Retail News

Amazon/Whole Foods

With Amazon’s $13.70 billion acquisition of Whole Foods Market finalized yesterday, shoppers have been promised immediate markdowns on a number of items, including salmon, avocados, baby kale and almond butter. According to published reports, when stores opened yesterday morning for the first time as a combined Company, prices were down by as much as 43% on those products. Other foods that will have prices slashed beginning next week include bananas, eggs, ground beef, rotisserie chicken, butter, and apples. According to a joint statement, “The two companies will together pursue the vision of making Whole Foods Market’s high-quality, natural and organic food affordable for everyone. Whole Foods Market will offer lower prices starting Monday on a selection of best-selling grocery staples across its stores, with more to come.” Amazon said it will continue to lower prices at Whole Foods stores and will eventually offer special discounts and in-store benefits to Amazon Prime members.

Meanwhile, Amazon Fresh began selling hundreds of new items from Whole Foods' private label brands, including staples from 365 Everyday Value, and pet foods from Whole Paws. The brands will also be available through Amazon.com, Prime Pantry and Prime Now.

Last Thursday’s news of the price cuts rattled the grocery industry, with shares of Kroger, Walmart, Target, Costco, Supervalu and Sprouts plunging. The decline in these six stocks alone erased nearly $12.00 billion in their market value in total. Bonds were also hit hard at companies like The Fresh Market and Albertsons.

In other news, Amazon will open a new fulfillment center in North Randall, OH, in the second half of 2018. The 855,000 square-foot fulfillment center will pack smaller items. The Company has two other Ohio fulfillment centers in Etna and Obetz. It will also open a one million square-foot fulfillment center in Salem, OR that will pack larger items. The Company recently announced an upcoming fulfillment center in Troutdale and it currently operates a sortation center in Hillsboro, and a Prime Now hub in Portland.

Hurricane Harvey

According to a report by weather analytic firm Planalytics released yesterday, the economic impact of Harvey, the Category 4 hurricane expected to drop more than 50 inches of rain on Houston, TX, will be substantial. Hundreds of retailers remain closed across Texas due to the heavy flooding. Lost revenue to area restaurants and retailers is expected to total around $1.00 billion. According to the firm, Houston's surrounding population controls roughly 4% of the spending power in the country. The area’s retail economy will face severe fallout in the months ahead, as businesses gear up for the holiday shopping season. The Houston area is home to more than 20% of U.S. oil refineries, which ship to regions including the Mid-Atlantic, Gulf Coast and Southeast. As a result, gas prices could spike and further impact the discretionary spending of consumers.

Weis Supermarket

Weis Supermarket will open a new 54,000 square-foot store in Randolph, NJ in mid-2018, on the site of a former A&P that closed in 2015. Randolph currently only has one grocery store, an Acme. Wegmans also entered the Morris County market with a 113,000 square-foot store and 15,000 square-foot liquor store in Hanover on July 23.

Burlington Stores

Burlington Stores reported second quarter sales increased 8.6% to $1.37 billion, driven by $70.0 million from new stores and a comp increase of 3.5%. As a result of top line growth and margin expansion, profit rose 144.7% to $49.9 million. CEO Tom Kingsbury stated, “We are extremely pleased to report strong second quarter results, driven by a 3.5% comp increase, which was on top of a 5.4% comp increase in last year’s second quarter. Our overall 8.6% sales growth, along with our 140 basis point adjusted operating margin improvement, enabled the Company to drive an 85% increase in adjusted EPS in the second quarter, well ahead of our guidance. Our inventories are fresh, we are well positioned for back to school, and we have significant open-to-buy entering the third quarter as opportunities remain plentiful.”

Cumberland Farms

Cumberland Farms recently opened its first "next generation" convenience store in Titusville, FL. The 5,000 square-foot store features a new design; equipment, including self-service ordering stations; and food offerings. The Company expects to continue to aggressively expand and remodel in Florida over the next year. 

There are two competing convenience stores within three miles of the new store, including a 7-Eleven and another Cumberland Farms.

