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365 by Whole Foods

Whole Foods Market will open a 365 store in Santa Monica, CA tomorrow. The 30,000 square-foot store will be the Company’s fifth 365 store. The others are located in Los Angeles, CA; Lake Oswego, OR; Cedar Park, TX; and Bellevue, WA. An Akron, OH, unit is slated to open September 14.

Publix

Publix’s second quarter sales increased 3.6% to $8.48 billion, positively impacted by 1.2% due to the Easter holiday shift, new store growth, and a 1.6% increase in comps. Net earnings were up 3.5% to $495.1 million. For the first half of the year, Publix’s sales increased 1.5% to $17.24 billion, comps fell 0.3%, and net earnings were down 0.9% to $1.05 billion. During this period the Company opened 19 supermarkets (including 2 replacements), remodeled 72 units and closed seven.

Effective August 1, Publix’s stock price decreased from $39.15 per share to $36.05 per share. Publix’ stock is not publicly traded and is made available for sale only to current Publix associates and members of its board. CEO and President Todd Jones commented, “This has been a tough quarter for supermarket companies in the stock market. We continue to be focused on growing sales and profits while providing premier customer service.”

Dillards

Published reports indicate that activist investor Snow Capital Partners is looking to unlock the real estate potential at Dillard’s, similar to recent moves made by Macy’s. Snow Capital currently owns about 2% of Dillard’s outstanding Class A stock. According to the reports, about 25% of Dillard’s real estate is located in top-tier malls, which value properties at an average of $650 in sales per square foot. Snow Capital believes the value of Dillard’s real estate is well above $200 per share. Dillard’s operates 268 full-line locations and 25 clearance centers across 29 states, and it owns approximately 90% of its square footage. The Company closed about 50 stores since 2008, and according to the reports Snow Park wants to accelerate the rate of closures or repurpose the locations to maximize their real estate potential. Starboard, an activist hedge fund that owns about 1% of Macy’s shares, reportedly announced earlier this year that Macy’s real estate assets are worth $21.00 billion, compared to the Company’s current market cap of $9.26 billion.

Supervalu

In a recent interview, Supervalu CEO Mark Gross said that while the Company has been selling off retail chains for years as it refocuses on its better-performing wholesale business, it does not plan on divesting its Cub Foods chain. The 80-store chain is the market share leader in the Twin Cities, although that share has reportedly been cut in half over the past 20 years. According to Nielsen, as of July 2017 Supervalu had 49 Cub Foods stores in the Minneapolis metro market and controlled 21% of the market. Target ranks second with 24 Supercenters and a 15% market share, followed by Walmart with 27 Supercenters and a 13% market share. According to Mr. Gross, Supervalu is using some of the $1.30 billion it received from the sale of Save-A-Lot to upgrade Cub Stores. It replaced a store in Oakdale last year and is remodeling one in Eagan this year. However, just last month during an earnings call, when Mr. Gross was asked about selling off other retail chains, his response was, “I think as we sit here and work to maximize shareholder value, any and all options are on the table and that’s the work we have in front of us.”

McLane Company/Love's Travel Stops

On August 2, McLane Company announced the renewal of its service agreement with long-time customer Love’s Travel Stops. As part of this extended agreement, McLane will continue to deliver to more than 430 Love’s stores across 41 states. Love’s Travel Stops has been adding approximately 40 – 50 stores per year. The length of the renewal was not specified, but McLane noted that it has had a 21-year relationship with Love’s.

The Bon-Ton Stores

The Bon-Ton Stores will expand its Close to Home in-store shop concept, launched last fall, to an additional 40 locations. The initial rollout last fall included 45 stores, and now nearly 150 locations have the departments. Products are locally sourced and themed to each store’s geographic location; they include jewelry, artwork, home décor, kitchen and bar, apparel and accessories. Bon-Ton operates 261 stores in 25 states in the Northeast, Midwest and upper Great Plains. The initiative is part of the Company’s quest to differentiate itself in an effort to reverse negative sales trends, including an 8.8% erosion in first quarter comps.

99 Cents Only Stores

99 Cents Only Stores will open a new store in Livermore, CA on August 17. It will feature a perishable food department, including produce, dairy and frozen foods. The Company currently operates 284 stores in the state.

