April 24, 2019
Office Depot is closing 50 underperforming stores this year (click here to request a list), under both its namesake and OfficeMax banners. Five Office Depot and four OfficeMax stores will shutter on May 18, with the rest to follow over the course of the year. The closings are part of the Company’s three-year plan announced in 2016 to shutter roughly 300 stores. During 2018, the Company closed 19 stores and opened two new stores, on top of 26 closed and 63 opened in 2017.
In connection with the filing of Sears Holdings Corporation, DIP’s monthly operating report for the period ended March 2, the Debtor reiterated its previous statement that it does not believe there will be sufficient funds in the estate to allow common stockholders to receive any distribution of value, and it expects to file a Chapter 11 Plan reflecting that belief in the coming weeks. Our analysts note that the statement does not directly address the potential impact on general unsecured creditors. However, the Debtors and the Creditors’ Committee both previously acknowledged the potential for the estate to be administratively insolvent, which would result in no recovery to general unsecured creditors.
On April 16, Smart & Final announced a definitive merger agreement with funds managed by affiliates of Apollo Global Management whereby Apollo will acquire all the outstanding shares of Smart & Final stock at $6.50 per share, representing a total valuation of $1.12 billion, including assumed net debt (6.2x TTM EBITDA). The transaction is expected to be completed through an all-cash tender offer and close by 3Q19. Upon completion of the transaction, Smart & Final will be a privately held portfolio company of the Apollo Funds.
In February, Aldi and Kohl’s announced a partnership in which a downsized Kohl’s leases space to Aldi. The pairing involves Aldi building new stores in portions of existing locations that previously belonged entirely to Kohl’s. The first Aldi combo store opened on February 7 in Waukesha, WI, with five to 10 such units expected to open this year. A recent survey showed that the partnership could drive increased traffic to both stores. According to the survey, 68% of consumers polled by market research firm Field Agent said they would very likely shop both sides of Aldi and Kohl’s combo stores in the same trip. About 90% said they would be at least moderately likely to shop at both, while 38% said they would be “completely” likely to do so. Aldi benefits by reaching customers who may not normally shop at its stores, while Kohl’s continues to diversify its retail space. Kohl’s has partnered with Planet Fitness to open 10 fitness centers next to its existing stores, and with WW (formerly Weight Watchers) to open an in-store WW Studio in Chicago. Customers can also return Amazon purchases at select Kohl’s stores.
This morning, Kohl’s announced it will now accept Amazon Returns at all 1,150 stores nationwide, expanding from 100 stores in the Los Angeles, Chicago and Milwaukee markets. The expansion will be rolled out in July. The Company also recently expanded its product relationship with Amazon, now carrying Amazon products in more than 200 stores.
Charming Charlie closed on a $35.0 million asset-backed revolving credit facility co-agented by Second Avenue Capital Partners, LLC (SACP) and White Oak Commercial Finance, LLC (White Oak). The new facility will be used for working capital needs. Charming Charlie emerged from bankruptcy on April 25, 2018, with a $25.0 million secured term loan, and a $35.0 million secured revolving credit facility from PNC Bank, in addition to a $20.0 million short-term vendor-financed facility that matures in May. Creditntell analysts note that the new facility replaced and improved on the terms of the $35.0 million revolver from PNC Bank. White Oak CEO Robert Grbic stated, “Charming Charlie has demonstrated unparalleled progress in reestablishing a strong business amid many challenges, and we are pleased to work with SACP to help this iconic retail brand reach for new levels of success.”
After closing 108 locations during the bankruptcy process, the Company emerged with 263 stores. As shown in the Store Concentration Map below, Charming Charlie currently operates 262 locations.
According to a published report, Cumberland Farms has hired Bank of America to explore its options for a potential sale or merger. CEO Ari Haseotes made the announcement to employees at a town hall-style meeting. Possible buyers mentioned include Alimentation Couche-Tard, Irving Oil, Marathon Petroleum Corp. (Speedway), and BP plc. EG Group, a privately held convenience store retailer based in the U.K. that entered the U.S. market in 2018 with its purchase of Kroger’s Turkey Hill portfolio of convenience stores, may also be looking to expand its presence. With estimated sales of $12.00 billion, Cumberland Farms operates more than 560 convenience stores, of which more than a third are in Massachusetts and the remainder are in Connecticut, Florida, Maine, New Hampshire, New York, Rhode Island, and Vermont.
