Openings, Closings, & Other Key Industry Highlights

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August 29, 2018

 
 
 

Toys "R" Us

In the Toys “R” Us, DIP bankruptcy case, the Propco I Debtors filed a motion to establish bidding procedures for an auction of 82 properties, including 52 ground-leased units, 29 building leases, and one parking lot leaseThe sites range in size from 22,000 to 63,000 square feet, and include Toys "R" Us and Babies "R" Us locations, as well as side-by-side or combined stores with both nameplates. The assets are located in 32 states, with heavy concentrations in New York, Michigan, California, Illinois, and Texas. A&G Realty Partners, LLC will distribute bidding procedures to potential interested bidders.

The Court entered an order approving the Propco II Disclosure Statement on a final basis and confirming the Chapter 11 Plan. The recovery for general unsecured creditors is expected to be 0%. Prior to the Chapter 11 filing, Propco II owned fee and ground leasehold interests in 123 U.S. properties covering five million square feet. 

 

Ahold Delhaize

As part of its remodeling effort, Ahold Delhaize’s Food Lion division invested $168.0 million in its 105 Norfolk, VA area stores this year, which will unveil their upgrades with grand reopenings this week. Upgrades include expanded assortments, new organization and new signage, as well as the hiring 4,000 additional associates. With the completion of Norfolk market, Food Lion has remodeled 649 of its 1,030 stores in the last four years. The Company will continue with its remodeling effort across other markets. According to Nielsen, as of July 2018, Food Lion held a 26% market share within the Virginia Beach metro area, which includes Norfolk. Walmart is the leader with a 29% market share.

 
 
 

Supervalu and United Natural Foods

Supervalu’s shareholders have approved a new corporate reorganization that may make it easier to sell its remaining retail brands. In July, Supervalu announced it was being acquired by United Natural Foods for $2.90 billion. Supervalu said the combined Company plans to divest Supervalu’s retail assets, which now mainly consist of Cub Foods in Minnesota, Hornbacher’s in North Dakota and Minnesota, and Shoppers Food and Pharmacy in several Mid-Atlantic States, “in a thoughtful and economic manner.” UNFI has placed some limited restrictions on potential deals related to timing and tax consequences. Supervalu is allowed to sell some or all of its retail assets first, if any such deals meet the conditions agreed upon by the two firms.

 

CVS Health

CVS Health opened a new retail distribution center in Kansas City, MO. The 762,000 square-foot DC will serve more than 500 CVS locations throughout the Midwest and reduce the driving distance for these deliveries. Shipping from the DC will begin on October 1, and adds to the Company’s network of 18 distribution centers nationwide.

In other news, CVS has debuted a new in-store beauty format called BeautyIRL in four test stores, with two in Florida, and one each in Massachusetts and Connecticut. The new offering includes an array of brands not typically associated with mass market beauty retail, and in-store beauty services provided through a partnership with Glamsquad. Services include blowouts, makeup and skin care services. The format boasts nearly twice the space as a typical CVS beauty section. CVS plans to add more in-store BeautyIRL shops in 2019, when it said it also would bring the BeautyIRL product offerings online.

 

BMC Stock Holdings

BMC Stock Holdings is relocating its Issaquah, WA operations to a new, 80,000 square-foot millwork facility 24 miles downstate in Auburn, WA. The Company indicated the new location is ideally situated for future growth and will open for business in the first quarter of 2019. The new facility doubles the footprint and capacity of the previous location. The relocation will begin on October 1.

In other news, BMC appointed David E. Flitman as president and CEO, effective October 1, 2018. Mr. Flitman succeeds Dave Keltner, who has served as interim president and CEO since January 2018 and will continue to serve on the board. Most recently, Mr. Flitman served as president and CEO of Performance Foodservice. 