Metro

On August 1, Metro, Inc. announced an agreement to acquire a majority interest in MissFresh Inc., a Montreal-based company that delivers ready-to-cook meals directly to customers. Financial details were not disclosed. MissFresh’s three co-founders will retain 30% of the capital and continue to take an active part in the Company’s management with the existing team. This deal appears to follow the same line as Premiere Moisson (2014) and Adonis (2011), whereby the Company acquired a majority stake in an emerging business (fresh baked products and ethnic products, respectively) in order to learn about their operations and expand the reach of their offerings to a larger store network. The Company’s deal with Adonis came with an option to buy out the minority interest after a period of time, which it exercised in April 2017. The acquisition will help Metro develop its own online presence, which is currently very limited, as the Company only started offering basic click-and-collect and delivery services at a handful of stores in the Montreal area in the fourth quarter of fiscal 2016. During the second quarter earnings call, management stated that it plans to expand these services to most of Montreal, Ottawa, and Quebec City by the beginning of fiscal 2018.

Big 5 Sporting Goods

Big 5 Sporting Goods reported second quarter sales increased 0.9% to $243.7 million, and comps were up 0.8%, reflecting sales gains from the closure of certain major competitors, offset by lower demand for certain hardgoods product categories such as firearms, camping and water sports. Profit rose 30.8% to $2.8 million. CEO Steven G. Miller said, “After a solid start to the period, sales for our second quarter came in below expectations. Same store sales increased in the low mid-single-digit range for each of our April and May periods, but decreased in the low single-digit range for June as we experienced weakness in certain outdoor product categories related to firearms, camping and water sports, and also began to cycle some of the benefit from the competitor store closures that occurred last year. As a result of the weakness in June, same store sales in our hardgoods category decreased in the low single-digit range for the quarter. Our apparel category continued to perform exceptionally well throughout the quarter, with same store sales increasing in the high single-digit range, and same store sales in our footwear category increased in the low single-digit range for the period.” During the quarter, the Company opened two stores, ending with 433 stores in operation; it anticipates closing one underperforming store during the third quarter.

Costco

Costco’s July sales increased 8.8% to $8.65 billion. Comps, excluding gas and currency exchange, rose 5.3% and consisted of 5.5% growth in the U.S., 4% growth in Canada and 5.9% growth in Other IntCosernational. For the year-to-date period, sales increased 6.1% to $113.70 billion and comps were up 3.6%.

Sprouts Farmers Market

Sprouts reported second quarter sales growth of 14.8% to $1.18 billion, driven by strong performance in new stores and a 1.4% increase in comps. Net income rose 10.1% to $41.0 million, resulting from higher sales and a lower tax rate related to an accounting change this year.

For the first half of the year, sales increased 14.3% to $2.31 billion, comps rose 1.2%, and net income increased 4.6% to $87.3 million.

During the quarter, Sprouts opened 13 new stores: two each in Colorado, Florida, Georgia and Texas, and five in California. Five additional stores have been opened in the third quarter to date, resulting in a total of 279 stores in 15 states as of August 3.

The Company raised its fiscal 2017 guidance. It now expects sales growth of 13% – 14%, up from prior guidance of 12.5% – 13.5%; comp growth of 1.5% – 2%, up from prior guidance of 0.5% – 1.5%; and EPS of $0.88 – $0.92, up from $0.87 – $0.91. It continues to expect to open a total of 32 new stores this year.

During its earnings conference call, Sprouts confirmed plans to expand its relationship with Amazon Prime despite Amazon’s pending acquisition of Whole Foods. CEO Amin Maredia commented, “Our partnership with Amazon Prime Now continues to grow. We will be delivering Sprouts products through the Prime Now service to over 20 locations across many of our major markets by year end.” For the last year, PrimeNow has provided e-commerce services for 10 Sprouts stores (less than 4% of its store base), with plans to double that this year and expand more significantly in 2018. Back in June we reported that CFO Brad Lukow said discussions with PrimeNow indicated it was “business as usual” for the partnership and does not expect a disruption. AmazonFresh shoppers buy groceries for delivery direct from Amazon. Should either Sprouts or Amazon decide to back out of their partnership, Mr. Lukow said they previously agreed to provide one another with “ample time” to redirect to another platform.

Meanwhile, published reports have surfaced that Sprouts is the “most likely” takeover candidate left among publicly traded grocery chains. While most grocers’ stocks have tanked in the three months since the Amazon - Whole Foods deal was announced, Sprouts’ stock is actually up more than 3% and has climbed about 25% since the start of the year, mostly related to takeover speculation.

PGA Tour Superstore

PGA Tour Superstore signed a lease to open a 30,000 square-foot store in downtown Summerlin, NV, marking its first store in the Las Vegas market. This will be the Company’s 31st store, once it opens later this year. PGA Tour Superstores are operated through Golf & Tennis Pro Shop. There are two Dick’s Sporting Goods stores and two Golf Galaxy locations within a 10-mile radius. Golfsmith, DIP closed its 22,000 square-foot store in downtown Summerlin at the end of 2016, as part of its liquidation.

