Openings, Closings, & Other Key Industry Highlights

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Whole Foods

Whole Foods’ second quarter sales rose 0.6% to $3.73 billion, and comps fell 1.9%, a less severe decline than projected. Net income was down 11.7% to $106.0 million. Co-founder and CEO John Mackey commented, “For the quarter, we delivered record sales and free cash flow, and returned $44.0 million in dividends to our shareholders. Our comparable store sales improved sequentially on a one- and two-year basis in the third quarter, and that momentum has accelerated 220 basis points in the fourth quarter, resulting in positive overall comps for the first three weeks.” During the quarter the Company opened six stores, including one relocation. In the fourth quarter, the Company has opened two stores and expects to open two additional Whole Foods stores and two 365 stores. Whole Foods agreed to be acquired by Amazon in June for $13.70 billion. With no other potential bidders coming forward, the Company expects to close the deal during the second half of this year; it said it would not update its earnings forecasts and would not hold a conference call.

Aldi

Aldi recently entered an agreement to open a regional office and distribution center in Goodyear, AZ. The new DC foreshadows Aldi’s first stores in the Phoenix area. Operations are expected to begin by 2020. According to the Company, it is “currently exploring opportunities in Arizona as well as multiple other markets from coast to coast.” Earlier this year, Aldi announced plans to open another 900 stores in the U.S. by 2022.

On July 27, Aldi opened its first store (18,000 square feet) in Fort Myers, FL. It is the second in Lee County and the third in Southwest Florida. The region’s first Aldi opened in Naples in November 2016, followed by one in Lehigh Acres in February; another Aldi is scheduled to open in Cape Coral by next month. A fifth is slated to open in south Fort Myers in the second quarter of 2018. The Company operates more than 100 stores in the state.

Meanwhile, Aldi will open a new 18,000 square-foot store in Gloucester, VA on August 10. The Company has recently opened stores in Newport News and Hampton, VA.

Last week, Aldi North said it was planning to spend €5.20 billion to revamp its stores in Germany and around Europe. Aldi North has about 4,800 stores in Europe. It operates 1,600 stores in the U.S. (Trader Joe’s) and earlier this year said it would add another 400 by the end of 2018. Sister chain Aldi South announced plans in June to invest $3.40 billion to expand its U.S. store base to 2,500 by 2022.

 

Nordstrom

As previously reported back in June, Nordstrom is exploring a going private transaction, under which Nordstrom family members will acquire all outstanding shares of common stock. Last week, published reports indicated that the family members plan to offer preferential terms to any potential equity partners willing to fund the buyout; the family is looking to raise about $1.00 billion in equity from outside investors. Options include offering potential partners preferred equity in the deal so that they reap more dividends or receive the first payment in any future stock sales. The family is also contemplating using $7.00 billion – $8.00 billion in debt to finance their bid. Although from a credit perspective, we never like to see debt financed transactions, the pro-forma debt/EBITDA appears it would be satisfactory at roughly 2.5x. The family members involved include Co-Presidents Blake W. Nordstrom, Peter E. Nordstrom and Erik B. Nordstrom; President of Stores James F. Nordstrom; Chairman Emeritus Bruce A. Nordstrom; and Anne E. Gittinger. So far reports speculate that private equity firms Leonard Green & Partners, Apollo Global Management and KKR & Co have shown interest because of the preferential terms. Looking ahead, should the Nordstrom family successfully take the Company private, it plans to invest heavily in e-commerce, close underperforming stores and invest in top-performing stores, including the Nordstrom Rack chain. Nordstrom operates 354 stores, including 221 Nordstrom Rack stores and 122 full-line stores in the U.S., Canada and Puerto Rico.

Supervalu

Following up on Supervalu’s first quarter earnings release, CEO Mark Gross commented that Wholesale sales increased by 12.4%, largely due to the onboarding of the remaining 160 of the 170 total The Fresh Market stores. Other contributors were shipments to some former Central Grocers customers, supply to America’s Food Basket as well as other smaller customers.  The Company also had about $80.0 million in sales to Marsh Supermarkets, which began winding down toward the end of the quarter in conjunction with Marsh’s bankruptcy and liquidation that resulted in $4.0 million of bad debt expense; Supervalu will continue to supply 15 of the sold stores. Sales of its private-label organics brand, Wild Harvest, were up 12% in the quarter and represented another 80 SKUs this year, on top of the existing 600. 

