic alternatives to maximize shareholder value. As part of this strategy, the Company will start closing underperforming units and hold liquidation sales at 159 stores targeted for closure (click here to request a list of closing locations), leaving the remaining 398 open for now. SB360 Partners, an asset disposition specialist, has been brought in to assist with the closures. The 159 stores will be closed by the end of May 2019. The Company has not indicated if the remaining stores are part of a long term turnaround strategy (not likely), or will be set up for possible sale (or eventual liquidation as the last option). The announcement follows a tumultuous year at Fred’s that has seen a revolving door in the executive suite, the sale of the Specialty Pharmacy unit, and the sale of scripts from 179 of its pharmacies.
Checkout-free Amazon Go stores will start accepting cash, likely a response to increased criticism that the Company is discriminating against U.S. households with no alternative methods of payments other than cash. The move comes as a growing number of cities and states are enacting laws that require stores to accept cash. Accepting cash seems counterintuitive to the whole premise of Amazon Go being quick and cashless. Amazon’s SVP Steve Kessel said last month that the Company plans to add “additional payment mechanisms” to its Go stores. Mr. Kessel highlighted some of the new payment methods Amazon has recently added to its site, including a pilot that accepts government subsidized SNAP benefits, and a new program called Amazon Cash, which lets users apply cash to their digital accounts by bringing money to a local store like 7-Eleven or CVS.
Amazon’s founder and CEO Jeff Bezos released the Company’s annual shareholder letter, detailing the Company’s success in discovering new markets and growing rapidly, even after 20 years. Mr. Bezos cited the growth of Amazon's third-party sales, from 3% of overall sales in 1999 to 58% in 2018 (up from 56% in 2017). He also affirmed his commitment to continue experimenting and failing on a large scale. Mr. Bezos also challenged rival retailers to increase their minimum wages to $16 an hour. He stated in the letter, "Today I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage." The Company raised its minimum wage to $15 per hour for U.S. employees in November.
In other news, Amazon has reportedly offered sellers in the New York City, Los Angeles, and Chicago areas the option to use “Amazon Shipping,” its owned and operated shipping capability, to ship from sellers’ warehouses directly to customers, and not through its fulfillment centers. It is the Company’s latest effort to reduce its reliance on delivery providers such as Fedex and UPS.
According to data from consulting firm Shipmatrix, Amazon currently handles 10% of its own shipping traffic. USPS handles 62% of Amazon’s traffic, UPS handles 21% – 26% and FedEx handles 8% – 10%. An owned and operated shipping service opens up possibilities to scale the service to companies outside of Amazon’s ecosystem.
Amazon’s Japanese unit raised the membership fee for its Prime service by 26% on Friday, the first increase since it was launched in the country 11 years ago. The new annual Prime membership fee is 4,900 yen ($43.86) versus 3,900 yen previously. Amazon did not provide a reason, but pointed to the growing number of services available to members.
In other news, Amazon acquired Canvas Technology, a robotics startup in Boulder, CO, that has built autonomous carts that can move goods around warehouses. Terms were not disclosed. Amazon has increasingly automated its fulfilment centers with robots, originally from Kiva Systems, which it bought for $775.0 million in 2012, that transport shelves of inventory to workers to pick customer orders. Amazon has also participated in a $530.0 million funding round in driverless car startup, Aurora Innovation Inc.
Macy’s launched Story, its narrative approach to retailing, on April 10 in 36 Macy’s stores across 15 states. The offerings include more than 400 products from small businesses and major companies and are an effort to boost foot traffic to its stores. Acquired by Macy’s last year, Story is a New York City-based concept store that changes its design and products every four to eight weeks. The first theme at Story at Macy’s is “color,” and is expected to last through June 26.
Meijer will open a new, 155,000 square-foot supercenter in Fremont, MI on May 21. The store’s gas station will open on April 25. It is the Company’s 116th supercenter in Michigan, and one of five opening throughout the Midwest in 2019. The Company operates more than 240 stores in Michigan, Ohio, Indiana, Illinois, Kentucky and Wisconsin.
