April 24, 2018
Sears Holdings
Sears Holdings is shutting down at least 11 Sears and two Kmart stores in addition to the 166 stores Sears previously said it would close in 2018, according to government filings. To request an updated list of Sears/Kmart closings, click here.
Bon-Ton Stores
On April 19, the U.S. Bankruptcy Court for the District of Delaware approved an asset purchase agreement between Bon-Ton Stores, DIP and a joint venture composed of the holders of the Company’s 8% Second Lien Senior Secured Notes due 2021, Great American Group LLC, and Tiger Capital Group LLC. Under the approved agreement, the joint venture group will acquire the inventory and certain other assets of the Company, including real estate and intellectual property. The purchase price was approximately $780.0 million. All stores are set to close no later than August 31. This came after published reports indicated there were no going concern bids for Bon-Ton at the Court-supervised auction held on April 16; the only bids came from liquidators, despite previous discussions with an investor group that had proposed acquiring the Company as a going concern.
Toys "R" Us
On April 23, Toys “R” Us, DIP notified the Court that it did not receive any qualified bids other than the $300.0 million stalking horse bid from Fairfax Financial Holdings Ltd. for the sale of 100% of the equity interest in the Canadian operations of Toys “R” Us. Therefore, the Company selected Fairfax Financial Holdings Ltd. as the successful bidder. Fairfax is a Toronto-based investment firm controlled by financier Prem Watsa.
Meanwhile, Toys “R” Us entered into a definitive agreement under which Smyths Toys Superstores will acquire over 90 Toys “R” Us stores in Germany, Austria and Switzerland for €79.0 million (US$96.4 million). Up to €37.0 million (US$45.2 million) may be escrowed at closing. Smyths Toys, which operates 110 stores and online shops in Ireland and Britain, said it intends to rebrand the Toys “R” Us stores under its own banner. The sale is subject to approval of the U.S. Bankruptcy Court for the Eastern District of Virginia.
The Company’s liquidation is taking a toll on toy maker Hasbro, which reported a 16% decline in first quarter sales and swung to a loss of $112.5 million. Hasbro’s management indicated that the impact of Toys “R” Us’ liquidation will start to wane in the second half of the year, and that it would take about a year to work through the full impact. Sales of Hasbro products at Toys “R” Us stores accounted for nearly 10% of Hasbro’s sales last year, while sales at Walmart and Target accounted for about 30% of Hasbro’s sales.
Isaac Larian, CEO of MGA Entertainment whose bid for more than 200 U.S. Toys “R” Us outlets was rejected earlier this month, says he is reassessing the value of the stores, as well as unspecified intellectual property he is seeking. His previous bid, $675.0 million for 274 stores, was rejected as inadequate. He has yet to specify what a “sweetened” deal would look like, but says he is compelled to save the chain. Mr. Larian estimates that Toys “R” Us accounts for up to one-fifth of MGA Entertainment’s sales.
Winn-Dixie
Several Winn-Dixie stores across South Louisiana are in the process of becoming Super 1 Foods stores. Brookshire Grocery Company (BGC) announced in February it would acquire eight Winn-Dixie stores for $8.5 million in Louisiana from Southeastern Grocers to become part of BGC’s Super 1 stores. The agreement includes Winn-Dixie stores in New Roads, Breaux Bridge, Franklin, New Iberia, Abbeville, Crowley, Rayne and Eunice, LA. The store in Crowley closed last week and is expected to reopen as a Super 1 on April 26. BGC operates more than 175 store locations under the banners of Brookshire’s Food Stores, Super 1 Foods Stores, Spring Market and FRESH by Brookshire’s.
Tops Holding II Corporation
According to court documents, Tops Holding II Corporation, DIP has proposed a total of $7.1 million in bonuses for key employees, including $3.6 million to its five highest-ranking executives. The plan would pay CEO Frank Curci more than $1.3 million and John Persons, the Company’s president and COO, more than $1.0 million if the Company exceeds certain financial targets by 10%. Tops is also proposing a separate bonus plan, with up to $3.5 million in payments, that would go to 115 key employees as part of a plan designed to both reward them for bettering Tops’ financial situation and give them an incentive to stay at Tops and not seek new jobs elsewhere, as the chain moves through the bankruptcy process. That plan would offer bonus payments of $10,000 to $100,000 apiece to the 115 Tops employees.