 

Orgill

Orgill plans to nearly double the size of its existing distribution center in Kilgore, TX to nearly one million square feet. Construction is expected to begin in the third quarter of 2018, with completion expected by June 2019. Orgill operates distribution facilities in Post Falls, ID; Tifton, GA; Inwood, WV; Sikeston, MO; Hurricane, UT; Kilgore, TX and London, Ontario, Canada.

Store Activity

 

Whole Foods

Four years since it was first announced, Whole Foods Market in Capitol Hill, WA is expected to open by December. The store will be the Company’s 11th Whole Foods in Washington. It recently opened a store in Kirkland and is aiming to open a long-delayed West Seattle location in the second half of 2019. 

 
 

Trader Joes

Construction has begun on a 13,000 square-foot Trader Joe’s in Bedford, NH, with an expected opening in Spring 2019. Meanwhile, the Company will open new stores in North Potomac, MD; Ashburn, VA; and Manchester, CT during the first week of September.

 

Aldi

Aldi recently opened a store in San Carlos, CA. The location put it within San Diego, CA city limits for the first time. Thus far it has operated only in Chula Vista, Escondido and Vista. Additional San Diego locations are planned, but specifics have not been disclosed. A store in Encinitas is reportedly in the works.

 

Kroger

Kroger will open a new store in Sugar Land, TX on August 31. The 100,000-square-foot store will have a gas station, pharmacy, and Starbucks. Its "Click List" service will be offered a week after the opening. Kroger currently operates 111 stores, 106 pharmacies, and 81 gas stations in the greater Houston area, College Station, and southwestern Louisiana.

 

Natural Grocers by Vitamin Cottage

Natural Grocers by Vitamin Cottage will open a store in Georgetown, TX, on September 5. The Company currently operates 23 stores in Texas. It believes the entire U.S. market can support at least 1,100 Natural Grocers stores, including approximately 200 additional stores in the 19 states where the Company currently operates.

 

Sears Holdings

On August 23, Sears Holdings announced it will be closing an additional 46 stores, click here for the list of locations. The Company said liquidation sales at the closing stores will begin as early as August 30. Earlier this summer, Sears provided an updated list of 78 Sears and Kmart stores that it said would close in September.

In other news, Sears Auto Center announced yesterday that it will be expanding its partnership with Amazon that provides full-service tire installation and balancing for customers who purchase any brand of tires on Amazon.com. Sears first partnered with Amazon back in May when it began offering the Ship-to-Store service at 47 Sears Auto Services in eight metro areas. It has now expanded it nationwide, including Alaska and Hawaii.

 

Costco

Costco opened its 100th store in Canada, located in Alberta. The store is 149,000 square-feet and includes 20 gas pumps. Another Canadian store is expected to open in October. 

 

Arby's Restaurant Group

Arby's Restaurant Group signed a development agreement to build 100 new Arby's locations in South Korea. The restaurants will be operated by franchisee S. Fresh Co. and are expected to start opening in 2019.

Hy-Vee

Allina Health Systems has plans to open four more clinics in Minnesota Hy-Vee stores by March 2019. The news follows the Company’s announcement in April that it would open clinics in Hy-Vee stores in Eagan, Lakeville, and Robbinsdale, MN.

   

 
 
 

 

Earning Releases

Lowe's

On August 22, in connection with the release of Lowe’s Companies’ second quarter earnings, two material announcements were made. First, the Company appointed David Denton as its EVP and CFO; he will replace Marshall Croom, who announced his intention to retire in June 2018 but will remain in the position until Mr. Denton comes on board. Mr. Denton currently serves as EVP and CFO of CVS Health Corporation and will join Lowe’s shortly after closing the CVS acquisition of Aetna, which is anticipated in the second half of fiscal 2018. Mr. Denton has served in executive positions of increasing seniority at CVS since 2007. Additionally, management noted that as part of a strategic reassessment, the Company will be exiting its Orchard Supply business and it expects to close all 99 stores as well as the distribution center, by the end of fiscal 2018 (click here to request the list of locations). Lowe’s has appointed Hilco Merchant Services to help manage the process. During the second quarter, the Company recorded a $230.0 million non-cash asset impairment charge, and estimated that net cash outflow associated with the store closures will be between $290.0 million and $375.0 million. Lowe's acquired the Orchard Supply business out of bankruptcy in 2013 for $205.0 million. The initial goal was to expand into California with a banner that could enter smaller neighborhoods not able to support the large size of a traditional Lowe’s unit. Although, the Company began expanding the Orchard Supply concept in Florida, the stores never fully gained traction. Since Orchard was acquired, the only material information released was in 2016 when the Company recognized an impairment of $76.0 million associated with Orchard Supply as part of a strategic reassessment of the business. Following the exit of the Orchard Supply business, Lowe’s announced that it plans to focus on its core home improvement business.