Ahold Delhaize’s Food Lion plans to invest $40.0 million to remodel 23 stores throughout the Charlottesville and Harrisonburg, VA, areas. The stores will remain open during the remodelings. The remodeled stores will offer an expanded variety and assortment of products, and two of the stores will have walk-in produce coolers installed. Back in March the Company announced plans to remodel nearly 100 stores in South Carolina. Once these renovations are complete, Food Lion will have remodeled 80% of its network of more than 1,000 stores across its 10-state operating area.
Meanwhile, Ahold Delhaize’s Hannaford chain has completed remodels at four Portland, ME-area stores. The stores have a new look with enhanced fresh offerings and new amenities such as self-checkout and its Hannaford To Go online grocery pickup service. The pharmacy departments have also been expanded and now include private consultation rooms. Earlier this year, Hannaford reopened two other remodeled stores located in Maine, and upgraded six stores in New York, Maine and Vermont last year. The Company will begin construction on a new 50,000 square-foot store in Brunswick, ME this summer and announced plans for a 49,000 square-foot store in Rome, NY, and a 38,000 square-foot store in Ballston, NY. One new store was opened last year in Mechanic Falls, ME. Hannaford currently operates 181 stores overall.
Workers at Ahold Delhaize’s Stop & Shop supermarkets in three states have gone on strike over stalled contract negotiations. Union workers from several locals walked off the job last Thursday in Massachusetts, Rhode Island and Connecticut. More than 31,000 employees authorized union leaders to call for a strike. Stop & Shop said in a statement that it was disappointed with the strike given that negotiations are ongoing with the assistance of federal mediators. It added that management's "reasonable" offer includes across-the-board raises and health and pension benefits it says are better than most other food retailers. According to the UFCW, Stop & Shop is claiming they are offering a wage increase, but $0.30 in hourly wages for a part-time worker would not offset the cuts they have included in their proposal such as: Elimination of Sunday and holiday pay for part-timers; increase in weekly premium costs for employee only coverage by up to 90% over three years; and doubling of health care out-of-pocket limits for many employees. The walk out comes as the Company is in the midst of trying to revive the Stop & Shop chain, pledging to invest up to $150.0 million annually to remodel stores and devote more space to categories like fresh produce and meat.
On April 24, Kroger will open a Harris Teeter store and fuel center in Fuquay-Varina, NC. The 53,000 square-foot location replaces Harris Teeter’s location at Sexton Commons. The store will offer expanded prepared and fresh foods, ExpressLane Online Shopping, and a drive-thru pharmacy.
Kroger also plans to open a $55.0 million distribution center just south of Dayton, OH in Monroe. About 68 acres of land were sold to Kroger for approximately $3.1 million, according to property records. Kroger, along with British online grocery retailer Ocado, announced in November they had chosen Monroe as the site of their first jointly developed warehouse and distribution center. It is expected to open 2021. Amazon also is opening a distribution center in Monroe.
Trader Joe’s will open a store in Brick, NJ in the space of a former Ethan Allen furniture store. An opening date has not yet been disclosed.
The company is also looking to open a store in Meridian, ID, its second location in the state. Building plans have been submitted for a space previously occupied by Rosauers, which closed in December 2017.
According to published reports, Trader Joe’s is planning a store for Denville, NJ, its second unit in Morris County. Sources indicate the Company has signed a lease to move into the Shoppes at Union Hill.
Wawa plans to open a smaller, 3,000 square-foot convenience store prototype in Philadelphia, PA. The store will maximize automation and include a walk-up window for order pickups. It will also feature new products such as juices, energy shots, and upscale hot tea offerings. It is about a mile away from the Company’s largest store (11,300 square feet), which opened in December 2018.