Hudson's Bay Company

Published reports indicate Hudson's Bay Company is reviewing its strategic options, following pressure last month from activist investor Land & Buildings Investment Management LLC (which has a 4.3% stake in Hudson’s Bay) to explore the potential of its real estate portfolio. The Company already hired an investment bank to respond to Land & Buildings, and reportedly plans to hire an additional financial adviser to conduct the review. The review will reportedly consider all available options, from the possibility of going private to potential sales of retail assets and real estate. On the August 25 news, shares of Hudson’s Bay rose 14% to C$11.45, the largest jump in two months; however, this is 60% below the $29 per share the stock was trading at during the summer of 2015.

In other news, Don Watros, president of HBC International, is leaving the Company, effective September 29. The Company did not name a successor. Mr. Watros was appointed to the role in January 2015. As previously reported, Edward Record, former CFO at J.C. Penney, began serving as CFO of Hudson’s Bay on Monday. 

Shoppers Value Foods

Shoppers Value Foods will open a new store in Baton Rouge, LA, in a former Winn-Dixie that was destroyed in an August 2016 flood. Shoppers Value Foods is a low-cost, full-service supermarket that focuses on selling groceries for less. The Company operates 11 stores in Louisiana and Mississippi, with a new store expected to open soon in Walker, LA.

Perfumania

On August 26, Perfumania Holdings, Inc., DIP filed a voluntary prepackaged Chapter 11 petition in the U.S. Bankruptcy Court in the District of Delaware. The Honorable Christopher S. Sontchi was assigned to the case, and the proceedings were assigned case number 17- 11794. The lead case in the filing is titled Model Reorg Acquisition, LLC, DIP. The Company plans to close 64 of its 226 stores during the bankruptcy process, and control of the Company will be turned over to a new undisclosed investor, who will provide a $14.3 million equity infusion. Vendors are expected to be paid in full in the ordinary course of business. The Company stated that it has “ample liquidity to fund operations” and it received a commitment for up to $84.0 million in Debtor-In-Possession financing from Wells Fargo, its existing lender, which is expected to be replaced by a $100.0 million exit facility upon emergence. As of August 27, the Company had $199.0 million in debt, including $19.0 million owed under a $175.0 million revolver, $125.4 million in subordinated promissory notes, and $54.8 million in unpaid interest. Part of the funds from the DIP Facility will be used to repay the outstanding balance under the prepetition revolver.

Aldi

Aldi is opening its third store in the Fayetteville, NC area late this year, a 19,000 square-foot location. Another nearby Aldi located in Sanford is expected to open in late 2017.

Kohl's

Kohl’s Corporation plans to reduce floor space in nearly half of its stores by the end of the year. This will include a reduction in the number of products available in-store, as the Company shifts its focus towards bolstering its digital offerings. The Company does expect to cut any jobs or remove any square footage as part of the plan. So far about 300 of its more than 1,100 stores were remodeled with the new interior layout. The Company said it expects these stores to operate more efficiently and be more engaging for customers. Looking ahead, Kohl’s plans to open four new small-format locations (averaging 35,000 square feet compared to a typical store at 88,000 square feet) in October in North Smithfield, RI, Blue Ash, OH, East Windsor, NJ and Montebello, CA; these four stores will bring the Company’s small format base to 12 locations. The Company will also open a fifth online sales fulfillment center in Plainfield, IN.

Earth Fare

Last week, Earth Fare opened its second store in Jacksonville, FL, its sixth in the state. The store features a juice bar, and a variety of organic prepared food options, along with a 65-seat café. The Company now operates 42 stores in 10 states in the Southeast and Midwest. Other recent store openings have been in Florida, Tennessee and North Carolina.

Lunds & Byerlys

Lunds & Byerlys appointed Pam Osborn to the position of CFO, effective September 18. Ms. Osborn previously served as CFO of Coborn’s for four years.

In other news, Lunds & Byerlys is seeking approval to build a 47,000 square-foot store in White Bear Lake, MN, the same spot that Hy-Vee was considering before it backed out due to cost concerns. The Lunds & Byerlys store would include a liquor store and grab-and-go- café. The Company operates 27 stores throughout the Twin Cities. 