 

Target

Target reported second quarter sales growth of 7% to $17.78 billion, reflecting comp growth of 6.5%, the highest growth in the past 13 years, and an “unprecedented” increase in store traffic of 6.4%. Comp digital channel sales increased 41% and represented 5.6% of total sales. Operating income was $1.13 billion, up 3.6% from $1.09 billion last year. Strong results came as the Company has focused on revamping its business to better compete in an omnichannel environment. The Company has been remodeling existing stores, rolling out new smaller stores, and adding new private label brands to its product mix. 

For fiscal 2018, Target raised its EPS guidance to $5.30 – $5.50, compared with the prior range of $5.15 - $5.45. On the news, Target’s stock rose 3.2% to close at $85.94 last Wednesday and continued to rise to $86.60 last Monday.

In other news, Target’s store in Huntington Station, NY reportedly could become the Company’s first-ever unionized store next month. The UFCW Local 1500 is attempting to organize the 250-worker store. Last week, National Labor Relations Board approved a vote for September 7 or 8. Target is protesting the NLRB's decision, arguing that a supervisor participated in the union's organization effort, and said it doesn't believe a union is needed at the store. Target has faced votes before, but no store has successfully unionized.

 

Meijer

Meijer’s revenue for fiscal 2017 (FYE ending 2/3/18) is estimated at $18.90 billion, up about 6% from last year. The Company opened seven new supercenters and closed two, smaller format stores during the fiscal year. Meijer expanded its presence in Wisconsin, Indiana, and Michigan, including its first stores in the Upper Peninsula.

In other Meijer news, the Company will open its first Bridge Street Market concept store on August 29 in Grand Rapids, MI. The 37,000 square-foot store, which is significantly smaller than the average 200,000 square foot format, will feature a full assortment of fresh and prepared foods, and include a Mayan Buzz Café coffee shop, a beer, wine and liquor counter, and basic cleaning, health and beauty care products.

Meijer will also open a newly-designed convenience store and gas station on August 28, next to its headquarters, in Grand Rapids, MI. The 5,500 square-foot location will be the first Meijer gas station to include a separate full-service Starbucks. It will also include expanded prepared food offerings, produce and organic items. The store also has a seating area, self-serve coffee station, and beer and wine offerings.

Meanwhile, the Company has canceled plans to build a store on the Geauga Lake property in Aurora, OH. The Company’s contract to purchase the property at the site expired before Meijer began construction. According to the Company, a contract gives it a set amount of time (usually a year) to work through the due diligence issues, but in this case when the contract expired the store was not ready for construction. Meijer currently owns sites it can build on in Lorain, Warren/Niles, and Austintown, OH with additional sites in Brimfield and Boardman under contract. The first stores in the Cleveland area are scheduled to open next summer in Avon, Mentor, and Stow, OH.