The Retail segment continues to struggle with comps falling 4.9% and EBITDA dropping 31%. The Company continues to evaluate alternatives for its retail business, including store sales and closures of underperforming stores. However, it continues to make targeted capital investments, particularly in the Cub banner. The 22 acquired Food Lion stores are not yet included in comps; sales are a bit less than Supervalu anticipated, and the Company would not comment on profitability at this point.    

On June 23, Supervalu completed the acquisition of Unified Grocers and is on track to achieve at least $33.0 million in run rate synergies by the end of 18 months following the transaction and $60.0 million by the end of the third year. The Company now operates three DCs in the Pacific Northwest resulting in excess capacity. Presently, Supervalu is designing and evaluating a new facility that could begin operation by late 2018 or early 2019, which would replace the other three that have expiring leases. There were no borrowings under the $1.00 billion revolver, and availability increased $37.0 million from FYE, due to the larger borrowing base, to $785.0 million.

On the earnings news, Supervalu’s stock rose 15.1% to $3.74 last Tuesday, and closed at $3.63 yesterday.

In other news, a group of Midwest wholesale grocery customers asked a Minnesota federal judge last Wednesday to approve an $8.75 million settlement with Supervalu to end litigation claiming that Supervalu and C&S Wholesale agreed not to compete with each other for customers in certain states. Supervalu continues to deny that it conspired with C&S, which is not a party in the settlement proposal, to divvy up regions and customers. The case dates way back to 2004, when five classes of customers in Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin allegedly paid fees based on Supervalu’s pricing system, called Activity Based Sell, or ABS, on wholesale grocery products they purchased.

Festival Foods/Gordy's Market

Festival Foods is buying three Gordy’s Market stores in Eau Claire (2) and Tomah, WI. The announcement comes the same week Gordy’s said it would close a store in Hayward, WI. The acquisition is expected to close in September, at which time all three locations will transition to the Festival Foods banner. Festival Foods operates 28 other locations throughout the state, including an Eau Claire store that opened in 2005.

Camping World

Camping World CEO Marcus Lemonis has previously stated his strategy of leveraging the Good Sam brand (which provides consumer services plans) over the Camping World retail stores, and through the acquisitions of Overton’s inventory and 57 of the Gander Mountain stores. He also said he was interested in other acquisitions that would enable cross-marketing to outdoor enthusiasts. In that regard, the Company inked a deal to acquire TheHouse.com; terms of the deal were not disclosed. TheHouse is an online retailer that specializes in bikes, sailboards, skateboards, wakeboards, snowboards and outdoor gear. Camping World plans to operate TheHouse separately from its camping and RV business.

 

Amazon

Amazon plans to open its second Michigan fulfillment center in Romulus. The 855,000 square-foot facility will ship smaller items like books, electronics and toys.

Amazon has also launched the PrimeNow service in Singapore, offering free two-hour delivery on a variety of items for orders of $40 or more.

According to research by Computerworld, Amazon’s Prime Day promotion trimmed foot traffic in rival brick-and-mortar stores 7% among those who didn’t have the Amazon app and 32% among those who did have the app. According to the study, “Sears saw a 36% drop, JCPenney 34%, Kohl’s 31%, Target 28%, Home Depot and Lowe’s 24% each, and Walmart 23%. Best Buy dropped 19%, Barnes & Noble fell 11%, and Macy’s took a 9% hit.”

Meanwhile, Amazon introduced a new delivery locker designed for apartment buildings and other housing complexes that lack the ability to accept or store packages. Called The Hub by Amazon, the modular system features compartments where packages can be stored for pickup. Depending on the module, the customizable unit can feature between 42 and 55 lockers. There are indoor and outdoor models, which stand 6 ft. high and 7 ft. high, respectively. To retrieve a package, customers enter the pickup code into the system. Upon authorizing the code, a corresponding door will open, revealing the stored items. The Hub accepts delivery from all carriers, according to Amazon.