Christopher & Banks

Christopher & Banks reported second quarter sales decreased 3.7% to $86.6 million, and comps were down 0.6%. Net loss widened 103.1% to $7.9 million. CEO Joel Waller commented, “Throughout our second quarter we saw encouraging signs that the initiatives we have been putting in place are gaining traction. We drove meaningful sequential improvement in our comparable sales with more product newness and a better balance between fashion and core in our assortment, which garnered favorable customer response. E-commerce sales grew in the double digit range driven by increased traffic and conversion. We have also taken swift action to improve our assortment in outlet stores, which led to positive sales comps and significant sequential improvement in margin in this channel for the quarter.” Christopher & Banks operates 473 stores in 45 states consisting of 320 MPW stores, 79 Outlet stores, 38 Christopher & Banks stores and 36 CJ Banks stores.

Starbucks

A month after Starbucks announced it would close all 379 of its stand-alone Teavana stores, the Company will reportedly be closing its online store, effective October 1. There was no public announcement from the Company, but there is a "Sale" logo on the Company website. The Company is expected to focus on its mobile ordering platform instead.

Sendik's

Last week, Sendik’s Fresh2GO store opened on the campus of Marquette University in Milwaukee, WI. The 4,800 square-foot store features healthy snacks and prepared foods and also offers an online ordering service called Sendik’s Express. It is the Company’s 19^th location.

Staples

Staples reported second quarter sales decreased 3.1% to $3.91 billion, driven by a 1% decline from the sale of its print solutions business last year, a 1% comp decline in North American retail, store closures, and a decline in online sales. These unfavorable items were partially offset by an 11% growth in Staples Business Advantage, and a 1% increase from the acquisition of Capital Office Products during the fourth quarter of fiscal 2016. Sales declines in ink and toner, office supplies, and paper were partly offset by growth in computers, janitorial and sanitation supplies, and food and breakroom supplies. North American delivery sales decreased 1.6%, while North American retail sales decreased 5.9%. The Company recorded a profit of $55.0 million, compared to a loss of $766.0 million last year, when it recorded pre-tax charges of $986.0 million related to the impairment of European goodwill and other assets and costs associated with the termination of the Office Depot merger agreement. During the quarter, Staples sold a facility in Lebanon, PA for $8.0 million, and recognized a gain of $5.0 million.

In other news, Staples announced that a subsidiary formed by Sycamore Partners closed on the sale of $1.00 billion of 8.5% Senior Notes, due 2025. The proceeds from the sale of the Notes, together with borrowings under a new secured credit facility, as well as cash contributions from Sycamore, will be used to finance the acquisition of the Company’s North American Delivery business. The proceeds were placed in an escrow account where they will remain until the closing of the merger, which is expected to occur during the third quarter. 

Sears

In addition to the 180 stores that Sears Holdings closed in the first half of the year and the previously announced 150 closures expected to take place in the third quarter, during its second quarter conference call management announced that 28 additional Kmart locations will close later this year. To request locations of the most recent round of Kmart closings, please click here.

The Michaels Companies

The Michaels Companies reported second quarter sales increased 1.2% to $1.07 billion, primarily as a result of 10 additional stores (net of closures) during the quarter and a comp increase of 0.6%. Profit was essentially flat at $35.6 million. During the second quarter, the Company opened five new Michaels stores and closed three Aaron Brothers stores, ending with 1,230 Michaels stores, 101 Aaron Brothers stores and 35 Pat Catan’s stores. CEO Chuck Rubin said, “Our efforts to create a more experiential, omni-channel shopping experience, improve our value perception, and leverage our customer analytics are gaining traction earlier than we initially expected. As we begin the second half of the year, we believe these efforts will continue to deliver profitable growth and enable us to further expand our leadership in the arts and crafts channel.”