 

Stage Stores

Stage Stores’ second quarter sales decreased 2.1% to $369.3 million as a result of having 24 fewer stores in operation since 2Q17 and a 0.2% same store sales decline. Department store comps fell 2% due to lower traffic but that was mostly offset by an 11% comp increase at Gordmans. Management also noted that e-commerce sales increased by double digits. Gross margin eroded 270 basis points due to higher markdowns and supply chain costs, but the quarter ended with a 2% decrease in average department store inventory and a 20% decrease in clearance inventory. As a result, second quarter EBITDA fell nearly 80% to just $1.9 million with TTM EBITDA at an unsustainable $26.0 million. Stage’s TTM EBITDA margin of 1.6% is the lowest in the department store sector. TTM interest coverage fell to 2.9x, below the warning threshold of 3.0x. Management maintained its fiscal 2018 guidance of sales between $1.61 billion and $1.64 billion (a 1.1% to 3% increase from 2017) with comps in a range of flat to an increase of 2%. The Company now expects EBITDA in a range of $26.0 million and $38.0 million and a net loss between $34.0 million and $41.0 million. Capital expenditures are expected to be between $30.0 million and $35.0 million. The Company expects to open one Gordmans store, convert nine department stores to Gordmans, and close 30 to 40 department store locations (an increase of five locations from previous guidance).

 

Stein Mart

Stein Mart’s second quarter sales were flat at $310.9 million, and comps increased 0.7%. Store traffic was down slightly, but offset by a 128% increase in e-commerce sales. Gross profit for the first quarter was 25.5% compared to 20.8% in 2017. Gross profit rate expansion was primarily due to reduced markdowns and better inventory management. Management said that average inventory per store is down 5%, which should reduce the need for markdown activity in the third quarter of fiscal 2018. Operating expenses were down $8.6 million due to cost savings initiatives and the impact of closed stores. As a result, Stein Mart generated $6.4 million in quarterly EBITDA compared to an EBITDA loss of $13.4 million in the second quarter of last year. Based on the improved first half results, management stated it expects fiscal 2018 EBITDA will be in excess of $45.0 million compared to the $4.9 million of EBITDA generated in fiscal 2017. During the first half of fiscal 2018, the Company closed four stores, ending the quarter with 289 locations. In the second half of the year, the Company expects to open two new stores and close an additional three locations.

 

Ross Stores

Ross Stores reported second quarter sales increased 8.9% to $3.74 billion, and comps were up 5%. Pre-tax earnings were up 1.5% to $517.8 million. CEO Barbara Rentler commented, “We are pleased with the above-plan growth we delivered in both sales and earnings in the second quarter. Though better than expected, operating margin of 13.8% was down from last year as higher merchandise margin and leverage on occupancy and buying costs were more than offset by a combination of unfavorable timing of packaway-related expenses, higher freight costs, and this year’s wage investments.” The Company also raised its long-term projected store potential to 3,000 locations, up from the previous target of 2,500. Management indicated that research showed it could further increase penetration in both new and existing markets. Ross Dress for Less can now grow to about 2,400 locations, up from its prior target of 2,000, and dd’s Discounts can reach 600 stores, up from its previous projection of 500. Currently, there are 1,453 Ross Dress for Less and 227 dd’s Discounts stores in operation.

 

Sportsman's Warehouse

Sportsman’s Warehouse reported second quarter sales increased 6.2% to $203.3 million due to the opening of eight new stores since last year, and a nominal 0.2% increase in comparable store sales (which also includes e-commerce sales) compared to a 9% decrease in the same period last year. The Company opened two new stores in the second quarter of fiscal 2018 and ended the quarter with 91 stores in 22 states. EBITDA margin eroded 160 basis points reflecting an unfavorable shift in product mix, higher payroll, and additional costs associated with the new stores. TTM EBITDA margin and interest coverage were 7.7% (in line with the industry average of 7.6%) and 4.3x, respectively. For the third quarter of fiscal year 2018, net sales are expected to be in the range of $220.0 million to $228.0 million based on same store sales ranging between (3%) and 0%. For fiscal year 2018, net sales are expected to be in the range of $841.0 million to $857.0 million based on same store sales in the range of (1%) to 2% and the Company expects to spend $12.0 million to $14.0 million on net capital expenditures.