Tops has also requested that the Court approve a settlement agreement between it and Topco Associates, LLC and Topco Holdings, Inc. (Topco) under which Topco will continue to supply Pharmacy Products and Fuel Products to Tops. Also as part of the agreement, Topco will have an allowed prepetition claim of $9.3 million, which Topco may set off against Prepetition Credits, totaling $9.9 million. Following the order, any prepetition amounts against Tops in excess of previously agreed amounts will be waived. Until termination of the agreement, Topco will continue to supply Pharmacy Products and Fuel Products to Tops.
Finally, according to documents filed April 18, Tops is requesting “to close any stores that they determine, in their business judgment, should be closed in order to preserve liquidity and maximize the value of their respective estates.” No information was available about which locations would be impacted. If approved, locations shutting down would have closing sales. The motion is planned to go before the Court on May 10.
Starbucks
On May 29, Starbucks will close all of its Company-owned U.S. stores and corporate headquarters for a training program designed to address racial bias. More than 8,000 stores will close for the program, which will also focus on promoting conscious inclusion and preventing discrimination. The initiative follows the arrest of two African-American men at a Starbucks store in Philadelphia last week that sparked accusations of racial profiling.
Walmart
According to published reports, Walmart is close to a $12.00 billion deal to buy a majority stake in Flipkart, India’s leading e-commerce company. Flipkart is valued at about $20.00 billion. Sources indicate that the two sides could come to a final agreement within the next two weeks. All major Flipkart investors are reportedly on board. Tiger Global Management will sell nearly all of its 20% stake, while SoftBank Group plans to sell off the bulk of its 20%-plus holding. At the end of the deal, Walmart will likely end up with 60% – 80% of Flipkart. Amazon also reportedly made a push to buy out Flipkart but, according to sources familiar with the matter, Flipkart’s board determined Walmart could close the deal more easily. Walmart will likely have to clear fewer regulatory hurdles since it currently lacks an online presence in India.
Sears Hometown and Outlet Stores
Operational deterioration continues to snowball at Sears Hometown and Outlet Stores. Fourth quarter sales fell 19% to $395.8 million due to the closing of 120 stores and a 12.4% drop in comparable store sales, which came on top of a 4.1% comp decrease for the same period last year. Management blamed merchandise availability issues, citing a growing inability to obtain sufficient quantities of Craftsman tools from Sears Holdings, which supplied 78% of its merchandise in 2017. This could become more of a problem following the recent announcement that Sears Holdings’ CEO Edward Lampert said he is evaluating the purchase of Kenmore and other units because Sears Holdings has been unable to find buyers for the assets.
EBITDA loss during the quarter widened 62.5% to $14.3 million, and EBITDA margin fell 180 basis points. This left TTM EBITDA margin and interest coverage in negative territory. It should be noted that management said it experienced improved operations during the first two months of the 2018 first quarter. However, the Company burned through $115.0 million in cash during 2017 and ended the year with just $35.0 million in liquidity.
Pier 1 Imports
Pier 1 Imports’ fourth quarter revenues declined 3.1% to $512.2 million, reflecting lost sales from 15 net store closures since the prior-year period and a 7.5% drop in comparable store sales (following 0.2% comp growth last year). The decline in comps was primarily due to an ineffective promotional program and value proposition, which led to lower customer traffic and average ticket. E-commerce sales represented approximately 25% of net sales compared to 20% in the same period last year.
Gross margin deteriorated 220 basis points due to higher shipping and fulfillment costs associated with the Company’s e-commerce business coupled with heightened promotional activity to move aging inventory. SG&A margin increased 60 basis points due to the sales deleveraging of fixed costs; ultimately, EBITDA declined 26% to $49.3 million, and margin eroded 300 basis points for the quarter. TTM EBITDA margin fell to 5.3%. In light of these results.
Looking ahead, Pier 1 is planning to redesign all of its stores with a more toned-down vibe and neutral palette, for a more modern, less “busy” look, in an effort to allow the merchandise to stand out. Management indicated that “stores are not terrible, but neither are they inspiring enough to drive visitation.” The Company expects to roll out the redesign, which was already implemented in the Dallas-Fort Worth market, this fall. Pier 1 ended fiscal 2017 with 1,020 locations.
METRO Inc.