Last week, Bashas opened its first newly built store in ten years, located in Sanders, AZ. The 16,000 square-foot store operates under the Bashas’ Diné Market banner, the Company’s store brand for Arizona’s Native American reservations. There are ten other stores operating under the Diné Market banner in the state. Bashas also operates over 100 stores in Arizona and one in New Mexico under its Bashas’, Diné Market, AJ’s Fine Foods, and Food City banners.
Price Rite Marketplace recently rebranded five of its stores in Connecticut located in Cromwell, New Britain, West Hartford, Wethersfield and Windsor. The refresh in Connecticut follows a successful pilot program at three of its Pennsylvania stores. The fresh new look and improved in-store experience included lower prices on hundreds of items as well as new private label and organic products. Price Rite Marketplace is part of the Wakefern Food Corp.
Sprouts is close to completing construction on its new store in Baton Rouge, LA, its first in the state. The 30,000 square-foot store will open on June 26.
Orlando, FL Metro Area - Hot Market Report
The Orlando Metro Area is the 24th largest metropolitan area in the U.S. and is one of the nine metro areas that make up Florida. From 2016 to 2017, the region grew 2.3% to reach a population of just over 2.5 million, the fastest population increase of the 30 largest cities in America. This growth can be attributed to domestic relocations from northern and high tax states as well as from immigration to the metro area. In addition, thousands of Puerto Rico residents migrated to Florida after Hurricane Maria in 2017. Grocery competition in Florida continues to intensify as the established players experience heightened competition from several new and existing players ready to grow in the state. Our report takes a closer look at the Orlando real estate landscape, and provides visual competitive analyses as well as key real estate metrics such as future openings, store count, market share, and demographics.
Publix is reportedly looking at a 15,000 square-foot space to open a new store in downtown Orlando, FL. It would be about a mile away from an existing Publix. See below for Future Store Openings Map - click here to request a list of future Publix locations.
Aldi opened a new store in Panorama City, CA, the first of more than a dozen planned for southern California this year. The Panorama City store is the Company’s 64th store in California. The head of Aldi’s Moreno Valley division commented, "We plan to open 15 stores in 2019, including Panorama City. That will bring the total to 78.” Southern California’s supermarket industry has grown increasingly crowded. While recent entrants include Aldi and Grocery Outlet, the area has a plethora of strong players such as Safeway’s Vons, Kroger’s Ralphs, Albertsons, Whole Foods, Trader Joe’s, Sprouts, Food 4 Less, Smart & Final, Stater Bros and Vallarta Supermarkets. On top of this, Walmart, Target and 99 Cents Only have expanded their grocery options. Sprouts announced earlier this month it will be opening 13 new stores this year, including locations in West Covina, West Hollywood and Lake Forest.
Walgreens will open primary care doctors’ offices in five Houston stores through a partnership with VillageMD, which will work with social workers, nurses and Walgreens’ pharmacists. The 2,500-square-foot offices will be inside the Walgreens stores, though they will have a separate storefront and a door connecting the two spaces. These clinics differ from Walgreens’ existing walk-in clinics, which typically treat people for acute conditions like cough and flu. They are primary care doctors’ offices where people can go for their annual physical and any other ailments. Walgreens will shrink the stores’ retail space to make room for the offices. The locations will include six to eight exam rooms, as well as a waiting area. The first locations of the concept, called “Village Medical at Walgreens,” are slated to open by the end of the year.
On April 13, CVS Pharmacy opened a new store in Redondo Beach, CA. The store will offer an expanded selection of healthier foods and wellness products in addition to a full-service pharmacy.
BJ's Wholesale Club opened a new store in Clearwater, FL, its 217th location. There are two other locations in nearby Hillsborough. Competitors Sam’s Club and Costco both have stores about 10 minutes away from the new BJ’s.
ABC Supply opened a new location in Mashpee, MA, which serves the Cape Cod market. The unit is the Company’s 13th in the state. ABC Supply operates more than 700 locations nationwide.
The below retailers recently released their earnings reports. To request more information on these companies, or to discuss the financial performance with a retail industry expert, please click here.
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.