 

Hibbett Sports

Hibbett Sports reported second quarter sales increased 12.3% to $211.1 million, and comps were up 4.1%. E-commerce sales represented 8% of total sales during the second quarter. Gross margin was 31.4% compared with 28.9% last year; the increase was mainly due to fewer clearance markdowns and leverage of logistics and store occupancy expenses associated with higher net sales. As a result, operating loss narrowed 63.5% to $1.9 million. During the quarter, Hibbett opened six new stores, expanded, relocated, or remodeled three stores, and closed 15 underperforming locations, bringing the store base to 1,059 in 35 states. Following the earnings release on August 24, in which earnings did not meet expectations and management announced that full year comps could fall 1%, the Company’s stock price closed Monday at $19.63, down 50% compared to the Company’s August 23 stock price of $29.40.

 

Best Buy

Best Buy’s second quarter sales increased 4.9% to $9.38 billion, and comps were up 6.2%. Domestic revenue increased 4.4% to $8.64 billion, driven by comp growth of 6%, partially offset by the loss of revenue from 292 Best Buy Mobile and 17 large-format store closures over the past year. International sales increased 10.8% to $740.0 million, driven by comp growth of 7.6%, due to both Canada and Mexico, sales from six new store locations opened in Mexico in the past year and approximately 60 basis points of foreign currency impact. Overall, operating income rose 4.4% to $335.0 million. Looking ahead to fiscal 2019, the Company now expects comp growth of 3.5% – 4.5%, up from original guidance of flat to 2% growth. It also expects EPS of $4.95 – $5.10, up from $4.80 – $5.00.

 

Ace Hardware

Ace Hardware’s second quarter sales increased 6.4% to $1.59 billion. Wholesale revenues increased 4.9% to $1.47 billion, and retail revenues were up 30.3% to $117.7 million. Retail comps increased 3.3% as a result of a 4.1% increase in average ticket, partially offset by a 0.8% decrease in same-store transactions. Ace added 39 new domestic stores during the quarter, and cancelled memberships at 34 stores. The Company’s total domestic store count was 4,423, an increase of 66 stores over the past year. Worldwide, Ace added 59 stores and cancelled 35, bringing its worldwide store count to 5,161.

 

Urban Outfitters

Urban Outfitters reported second quarter sales increased 13.7% to $992.5 million, with retail sales up 14% to $902.0 million, and wholesale sales up 9.9% to $90.4 million. Retail comps were up 13%, driven by strong, double-digit growth in the digital channel and positive retail sales. By brand, comps increased 17% at Free People, 15% at Urban Outfitters, and 11% at Anthropologie. Gross margin improved 180 basis points, driven by lower markdowns at all three brands and leveraging in store occupancy costs due to strong retail comps. These gains were partially offset by deleverage in delivery expense due in part to the increased penetration of the digital channel. Operating income rose 55.4% to $116.9 million. During the first half of the year, the Company opened seven new locations including three Free People stores, two Urban Outfitters stores, and two Anthropologie stores; the Company also closed two underperforming units, consisting of one Urban Outfitters and one Anthropologie store. It ended the quarter with 246 Urban Outfitters stores, 227 Anthropologie stores, 135 Free People stores, and 10 restaurants.

 

L Brands

L Brands’ second quarter sales increased 8.3% to $2.98 billion, and comps were up 3%. Operating income declined 24.2% to $228.1 million. During the quarter, the Company opened 26 stores and closed 25 underperforming locations, ending with 3,076. The Company updated its guidance for fiscal 2018, now expecting EPS of $2.45 – $2.70, down from $2.70 – $3.00. It also announced that Denise Landman, CEO of Victoria’s Secret PINK, decided to retire at the end of this year. Amy Hauk, current president for merchandising and product development of Bath & Body Works, will replace Ms. Landman as CEO of Victoria’s Secret PINK.