The move is taking aim at Walmart’s Jet.com e-commerce initiative to team up with Latch, a provider of smart building access technologies, to integrate a reader-style electronic access product in 1,000 buildings in New York City. It will give more than 100,000 residents the ability to retrieve orders electronically.

Belk

Belk plans to open three new stores as part of a nearly $40.0 million investment in store remodels, capital improvements and new store openings for 2017. The first two stores will open on October 11 in Evans, GA and Bowling Green, KY, and the third store is scheduled to open in 2018 in Hagerstown, MD. In addition, Belk is investing $10.0 million of the $40.0 million to remodel 12 existing stores, and $15.0 million will be used for capital improvements. Belk, which operates 292 stores, was acquired by Sycamore Partners in a $3.00 billion deal in 2015.

With roughly 4,000 major retail chain store closings last year and up to another 10,000 expected in 2017, brick-and-mortar retailers are scrambling to remain relevant. Out 20-page Store Activity and Retailer Health Analysis report includes a list of retailers adding and closing stores in 2017 and provides insight into companies expanding into new markets. Click here for more information.

Smart & Final

Smart & Final’s second quarter sales rose 3.9% to $1.08 billion, driven by comp growth of 1.3% and new stores. Comp growth was attributable to a 1.9% increase in transaction count, partially offset by a 0.6% decrease in transaction size, including the effect of cannibalization from new stores. Sales for the Smart & Final banner rose 3% to $836.1 million, and comps increased 1.2%. Sales for the Cash & Carry stores were up 6.9% to $242.2 million, and comps rose 1.8%. Net income fell 8.7% to $7.1 million, including the effect of store development expenses. During the quarter, the Company opened four new Smart & Final Extra! stores, completed one conversion of a legacy Smart & Final store to the Extra! format, and relocated one store. The Company opened one new Cash & Carry store. As of June 18, it operated a total of 313 stores, including 180 Smart & Final Extra! stores, 72 legacy Smart & Final stores and 61 Cash & Carry stores.

Aaron's

Aaron’s reported second quarter sales increased 3.3% to $815.6 million. Profit fell 5.6% to $36.3 million. Aaron’s Brothers’ sales decreased 10.7% to $433.6 million, and comps fell 8.1%. Aaron’s stores had 932,000 customers as of June 30, a 7.2% decline from the prior year. There were 1,093 Company-operated stores and 680 franchised stores in operation as of June 30, following the closure of 62 Company-operated stores and six franchised stores during the quarter. Progressive Leasing’s sales increased 25.1% to $373.5 million, and active doors increased 37% to 19,000. Progressive had 646,000 customers as of June 30, a 23% increase from the prior year. DAMI’s revenue was $8.5 million, up 60.4% from the prior year.

In other news, Aaron’s acquired substantially all of the assets of its largest franchisee, SEI/Aaron’s, Inc., in an all-cash transaction valued at approximately $140.0 million. The Company expects the transaction to be accretive to earnings in 2017. SEI was founded in 1995 and currently serves more than 90,000 customers through 104 Aaron’s stores in 11 states, primarily in the Northeast. Aaron’s indicated that SEI has been one of its top-performing franchisees, and the acquisition will strengthen its presence in “highly attractive markets.”

Wawa

Last week, Wawa opened two new stores in Davie and Pompano Beach, FL, bringing its store count in the state to 120. The Company also disclosed that it will be entering the Miami-Dade market with its first three stores expected to open in the second quarter of 2018. It plans to open 30 new Florida stores this year alone and within the next five years plans to open about 50 new South Florida Wawa stores.

Neiman Marcus

Neiman Marcus eliminated 225 positions across all brands and operating divisions as part of a plan to improve its capital structure and reduce debt. According to a Company statement, Neiman Marcus is also “assessing” its Last Call stores to “ensure we have the right mix of brick-and-mortar and online stores to meet our customers’ evolving demands.” Last Call stores average 25,000 square feet and are located in outlet centers and neighborhood shopping centers. Meanwhile, the Company is looking to adopt digital solutions to provide a more personalized shopping experience. These strategic initiatives come as the Company decided not to pursue a potential sale to Hudson’s Bay Company. Back in March, the Company announced it was exploring options to reduce its heavy debt load, which was accumulated from its $6.00 billion leveraged buyout in 2013, and turnaround sales declines and disappointing earnings.