Yesterday, METRO Inc. said it received Competition Bureau authorization to proceed with its acquisition of The Jean Coutu Group for $4.50 billion, which was first announced on October 2, 2017. The transaction is expected to close on May 11, 2018. As part of its agreement with the Competition Bureau, METRO will divest all of its rights in 10 pharmacies. No pharmacy will close as a result of these divestitures. The combination will create a new $16.00 billion company. The Jean Coutu Group will become a wholly owned subsidiary of METRO, combining all of its operations in the pharmaceutical sector.
METRO Inc. also reported second quarter results for the period ended March 17. Sales fell 0.1% to $2.90 billion, due to Christmas falling out of the first quarter compared to 2Q17. Comps fell 1.2% but would have been up 1% excluding the impact of the shift. Operating income was down 2.6% to $206.5 million, and included $1.6 million in expenses in connection with the Jean Coutu acquisition.
Weis Markets
On April 12, Weis Markets opened a new store in Nottingham, MD, outside of Baltimore, its 52nd in the state and 12th in Baltimore County. The 67,500 square-foot store offers expanded organic and specialty sections, Weis 2 Go online ordering with curbside pickup, and a Gas N’ Go Fuel Center with six pumps.
Executives at Weis say the chain is expanding while others are closing or scaling back. COO Kurt Schertle recently stated, “A lot of people are closing stores and we are growing…. We think we’re putting up nicer, newer, more relevant stores that can compete in this day and age.” The Company has been able to grow in part due to repurposing retail spots once occupied by the likes of A&P, SuperFresh, Kmart, Food Lion and Mars Super Markets. The Company has grown rapidly in Baltimore’s suburbs like Dundalk, Essex, Perry Hall, Owings Mills, Reisterstown, Towson, Woodlawn and White Marsh.
Casey's General Stores
Casey’s General Stores opened its first Michigan store on April 13 located in Watervliet. The 4,500 square-foot store is open 24 hours, features a six-pump fueling station, and offers expanded prepared food products. Michigan marks the 16th state of operations for Casey’s, with plans for additional locations there in the future.
Sprouts Farmers Market
On July 11, Sprouts Farmers Market will open its second store in Maryland, in Townson, following the March opening of a store in Ellicott City. The 30,000 square-foot Townson location will offer an expanded fresh foods section, along with a Vitamins and Body Care department. Sprouts operates nearly 300 stores in 16 states from coast to coast.
WinCo Foods
On April 18, WinCo Foods opened a new 84,000 square-foot store in Oklahoma City, OK, its first location within the Oklahoma City limits and its third in the state. The store will be open 24 hours and offer grocery items along with a full produce section and meat, deli, bakery and a bulk foods department. WinCo Foods now operates 122 stores across nine states.
Natural Grocers
Natural Grocers opened a new store last Wednesday in Northeast Portland, OR. It is the Company’s fifth Portland-area store and is among its first to include a beer and wine section.
Wawa
Wawa recently announced it will open its largest location in Philadelphia, PA by the end of the year. The store will be 11,300 square feet and feature expanded prepared food and beverage offerings. Previously its largest location was in Washington, D.C., at 9,200 square feet.
Supervalu
Three of Supervalu’s Farm Fresh stores closed last week, in Gloucester, Hampton and Williamsburg, MA. Five others are slated to close as soon as this week. The pharmacies and fuel centers continue to operate. On March 14, Supervalu announced it was selling 21 of its 38 Farm Fresh stores to Kroger, Harris Teeter and Food Lion.
Gap
Gap plans to open 60 new Old Navy stores and remodel about 150 existing Old Navy locations over the next few months. The remodeled stores will get upgraded fitting rooms, restrooms and checkout areas, and more modern fixtures. Old Navy has been a key driver in Gap’s sales, as comps for the brand were up 9% during the fourth quarter and 6% for 2017.
Last September, Gap announced it would shift its emphasis to its two best-performing brands, Old Navy and Athleta, which it expects to exceed $10.00 billion and $1.00 billion, respectively, over the next few years. At fiscal 2017 year-end, Old Navy had 1,066 stores in North America and 14 in Asia, with annual sales of $7.24 billion for the brand.
True Value
True Value stated that its previously announced investment from ACON was finalized. This creates the only branded hardware store without a membership requirement. In connection with the investment, although specific financial terms were not released, True Value members receive approximately $230.0 million in returns and credits, consisting of 70% of invested capital, the 2017 patronage dividend and 100% of the promissory notes. Additionally, members will retain a 30% investment in the new True Value Company. True Value members voted 85% in favor of the private equity deal, a landslide victory. Additionally, the existing management is expected to remain in the new entity.