 

The Children's Place

The Children’s Place reported second quarter sales increased 20.1% to $448.7 million; this increase was primarily driven by comp growth of 13.2%, a $22.0 million benefit from the calendar shift related to the 53rd week in fiscal 2017, and $5.0 million due to the new revenue recognition rules. Adjusted gross margin leveraged 10 basis points to 34.5% of sales, as a result of fixed cost leverage based on strong comps, the reclassification of certain items due to the new revenue recognition rules, offset by lower merchandise margins along with continued increase in e-commerce penetration. Operating income rose 211.3% to $10.0 million. During the quarter, the Company’s closed 10 underperforming stores and did not open any new stores. It ended the quarter with 992 stores, a 4% decrease from last year. Since the Company began its fleet optimization initiative in 2013, it has closed 191 stores.

 

The Cato Corporation

The Cato Corporation’s second quarter sales inched up 0.9% to $208.9 million, and comps were up 4%. Gross margin increased 610 basis points to 37.2%, primarily due to higher merchandise margins and lower buying and occupancy costs. The Company recorded $7.5 million in pre-tax income, compared to a loss of $2.1 million in the prior year period. CEO John Cato said, “We had a solid performance in the second quarter and first half of 2018 mainly due to positive same-store sales and strong merchandise margins, as a result of much lower markdown sales versus last year. However, again we are cautious about our second half merchandise margin improvement as markdown sales were not as significant in the second half of 2017.” As of August 4, Cato operated 1,350 stores in 33 states.

 

The Buckle

The Buckle’s second quarter sales increased 2.8% to $201.1 million. Comps increased 1.4%. Online sales increased 8.6% to $21.2 million. Gross margin for the quarter was 39.2%, up 130 basis points from 37.9% in the prior year second quarter. The year-over-year increase was a result of a 100 basis point reduction as a percentage of net sales in occupancy, buying and distribution costs and a 30 basis point improvement in merchandise margin. Operating margin was 10% compared to 8.9%. Operating income rose 15.8% to $20.2 million. The Company has no store opening plans for fiscal 2018, but during the quarter it completed three full remodeling projects and anticipates completing one additional full store remodel prior to the holiday season.

 

New York & Company

New York & Company’s second quarter sales declined 3.5% to $216.4 million, reflecting a reduced store count and the shift of a pre-Mother’s Day week into the first quarter, partially offset by increased sales from Fashion to Figure. Comps inched up 0.6%, with spring comps up 1.7%. Gross margin increased 150 basis points to 32.1%, reflecting a 160 basis point increase in merchandise margin, reduced product costs, decreased promotional activity and shipping efficiencies, partially offset by a 10 basis point decrease in the leverage of buying and occupancy costs due to lower gross sales. Operating income declined 40.7% to $3.1 million. During the second quarter, the Company opened one Outlet store, converted two existing New York & Company stores to Outlet stores. It closed five New York & Company stores and two Outlet stores, and remodeled/refreshed three existing locations ending the spring season with 426 units, including 120 Outlet stores, and 2.1 million selling square feet in operation.

 

Citi Trends

Citi Trends’ second quarter sales increased 9.5% to $182.0 million, and comps were up 3.3%. The sales increase included a benefit of $6.7 million due to a calendar shift. The Company recorded operating income of $3.7 million, compared to a loss of $475,000 in the prior year. During the second quarter, the Company opened three new stores, relocated or expanded four stores, and closed two underperforming locations. CEO Bruce Smith commented, “Our second quarter reflected a significant improvement in earnings, highlighted by a 3.3% increase in comparable store sales and a benefit to total sales from a shift in the fiscal calendar in relation to 2017, together with healthy gross margin expansion and expense leverage.”

 

Foot Locker

Foot Locker’s second quarter sales increased 4.8% to $1.78 billion, and comps inched up 0.5%. Operating income rose 55.6% to $112.0 million. Gross margin increased to 30.2% from 29.6%, while the SG&A expense rate increased to 21.3% from 19.9%. CEO Richard Johnson commented, “Our performance reflects the work we are doing on several fronts to position the Company to succeed in a rapidly evolving retail environment. We remain optimistic that our improving product flow and depth in premium styles positions us to deliver stronger comparable sales growth in the second half of 2018.” During the second quarter, the Company opened 13 new stores, remodeled or relocated 33 stores, and closed 21 underperforming locations. As of August 4, the Company operated 3,276 stores in 24 countries, and franchised 107 stores in the Middle East, and 10 Runners Point stores in Germany.