Wal-Mart de Mexico

Wal-Mart de Mexico’s (Walmex) second quarter revenue rose 9% to 135.70 billion pesos. Online sales jumped 35%, but the segment is still less than 1% of its total sales. Net income more than doubled to 13.50 billion pesos (US$743.0 million), driven by the sale of clothing chain Suburbia to department store and shopping mall operator El Puerto De Liverpool. The Company said it recorded a net gain of 7.00 billion pesos from the sale of Suburbia. Walmex opened 21 stores during the quarter, bringing its total store count to 3,046. 

Staples/Office Depot

Staples announced on July 26 that the U.S. FTC granted early termination of the waiting period for its pending acquisition by Sycamore Partners. This satisfies one of the conditions to closing the pending acquisition, which remains subject to other customary closing conditions, including stockholder approval. Sycamore is interested in Staples’ commercial business, not the retail side. In that regard, recent published reports indicate Staples may be in talks to spin off its 1,500-store retail business to Office Depot. In a filing with the SEC, Staples revealed that on June 5 a bidder called “Party A” offered $625.0 million – $700.0 million for Staples’ North American retail locations. Reports speculate that “Party A” was Office Depot and that Staples turned down the offer in favor of the acquisition by Sycamore. However, Sycamore may be more willing to spin-off the retail stores and focus on Staples’ better-performing distribution business selling paper, pens and ink cartridges to mid-size and large corporate clients. The FTC’s concerns over the planned merger between Staples and Office Depot last year were based on concerns over the commercial side, not the retail side of the business. 

Hy-Vee

Hy-Vee is planning a super-sized convenience store and gas station in Lakeville, MN. The 8,800 square-foot store will offer prepared meals and scaled-down versions of its typical produce, dairy and meat departments and Market Grill restaurant. A Starbucks coffee shop will also be available within the store. The store will be three miles from Hy-Vee’s 91,000-square-foot Lakeville supermarket, which opened in June 2016. The size of a typical convenience store is 1,500 – 5,000 square feet.

Hy-Vee already operates 142 smaller convenience stores, including 16 in Minnesota, throughout its eight-state operating region. Most of the stores are adjacent to the chain’s supermarket stores or in a nearby lot. The Company said it is looking at other Twin Cities sites for the super-sized convenience store concept. Hy-Vee has 23 grocery stores in Minnesota, including six that have opened in the Twin Cities since the Company entered the market in fall 2015. A Cottage Grove store is expected to open soon, while one in Shakopee is slated to open in fall. Other stores are planned for Chaska, Columbia Heights, Farmington, Maple Grove and Robbinsdale.

Michael Kors/Jimmy Choo

Luxury retailer Michael Kors inked a deal to acquire shoemaker Jimmy Choo for $1.35 billion. The transaction is expected to close during the fourth quarter of fiscal 2017 and was already approved by both boards. As part of the deal, Pierre Denis will continue to serve as CEO of Jimmy Choo. The acquisition comes as Michael Kors continues its efforts to rebuild its brand, which includes shuttering 100 – 125 full-price retail stores over the next two years. Looking ahead, the Company expects fiscal 2018 to be a transition year before returning to long-term growth. Another recent deal in luxury was Coach’s announcement that it will acquire Kate Spade & Company for $2.40 billion; that deal is expected to close during the third quarter.

The Fresh Market

The Fresh Market will unveil 11 updated stores in the Atlanta area on August 9. Stores will include an expanded selection of fresh foods and specialty items, an interactive sampling station, and meal solutions. The Fresh Market operates 15 stores in Georgia.