Wegmans
Wegmans will open its sixth store in Massachusetts located in Natick on April 29. The 146,500 square-foot store is connected to a mall and features expanded fresh and prepared food offerings as well as a full-service Mexican restaurant.
K-V-A-T
K-VA-T is building three new Food City stores in Northwest Georgia, in Walker County, Ringgold and Dalton. Two of these are replacement stores. The new stores are part of $50.0 million – $60.0 million that Food City is investing in the Chattanooga market, up from an original planned investment for that market announced in 2015 of $40.0 million – $50.0 million. K-VA-T currently operates 132 stores throughout southeast Kentucky, southwest Virginia, east Tennessee, Chattanooga and north Georgia.
Hy-Vee
Hy-Vee is looking to open an 8,000 square-foot Hy-Vee Fast and Fresh in Polk City, FL. The new concept is a smaller-scale store that serves more as a convenience store with expanded prepared foods. There are only two other stores under this format under construction — in Davenport and Altoona.
Golub Corporation
Golub Corporation has renovated a former Price Chopper store in Amsterdam, NY into its newest Market 32 store. It is the Company’s 20th under the format, either as a newly constructed store or as a remodeled Price Chopper. The stores emphasize convenience, with expanded prepared foods and locally grown and produced products.
Target
Last week, Target announced that it is bringing same-day delivery to five major U.S. cities this month. Customers in nearly 60 stores in Boston, Chicago, New York City, San Francisco and Washington D.C. will be able to have purchases delivered within a two-hour timeframe.
On May 3, Target will begin same-day home delivery in the Boulder, Colorado Springs, Denver and Fort Collins metro areas through Shipt. The new partnership gives nearly four million households across Colorado access to Target products.
Last week, Target began offering its “Drive Up” curbside pickup service at stores in Florida and Texas. Target hopes to expand the service to nearly 1,000 stores across the U.S. by the end of the year. It is now available at 270 stores throughout the South and Southeast.
Big Y Foods
Big Y Foods completed $5.4 million in renovations at its stores in Milford and Easton, CT. A new feature at both stores is self-checkout, an offering the Company removed from its stores in 2011 due to technical complications, but has now begun to reintroduce. Big Y said the upgrades at the two stores are in response to changing consumer demand. Big Y has 78 locations throughout Massachusetts and Connecticut.
Dunkin' Brands
Dunkin’ Brands signed a multi-unit store development agreement with existing franchisees Lagunita Franchise Operations LLC. Over the next several years, the franchisee group is planning to open seven new Dunkin’ Donuts restaurants throughout Montgomery, AL. Financial terms were not disclosed.
CVS Health
CVS Health opened its newest Hawaii Longs Drugs store in Makaha over the weekend. The 18,000 square-foot store took over a building that had been vacant since 1995. Meanwhile, construction is set to begin on a 20,000 square-foot, $20.0 million Longs Drugs in Nanakuli that will include a drive-thru pharmacy.
Camping World Holdings
Rock/Creek Outfitters was sold to Uncle Dan’s Outfitters, a subsidiary of Camping World Holdings, in a move to expand the chain across the Southeast. Rock/Creek provides gear for sports including kayaking, rock climbing, camping and hiking; it operates six brick-and-mortar locations in Chattanooga, Cleveland, and Franklin, TN, and a seasonal outpost near Benton, TN. The stores will remain open, and current staff and management will also remain in place. Terms of the deal were not disclosed.
Greats
Online luxury sneaker brand Greats opened a 500 square-foot store in Manhattan’s SoHo neighborhood on April 20. Greats was founded by CEO Ryan Babenzien and launched online in 2013. It serves a niche market with Italian leather sneakers for men and women, with prices ranging from $79 to $299. In addition to selling its products online and in its stores, Greats is partnering with Nordstrom to offer its products in at least 20 Nordstrom stores this year.
Primark
Irish retailer Primark will open a 57,900 square-foot store in Brooklyn, NY on May 16. It will feature women’s, men’s and children’s clothing and accessories, along with home goods, beauty products and gifts. This will be Primark’s ninth U.S. location, after the chain opened its first U.S. store in Boston, MA in fall 2015. Primark is a division of Associated British Foods PLC and is considered a deep discount apparel retailer, operating over 350 stores in 11 countries – the U.K., Ireland, Spain, Portugal, Germany, the Netherlands, Belgium, Austria, France, Italy and the U.S.