Last week Shopko Holdings, DIP selected Monarch’s $8.5 million winning bid in the auction for the optical business. An order is still pending. The Debtor also filed a motion to extend the exclusive periods to file and solicit acceptances of Chapter 11 Plan by 180 days to December 12, 2019 and February 10, 2020 respectively. The Debtors stated they intend to use the extension of the exclusive Periods to “work with Monarch (their largest landlord) to consummate the sale of the Optical Business to develop and preserve the associated going concern; continue to monetize their retail assets in an efficient manner and realize on other non-operating assets; and negotiate with their stakeholders on an emergence from Chapter 11.”
Published reports claim Kroger’s Home Chef and 84.51° divisions are relocating to a 75,000 square-foot space in Chicago’s Old Post Office. The 2.8 million square-foot structure is being converted into offices in an $800.0 million+ project. Home Chef, acquired by Kroger last year, plans to move its headquarters by December; it will include a research kitchen and customer support department. Home Chef, which currently has 250 employees in three smaller offices in Chicago, plans to hire 150 more employees over the next few years. Kroger’s data analytics arm 84.51° will move into a 57,000 square-foot office, with plans to go from 86 employees to 250 in the next few years. Other future tenants of the building will include Walgreens (which sells Home Chef in some of its locations) and Ferrara Candy. See below for Future Store Openings & Closings Map - click here to request a list of future Kroger openings & closings.
As part of a $40.0 million capital improvement program, Tops Friendly Markets is in the midst of six major floor-to-ceiling interior renovations and updated exterior facades, landscaping, and parking lots. The stores, all expected to be completed by July, will highlight the fresh departments and will offer expanded selections of produce, bakery and deli/carry out, as well as natural, organic and gluten-free offerings. President and CEO John Persons noted the Company is also investing in stores by expanding its omnichannel offerings, including “buy online, pick up in store” and grocery delivery. He commented, “By the end of May 2019 Tops will have twenty stores that will offer grocery pickup service to its customers with expansion into our other major markets on the horizon.” Tops is targeting more stores for renovations for phase two of the capital improvement program; those stores will be named at a later date. The ability to achieve a major turnaround is still a longshot, following its November 2018 emergence from bankruptcy, but these moves and investments are a step in the right direction.
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.
On April 19 Fred’s announced it has delayed the filing of its annual 10-K report due April 18, indicating it will file within 15 calendar days of the due date. This would target approximately May 3 for the release. Fred’s announced on April 11 that it would be closing 159 stores (click here to request a list of the closures); the additional time to file is necessary to reflect the effect of the closures on its financial statements.
Walmart has said it plans to invest $173.0 million in its Florida stores this year and is targeting South Florida for technology upgrades. It is installing pickup towers in three stores in South Florida to make it easier for online shoppers to pick up their orders. These towers are 16-foot vending machines that fill online orders after customers scan a code on their phones. Walmart is also adding grocery pickup to 72 stores in Florida this year. Dozens of Walmart stores in Florida will receive robotic shelf scanners and floor scrubbers to handle some tasks previously done by employees. A Walmart Neighborhood Market is under construction in south Miami-Dade County and is expected to open in late spring. In its 4Q and FYE results in February, the Company indicated plans to open fewer than 10 stores domestically across all banners in fiscal 2020.
Meanwhile, Walmart is partnering with KidBox, an online subscription-based service that sends out curated boxes of children’s clothing based on kids’ individual fashion preferences and personalities. Under the deal, Walmart.com shoppers will be able to purchase up to six different boxes a year.
Finally, a published report claims Walmart plans to open 40 Sam’s Club stores in China by 2020, almost doubling the number it operates there. There are 23 Sam’s Clubs in China at the moment, with approximately two million members. According to the report, “The Sam’s Club stores are part of Walmart’s China business, which also includes hypermarkets and compact community-based small supermarket businesses. Walmart also operates an online grocery delivery business JD Daojia, through a partnership with JD.com, as well as WeChat mini program, which has more than 30 million members.”
Amazon recently opened its third Go store in San Francisco, CA, standing at 1,750 square feet. However, it is uncertain whether it will remain a cashless convenience store. A Board of Supervisors will vote this week on whether to require retail outlets in the city to accept cash as payment. Amazon said earlier this month that it would begin to accept cash at its Go locations but did not disclose details. If and when Go stores accept cash, its walk-out model would no longer exist. The proposed legislation initially excluded Amazon Go, food trucks, pop-ups and other storefronts that didn’t staff employees to handle cash but was revised last month to include Amazon. Similar legislation has been passed in Philadelphia and New Jersey, two cities in which Amazon has not yet opened Go stores.
A published report claims that Amazon Prime membership grew by some two million people in the most recent quarter - from 101 million in the fourth quarter of 2018 to 103 million in the first quarter of 2019. This represents roughly 11% growth compared to 16% growth a year earlier. The story also notes that “nearly two-thirds (64%) of trial subscribers converted to paid memberships in the first quarter while 93% of one-year subscribers renewed for another year. Nearly all (98%) of two-year subscribers renewed their subscriptions.”