Walmart

Google and Walmart are teaming up to take on Amazon's Prime shipping service. Starting in September, Walmart will join Google's e-commerce platform, Google Express, as its largest vendor. Customers will be able to place orders with Walmart at Express.google.com, on the Google Express app, or through Google Assistant-enabled devices like Google Home. Google's head of commerce, Sridhar Ramaswamy, called the partnership "the first of its kind." Mr. Ramaswamy said customers could link their Walmart and Google accounts, allowing integrated features like a shortcut to reorder items frequently bought from Walmart through the Google Assistant voice software. The partnership notches up the competition with Amazon, which has a similar service in Alexa integrating voice-control and speech-recognition technology for customers to place orders through its Prime service. Google is also removing the $95-a-year membership fee for Google Express, which previously enabled customers to get free two-day shipping at retailers. Now each store on the platform will have its own threshold for free shipping. Walmart's policy will mirror its website, with orders of at least $35 receiving free two-day shipping.

Meanwhile, former Walmart chairman Rob Walton sold 776,000 shares over two days last week, resulting in proceeds of $62.3 million. Even after this sale, Rob Walton still holds more than 106 million shares in the Company, with a total current value of nearly $8.40 billion. 

Best Buy

Best Buy’s second quarter sales increased 4.8% to $8.94 billion, and comps were up 5.4%. Domestic sales increased 4.9% to $8.30 billion, driven by comp growth of 5.4%, partially offset by the loss of revenue from 11 large format and 42 Best Buy Mobile store closures. Comps grew in computing, wearables, smart home, mobile phones and appliances, but declined in tablets. Domestic online revenue increased 31.2% to $1.10 billion due to higher conversion rates and increased traffic; online sales now make up 13.2% of domestic revenue, up from 10.6% last year. International revenue increased 3.7% to $668.0 million, driven primarily by comp growth of 4.7% due to growth in both Canada and Mexico. Overall, profit rose 5.6% to $209.0 million. CEO Hubert Joly commented, “Against a backdrop of continued healthy consumer confidence, we believe broad-based product innovation is resonating with consumers and driving higher spend. And, with our effective merchandising and marketing activities, combined with our expert advice and service available online, in-store and in-home – we are garnering an increasing share of those dollars.” Looking ahead, the Company raised its fiscal 2018 sales guidance to a 4% increase from its previous outlook of a 2.5% increase. Best Buy now expects operating income growth of 4% – 9%, up from its prior guidance of 3.5% – 8.5% growth.

Ulta Beauty

Ulta Beauty’s second quarter sales increased 20.6% to $1.29 billion, and comps were up 11.7%. Retail comps increased 8.3%. Salon sales increased 15.3% to $68.0 million, and comps were up 7.7%. E-commerce sales grew 72.3% to $96.3 million. Profit rose 26.9% to $114.2 million. During the second quarter, the Company opened 20 stores, ending with 1,010 stores, an 11.3% increase in square footage from the prior year period. CEO Mary Dillon said, “We accelerated our market share gains while continuing to reduce promotional intensity and increase personalized offers through our industry leading loyalty program. Product category strength was broad based, with prestige cosmetics still driving the majority of our growth, and with skincare, fragrance, and haircare all gaining momentum.”

Dollar Tree

Dollar Tree reported second quarter sales growth of 5.7%, to $5.28 billion. Comp growth was 2.4%, driven by increases in comp transaction count and average ticket. Comps for the Dollar Tree banner rose 3.9% and increased 1% at the Family Dollar banner. Net income was $233.8 million, compared to $170.2 million last year. The Company recorded $2.6 million of impairment charges related to its receivable from Dollar Express, which acquired the stores the FTC required the Company to divest.

During the quarter, the Company opened 133 stores, expanded or relocated 31 stores, and closed 34 stores. 

Looking ahead at fiscal 2017, the Company raised its guidance and now expects sales of $22.07 billion – $22.28 billion, compared to previous guidance of $21.95 billion – $22.25 billion. This estimate is based on a low single-digit increase in same-store sales and 3.9% square footage growth. It also raised its EPS guidance to $4.44 – $4.60, up from $4.17 – $4.43. Fiscal 2017 includes an extra week in the fourth quarter that is expected to add $400.0 million – $430.0 million to sales and $0.19 – $0.22 to EPS, both of which are included in the guidance. 