 

DSW

DSW’s second quarter sales increased 16.4% to $795.3 million, and comps were up 9.7%. Sales included $72.5 million from the consolidation of its Canadian retail business, which was excluded from comparable sales. The Company also announced it will exit its full-price, mall based banner, Town Shoes, which operates 38 locations in Canada, by the end of fiscal 2018. Management did not see growth or profitability for the future in Town Shoes and as a result recorded a $36.2 million goodwill impairment. Going forward, DSW will focus on its largest retail banners in Canada, Shoe Company, Shoe Warehouse and DSW. Gross margin increased 280 basis points due to favorable merchandise margin and occupancy leverage. However, operating expenses increased 220 basis points, driven by marketing investments, acquisition-related costs and restructuring expenses. As a result, operating income fell 47.8% to $24.5 million. CEO Roger Rawlins stated, “The strong results we've had this spring demonstrate we're successfully activating customers and increasing lifetime value. I'm proud of the progress we're making and with our updated earnings outlook, we look forward to sales reaching $3.00 billion for the first time in DSW's history.” Fiscal 2018 revenue is expected to increase 6% – 9%, a sizeable improvement compared to its previous outlook for sales to decrease 1% – 3%. Adjusted net income is projected to be $131.2 million – $143.5 million, up from $123.1 million – $135.3 million.

 

Bed Bath & Beyond

Bed Bath & Beyond received approval from the Ohio Tax Credit Authority for a new, $33.0 million, 800,000 square-foot distribution center in Monroe, OH, a facility meant to accommodate the Company’s growth. The 1.5%, 10-year tax credit has an estimated value of $3.7 million and is contingent on job creation. The Company expects to create 900 full-time jobs with an annual payroll of $26.6 million by the end of 2022. Hiring is expected to begin on September 1, 2019.

 

Tuesday Morning

Tuesday Morning’s fourth quarter revenue increased 3.1%, to $230.5 million, despite a slightly lower store count. Comparable stores sales increased 2.4%, on top of a 1.8% increase last year, boosted by higher customer transactions coupled with stronger sales generated by relocated stores. Sales at 45 relocated stores during the past year increased about 50% during the quarter driven by favorable real estate and larger average store footprint. Gross margin expanded 200 basis points on lower distribution and freights costs coupled with reduced markdowns. SG&A margin decreased 160 basis points primarily from reduced advertising, reduced real estate projects, leveraging of store labor costs and cost discipline in corporate expenses. Ultimately, EBITDA loss contracted to $2.1 million for the quarter. Full year EBITDA crossed into positive territory, however TTM EBITDA margin remained thin at 0.9%. In fiscal 2019, the Company plans to open 10 to 12 new stores, relocate 15 to 20 stores, expand one to three stores and close 20 to 30 locations. Net capex is expected to be in the range of $15.0 million to $20.0 million reflecting fewer relocations and new stores, partially offset by higher investments in information technology.

 

Williams-Sonoma

Williams-Sonoma’s second quarter sales increased 6.1% to $1.28 billion, and comps were up 4.6%. E-commerce revenue increased 8.9% to $687.0 million, and e-commerce sales now make up 53.9% of total revenue. Retail sales increased 3.1% to $588.0 million. By segment, comps were up 2% at Pottery Barn, 9.5% at West Elm, 1.6% at Williams Sonoma, and 5.7% at Pottery Barn Kids and Teen. However, as a result of higher SG&A expenses, operating income declined 9.1% to $74.2 million. The Company opened 22 new stores and closed 30 underperforming locations, ending the quarter with 623 stores in operation.