In other news, Amazon is again facing a strike called by its German employees in four of its warehouses. The workers alleged that poor pay and unfair working conditions are the primary reasons behind the strike. Workers at Amazon’s distribution centers in Germany have been calling such strikes since May 2013, demanding the right for collective bargaining, proper working conditions and regard for their efforts.
On July 18, Amazon will shut down its domestic e-commerce marketplace business in China. The Company said it will focus on “cross-border” selling to Chinese consumers. Amazon shoppers in China will no longer be able to buy goods from third-party merchants in the country, but they still will be able to order from the U.S., Britain, Germany and Japan via the Company’s global store. Amazon has faced stiff competition from Chinese e-commerce companies Alibaba and JD.com.
Yesterday, Amazon announced it has launched Key for Garage, which allows Prime members to have orders delivered securely in their garages using the Key Smart Garage Kit; customers can check the status of their garage door in the Key by Amazon app and remotely open or close it. Also yesterday, Amazon expanded Key by Amazon’s delivery service, with which customers can have Amazon packages delivered into homes or vehicles, to millions more Prime members in the U.S. Key by Amazon delivery is now available in 50 total U.S. cities and surrounding areas.
According to a published report, Target is giving consumers the option to ship their online orders in fewer boxes and thereby pay less for their items. Customers will be offered a $1 incentive to do so and accept that orders may not ship as quickly. The move is part of efforts to streamline fulfillment and lower fulfillment costs.
Yesterday, Target launched Everspring, its sustainable and environmentally conscious brand of more than 70 household items, including laundry detergent, cleaning products, and paper goods. The Company has recently launched the Auden, Colsie, and Cloud Island Essentials brands, and by the end of 2019, will offer more than 25 new owned and exclusive brands.
See below for Future Store Openings & Closings Map - click here to request a list.
REI announced an expansion of its watersports products, adding hundreds of Hobie-branded items, including kayaking, canoeing and paddling accessories, to its line of specialty water brands. In addition, REI is increasing its paddling field programs and tours, including classes and exploration-focused tours. Joining current boathouses in Chicago, IL, Atlanta, GA and Lincoln, RI, REI is opening two boathouses in Bellevue, WA and Denver, CO in the next month. REI boathouses offer guided water-based outings and classes, in addition to gear rentals. Select locations will also include bike rentals.
On April 28, Wegmans plans to open a 113,000 square-foot store in Virginia Beach, VA, marking the Company’s southernmost location. That metric will be surpassed on September 29, when Wegmans is scheduled to open its first North Carolina location, a 104,000 square-foot store in Raleigh. Both will feature the Company’s signature European-style open-air market layout and will house casual restaurant The Burger Bar. Wegmans also plans to open a 121,000 square-foot store in Harrison, NY, just north of New York City, slated to be operational in spring 2020.
Sprouts Farmers Market is putting the finishing touches on its first New Jersey location, slated to open on June 5. The 33,000 square-foot Marlton store will feature an open layout that highlights fresh fruits and vegetables, grains, nuts and sweets. The store will also include an in-house butcher, fresh and prepared deli items, and fresh baked goods.
7-Eleven has opened a new 700 square-foot store - about half the size of its traditional stores - in Arlington, TX, in between the Dallas Cowboys AT&T Stadium and the Texas Rangers’ Globe Life Park. It is the Company’s second opening of a targeted store in a sports-centric location; last fall, 7-Eleven opened a store in a sports venue at Texas Motor Speedway.
McDonald’s announced plans to open 25 restaurants across Italy this year and increase its 23,000-person staff by 10% (2,300 new employees).
A published report claims that Subway, which closed 1,000 locations in 2018 and 900 units in 2017, is focusing “on only the most desirable locations,” for which it “has rolled out new designs and physical features to freshen [its] image. Additionally, “culinary teams have heavily invested in research and development efforts that may well transform the brand’s menu for years to come. Subway has already launched a new cheesy garlic bread product and tested a pit-smoked meat sandwich - just small samplings of an aggressive pipeline of new foods under development.” Chief Development Officer Don Fertman indicated that “efforts to reinvigorate both menu boards and real estate are helping right the ship.”
Conn’s is planning to open two HomePlus stores in Birmingham, AL in mid-September. The stores will open in Roebuck Shopping Center and Wildwood Centre, with a combined 88,500 square feet of showroom floor space. The Company currently operates two stores in Alabama, in Huntsville and Montgomery. Overall, there are 129 Conn’s stores, with roughly half in Texas.
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.
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.”
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.