Big Lots

Big Lots reported second quarter sales growth of 1.5% to $1.22 billion, driven by 1.8% comp growth, partially offset by a lower store count. It operated 17 fewer stores compared to last year, and had a total store count of 1,428 as of July 29. Net income was up 28.2% to $29.1 million.

Big Lots increased its fiscal 2017 EPS guidance to $4.15 – $4.25, compared to previous guidance of $4.05 – $4.20, representing 15% – 17% growth over fiscal 2016. It expects comp growth of 1% – 1.5% and total sales growth of 2% – 2.5%. 

Lowe's

Lowe’s Companies’ second quarter sales increased 6.8% to $19.50 billion, and comps were up 4.5%. Profit rose 21.6% to $1.42 billion. Results include a $96.0 million gain from the sale of the Company’s interest in its Australian joint venture. CEO Robert A. Niblock commented, “We are pleased with our improved comparable sales performance relative to last quarter, and the strong momentum we built throughout the second quarter culminating in a 7.9% comparable sales increase for the month of July. While our results were below our expectations in the first half of this year, the team remains focused on making the necessary investments to improve the customer experience and drive sales. This includes amplifying our consumer messaging and incremental customer-facing hours in our stores which will put pressure on our operating margin. We believe this is the right strategy to more fully capitalize on strong traffic trends in what we believe is a supportive macroeconomic backdrop for home improvement.” As of August 4, 2017, Lowe’s operated 2,141 stores in the U.S., Canada and Mexico.

J. Crew

J. Crew reported second quarter sales decreased 1.6% to $560.9 million, and comps fell 5%, with J. Crew comps down 8% and Madewell comps up 11%. Gross margin expanded by 290 basis points to 38.6% of sales, primarily due to fewer markdowns. As a result, quarterly EBITDA rose 76.2% to $58.8 million. J. Crew’s balance sheet remains leveraged from its May 2011 LBO, with a deficit tangible net worth position of nearly $1.60 billion and $1.72 billion in debt. Debt was up 13.9% year-over-year due to the debt exchange and refinancing completed in July. However, the nearest debt maturity date is now 2021. TTM interest coverage improved to 2.11x but remains at concerning levels. J.Crew generated $58.5 million in TTM free cash flow and liquidity is adequate for near-term working capital needs. Management noted on its quarterly conference call that it lowered capital expenditure guidance by $5.0 million to $45.0 million – $55.0 million. The Company now expects to open two J. Crew and nine Madewell stores and close at least 30 locations (compared to previous guidance of 20 closures) in fiscal 2017.

The Company also announced that Vincent Zanna was appointed CFO. Mr. Zanna had previously served as SVP of Finance and Treasurer. Mr. Zanna replaces Michael Nicholson, who was promoted to president, COO in April.

American Eagle Outfitters

American Eagle Outfitters reported second quarter sales increased 2.7% to $844.6 million, and comps were up 2%. However, profit fell 48.9% to $21.2 million due to $21.0 million of restructuring charges related to the initiative to explore the closure or conversion of Company-owned and operated stores in the U.K., Hong Kong and China to licensed partnerships, and the planned exit of a joint business venture. CEO Jay Schottenstein commented, “In the second quarter, we achieved sales and earnings above our expectations in a challenging retail environment. Sales trends improved and I’m proud of the continued growth in jeans, bottoms, women’s apparel and Aerie, with encouraging signs in men’s tops beginning to emerge. Our brands are strong and we have significant opportunity for further growth. I’m optimistic as we enter the second half of the year, and we remain focused on delivering product innovation, strengthening customer engagement and improving profit flow-through.” During the quarter the Company opened nine new Aerie locations, six new American Eagle stores, and nine international licensed stores; it also closed three international licensed stores. For the remainder of the year, the Company plans to open another five American Eagle stores and five Aerie stores in the U.S., Canada and Mexico, as well as 32 international licensed stores. The Company is on track to close 25 to 40 stores this year.