Dicks Sporting Goods

Dick’s Sporting Goods is opening five stores this month, including two namesake stores and three Field & Stream stores. In Prosper, TX, the Dick’s and Field & Stream stores scheduled to open will operate under one roof. Additional stores will open in Houston, TX (Dick’s), Florence, AL (Field & Stream) and Kennesaw, GA (Field & Stream). Once these five stores open, Dick’s will have 704 locations and 32 Field & Stream stores in operation. The Company hinted in its last earnings call that it will slow future expansion as more sporting goods sales transfer online.

Walmart

Published reports indicate that Walmart plans to roll out its online grocery pickup service in 26 stores in California, bringing the total number in the state to 36. The 26 stores in California join more than 800 Walmart stores across the country that offer curbside pickup of groceries. Walmart has been slowly rolling out the program in various markets. Meanwhile, the Company has reportedly unveiled a new in-store item scanning system that will eliminate checkout. According to published reports, it is testing new “Scan & Go” technology at a number of U.S. stores that allows customers to download a phone app that scans the barcodes of items as they are placed in the cart. The customer can then also pay via the app and would have their cart contents verified by a Walmart employee as they leave.

Natural Grocers by Vitamin Cottage

Natural Grocers’ third quarter sales increased 8.6% to $194.7 million, primarily due to a $16.7 million benefit from new stores, partially offset by a $1.3 million decrease in comps due to one less selling day as a result of the timing of Easter. Daily average comps rose 0.4%; average transaction count fell 0.3%. Net income was $600,000, compared to $2.7 million last year. For the year-to-date period, sales rose 8.8%, comps fell 0.7%, and net income dropped from $10.0 million to $5.7 million. During the third quarter, the Company opened five new stores, bringing the total store count to 140 stores in 19 states (as of June 30). So far during 4Q, it relocated one store in Denver, CO and does not plan to open any additional stores during the remainder of the year. Natural Grocers has signed leases for nine stores that are planned to open in fiscal 2018 and beyond in Iowa, Missouri, Oregon, Texas and Utah.

Looking ahead at fiscal 2017, the Company revised its outlook and now expects comp growth of -1% to 0.5%, compared to previous guidance of -1% to 1%; and EPS of $0.31 – $0.34, down from prior guidance of $0.50 – $0.54. Capital expenditures are now expected to be $39.0 million – $41.0 million, down from its previous estimate of $40.0 million – $44.0 million.

Boot Barn

Boot Barn reported first quarter net sales increased 4.5% to $139.4 million driven by comps increasing 1.3%, 10 net store openings and incremental sales from the recently acquired Country Outfitters site. Retail comps started to gradually improve in oil states (North Dakota, Wyoming, Colorado and Texas), highlighted by a low single-digit sales increase in Texas. Additionally, overall e-commerce sales were flat, with bootbarn.com comps increasing double-digits, offset by a double-digit comp decline from the conversion of sheplers.com to a new e-commerce platform in the first quarter. Management noted that sheplers.com comps have improved in July and should return to positive territory in the third quarter. Going forward, the Company remains committed to marketing initiatives that will add new customers (noting two-thirds of Country Outfitters sales came from new customers), increasing its private-brand portfolio (Cody James, Shyanne, and Moonshine Spirit) by recently signing a multi-year agreement, and expects merchandise margin to improve. During the first quarter, the Company opened one new store, ending with 220 stores in 31 states. For fiscal 2018, Boot Barn is planning to open a total of 12 stores. The average store size of these openings is approximately 10,000 square feet.

K-VA-T

On Saturday, K-VA-T closed a 26,000 square-foot Super Dollar Discount Foods store in Vinton, VA. The Company has 11 Super Dollar locations in Virginia, Kentucky and Tennessee.

Amazon

Beginning August 31, third-party sellers of books, CDs and DVDs on Amazon will have to deliver items within a window of four to eight days, down from four to 14 days. This will mean that marketplace merchants, who sell out of their garage or warehouse rather than using Amazon’s fulfillment centers, have to build in these new shipping costs into their business model.

Party City

Party City’s second quarter sales increased 4.9% to $544.9 million, and comps were up 0.1%. Retail sales rose 6.3%, driven primarily by increased store count through acquired franchise stores (36 stores), one acquired independent store, and new store growth (22 new stores in the past 12 months). Profit jumped 11% to $25.0 million. CEO James M. Harrison stated, “We delivered strong second quarter revenue growth of just under 5% on a reported basis, or almost 6% in constant currency, and are pleased with how the quarter played out, as we met our top line and bottom line objectives. By focusing on our fundamentals of top line growth, gross margin expansion and solid cost control, Adjusted EBITDA increased 13.5% and Adjusted EPS increased 17%.”