Central Grocers

On July 27, the Court approved the sale of Central Grocers, Inc., DIP’s Joliet IL distribution center to Supervalu for a cash price of $61.0 million. The sale was approved despite objections by the Official Committee of Unsecured Creditors, which claimed the sale price was just a fraction of the appraised value. The Debtors’ argued the appraisal was outdated.

Tractor Supply Company

Tractor Supply Company’s second quarter sales increased 8.9% to $2.02 billion, and comps were up 2.2%. The increase in comps was driven by broad growth across a number of product categories and geographic regions. Profit rose 2.7% to $160.6 million. The Company opened 14 new Tractor Supply stores and closed one underperforming Del’s store; the Company also opened eight new Petsense stores. CEO Greg Sandfort stated, “We experienced broad based positive sales trends across our business and were pleased to see improved performance across many of our major departments in the second quarter. With favorable weather conditions, we have seen continued strong demand for spring seasonal products into the early weeks of the third quarter, and we believe we are positioned to take advantage of an extended spring selling season.”

Sears Canada

On July 28, ESL Partners and Fairholme Capital Management terminated a joint legal engagement that would have facilitated a potential bid for Sears Canada, DIP. Eddie Lampert stated he might sell some or all of his 45.3% stake in Sears Canada to generate a tax loss for ESL investors, though he left open the possibility that ESL may consider other financing transactions or sale agreements. The deadline to submit bids is August 31. Reportedly, more than 20 potential bidders have expressed interest in the Company. Previously, the Court granted an order extending the Stay of Proceedings to October 4.

Albertsons

Albertsons announced results for its first quarter ended June 17. Sales rose 0.4% to $18.46 billion, primarily driven by volume of $309.9 million from new and acquired stores, net of sales related to store closings, and an increase in fuel sales of $131.3 million, partially offset by a decrease of $360.9 million from a 2.1% decline in identical store sales (ID sales). ID sales were impacted by investments in price, together with deflation in certain categories, including meat, eggs and dairy.

Meanwhile, S&P revised Albertsons Companies’ outlook to “stable” and affirmed its credit ratings, including its B+ corporate credit rating. S&P also affirmed the B- issue level rating on various New Albertsons Inc. and Safeway Notes. 

Albertsons announced July 31 that it extended the expiration date of its offer to exchange its outstanding 6.625% Senior Notes due 2024, 5.75% Senior Notes due 2025, and 5.75% Senior Notes due 2025, from July 28 to today (August 1). As of July 28, $1.25 billion, or 99.9%, of the original 2024 notes and $1.24 billion, or 99.28%, of the original 2025 notes had been tendered.

In other news, Albertsons’ Acme Markets chain is advertising “thousands” of new lower prices beginning this week. The campaign is one of Jim Perkins’ first moves as the chain’s new president since he replaced Dan Croce last month. Mr. Perkins had previously served as Acme’s president until 2015.  

Albertsons will close an underperforming store in Bossier City, LA in September. A Company representative stated, “We remain invested in Louisiana and continue to move forward with store remodels throughout the state to better serve our customers.” Albertsons currently operates 18 stores in Louisiana.

Rouses Markets

Rouses Markets is investing more than $2.5 million in a renovation of its Ocean Springs, MS store. The renovation, which is expected to take four months, will make room for expanded prepared foods, baked goods, frozen food, and organic and specialty items sections.

Floor & Décor

Floor & Décor’s second quarter sales jumped 29.4% to $344.0 million, and comps increased nearly 15%. Profit more than tripled to $20.4 million. Floor & Décor completed its IPO in April 2017, receiving $192.0 million in proceeds. The funds, higher than the $150.0 million expected, were used to pay down its term loan. The Company opened one new store during the quarter, ending with 73 locations, a unit increase of 15.9% year-over-year. The Company’s average location size is 72,000 square feet, and it expects to grow its store base by 20% annually, with a long-term target of 400 stores. The average store currently generates $16.7 million in revenue and $210 in sales per square foot. CEO Tom Taylor stated, “We are very pleased to report a strong second quarter that once again demonstrates the positive response customers have to our highly differentiated, multi-channel, hard surface flooring and accessories business.”