Grocery Outlet

Last week, Grocery Outlet opened a 14,000 square-foot store in San Diego, CA, at a former Albertson’s location that had been closed for about two years. It is Grocery Outlet’s 16th San Diego County location.

J. Alexander's Holdings/Ninety-Nine Restaurants

J. Alexander’s Holdings, Inc. (JAX) announced that it will acquire Ninety-Nine Restaurant & Pub, a 106-unit casual dining chain, from Fidelity National Financial, Inc. in an all-stock transaction valued at approximately $199.0 million, including the assumption of $20.0 million in net debt. Most importantly, JAX will not need to raise debt to fund the acquisition. JAX shareholders are expected to vote on the merger in the fourth quarter of 2017. Fidelity will exchange all of its ownership interest in 99 Restaurants for common-share equivalents of JAX. At closing, Fidelity will own approximately 52.5% of the outstanding shares of capital stock of J. Alexander’s.

The Container Store

The Container Store Group’s first quarter sales increased 3.2% to $183.1 million, and comps were down 1.2%. Retail sales were up 3.6% to $167.1 million, while Elfa’s sales fell 1.2% to $16.0 million as a result of foreign currency fluctuations. The Easter timing shift negatively impacted comps by 0.7%. The Company’s net loss widened 273.2% to $7.7 million. During the first quarter, the Company opened one new store in Cleveland, OH. In addition, it opened a new store in Albuquerque, NM on July 8, subsequent to quarter end. Looking ahead, the Company plans to open additional locations in Livingston, NJ and Staten Island, NY, and relocate a store in Chestnut Hill, MA. The Company’s average store size is 19,000 square feet, and new stores have an initial lease term of 10 – 15 years.

Yum! Brands

Yum! reported that its second quarter sales fell 4% to $1.45 billion. Meanwhile, worldwide system comps increased 2%, including growth of 3% at KFC, 4% at Taco Bell and a 1% decline at Pizza Hut. Net income dropped 38.7% to $206.0 million, impacted by higher expenses related to improving the Pizza Hut stores.

During the quarter the Company opened 174 net new units and refranchised 244 restaurants, including 40 KFC, 163 Pizza Hut and 41 Taco Bell units, for proceeds of $136.0 million. As of quarter end, its global franchise ownership mix was 94%.

Cabela's

Cabela’s second quarter sales decreased 4.2% to $890.4 million, reflecting a 6.7% drop in retail store sales, a 3.9% drop in Internet and catalog sales, and a 9% increase in Financial Services revenue. Comps fell 9.3%, with U.S. comps down 9.7%, as lower sales of firearms and shooting-related products were responsible for nearly half of the overall decline. Management attributed lower sales of firearms and shooting-related products to the residual impact of the election and the anniversary of several tragedies a year ago. As we previously reported, the FTC did not block Bass Pro’s planned acquisition of Cabela’s nor did it require any store closings. Cost cutting will be necessary to improve profitability at both companies. Comps at Cabela’s have now been negative during 14 of the last 15 quarters, and Bass Pro’s comps have also been down for most of that period. Additionally, margins in Cabela’s retail unit lag its competitors, although the overall margin is acceptable because it reflects the impact of the profitable credit card operations. Debt funding for the transaction will leave the new entity more leveraged. The transaction is expected to close during the third quarter.

Fiesta Restaurant Group

Fiesta Restaurant Group’s second quarter sales fell 4.9% to $172.6 million, due to 14 fewer stores in operation. Comps decreased 7.7% at Pollo Tropical and fell 4.7% at Taco Cabana. Fiesta reported a net loss of $2.2 million, compared to net income of $8.2 million last year. During the quarter, the Company opened three Company-owned Pollo Tropical restaurants and two Company-owned Taco Cabanas.

The Company also provided an update on the progress it is making with its Strategic Renewal Plan to drive long-term shareholder value creation. CEO Richard Stockinger commented, “Since initiating the Strategic Renewal Plan in April and implementing related major operational changes, we significantly reduced our media presence and moderated promotions and discounts, which negatively impacted our quarterly revenues.… We are now preparing to relaunch Pollo Tropical in October and Taco Cabana shortly thereafter once the material aspects of our Plan are in place, including new and impactful creative advertising campaigns…. By early 2018, among other things, we intend to implement incremental strategies for growth including digital solutions aimed at building effective programs to foster loyalty and grow online ordering, delivery and catering sales.”