On July 25, certain stockholders completed a secondary public offering of 10.7 million shares of common stock at $40 per share. The underwriters also can exercise their option to purchase an additional 1.6 million shares of common stock at the public offering price less discounts and commissions.

BJ's Restaurants

BJ’s reported second quarter sales growth of 6.2% to $265.8 million, reflecting an increase in total operating weeks. Comps declined 1.4%, and net income fell 30.1% to $9.6 million. During the quarter, BJ’s opened four new restaurants and seven year-to-date. It expects to open a total of 10 during the year. President and CEO Greg Trojan commented, “After a solid start to the second quarter, we experienced softer sales beginning in mid-May. While we are disappointed with our current results, we made important investments in the business during the quarter which we believe will build future sales and maintain our industry leading guest traffic per square foot.”

The Tile Shop

The Tile Shop opened its first store in the Houston, TX market, in the suburb of Webster. The Company plans to continue expanding within the metro area later this year with several other store openings in the works. The second location is slated to open mid-August in Sugar Land. Following this second opening, the Company will have 132 stores in 31 states and Washington D.C. There are 12 competing retail stores within a 10-mile radius of downtown Houston, including seven Home Depots, four Lowe’s, two True Value stores and one Lumber Liquidators.

Ahold Delhaize

Ahold Delhaize's  Food Lion division completed its $178.0 million investment to remodel 93 stores in the Greensboro, NC-area that will debut tomorrow (August 2). The stores feature enhanced offerings, lower pricing, and new associates (about 1,000 in the region). The remodels are part of Food Lion’s “Easy, Fresh and Affordable…You Can Count on Food Lion Every Day” strategy that has included remodels at 473 of its 1,000 stores since 2014, largely in North Carolina. The Company will be remodeling 71 Richmond, VA-area stores later this year.

Trader Joe's

Last week, Trader Joe’s opened a 22,000 square-foot relocated store in Santa Barbara, CA. The Company had previously operated a location about three blocks away.

Stew Leonard's

Stew Leonard’s is slated to open a 70,000 square-foot grocery store in East Meadow, NY on Long Island on August 23, marking its sixth tristate location and its second on Long Island (the other is in Farmingdale). 

Starbucks

On July 27, Starbucks announced that it will shutter all 379 Teavana stores over the coming year, with the majority closing by spring 2018. The principally mall-based retail stores have been persistently underperforming, despite the Company’s efforts to reverse trends through new store designs and changes in merchandise. Teavana products, however, will continue to be sold at Starbucks locations.

The Company also announced that it will be acquiring the remaining 50% equity stake of its East China Joint Venture for approximately $1.30 billion in cash. Starbucks will assume 100% ownership of all 1,300 stores in mainland China. Concurrently, the Company sold its 50% interest in its Taiwan Joint Venture for $175.0 million. The Taiwan JV currently operates 410 stores in Taiwan. For the third quarter ended July 2, Starbucks reported earnings were down 8.3% to $691.6 million. Revenues were up 8.1% to $5.70 billion.

 

Destination Maternity

On July 27, Destination Maternity announced that its merger agreement with Orchestra-Prémaman, S.A. was terminated. The parties initially entered into the merger agreement on December 19, 2016. Management noted that despite efforts by both companies, the challenges associated with securities regulations in the U.S. and France would have required unnecessary effort and expense (Orchestra is a French company and the merger would have required it to be listed in the U.S.). Following termination of the agreement, Orchestra-Prémaman must pay a net breakup fee of $750,000 in cash to Destination Maternity. It is important to note Orchestra and its affiliates continue to own 13.75% of the outstanding common shares of Destination Maternity and have agreed to certain standstill restrictions in connection with terminating the merger agreement.

American Eagle Outfitters

American Eagle Outfitters is closing the three stores it operates in the U.K., exiting the market. So far one location has already closed, and operations are winding down at the remaining two stores. The Company opened its first store in the country in 2014 but struggled to get a foothold in the competitive market. American Eagle was aiming to operate 20 – 30 U.K.-based stores as well as introduce its Aerie brand. Looking ahead, American Eagle plans to open 35 stores in the U.S., Canada and Mexico, and close about 25 – 40 underperforming stores.