February 13, 2019
Industry Spotlight:
Mass Merchandisers
The Mass Merchandise sector, like the rest of retail, is dealing with increased online competition and changes in consumer behavior. Mass Merchandisers must react quickly to changes in the retail landscape. The Shopko mass closures will result in available space, offering other retailers opportunity for growth.
Tru Kids
February 11 marked the opening of Tru Kids Inc., a new company created by former executives of Toys “R” Us. The Company will be led by President and CEO Richard Barry, former chief merchandising officer at Toys “R” Us. Management also includes Matthew Finigan as CFO (former VP, treasurer), James Young as EVP of global license management and general counsel (former EVP and general counsel), and Jean-Daniel Gatignol as SVP of global sourcing and brands (former SVP). More details regarding the new business are expected to be forthcoming.
The liquidation of Toys “R” Us last year led to toy sales falling 2% to $21.60 billion during 2018, according to NPD Group. Other retailers like Walmart, Target, Amazon, Kohl’s, and J.C. Penney, attempted to fill the void by expanding their toy offerings, which resulted in sales boosts for each of those companies. However, executives at Tru Kids believe there is still a “significant gap” that can be filled through the return of the Toys “R” Us and Babies “R” Us brands. Meanwhile Toys “R” Us is profitable in Asia, where it separated itself from its parent and was acquired by Fung Retailing in December 2018 for $760.0 million. Fung Retailing plans to open 70 new stores this year in Asia, India and Europe.
Two major American toymakers, Hasbro and Mattel, reported in their respective fiscal 2018 earnings releases that they took a hit from the liquidation of Toys “R” Us; Hasbro’s fiscal 2018 sales were down 12.1% to $4.58 billion, and Mattel’s fiscal 2018 sales decreased 8% to $4.51 billion. Hasbro indicated that the Company was not able to recapture as much of the Toys “R” Us business from other retailers as anticipated. Mattel noted that 6% of its sales decline was attributed to the loss of Toys “R” Us, but cost-cutting measures begun in 2017 helped soften the blow from the loss of that business.
Walmart
Walmart has ended its partnership with Google-backed logistics firm Deliv for same-day grocery delivery. Deliv, which was one of Walmart’s earliest partners with pilot programs in Miami and San Jose, served Walmart with a 90-day termination notice, and the two companies stopped working with each other in late January, according to people familiar with the situation. According to sources, Deliv drivers had to frequently wait 40 minutes or more to collect grocery orders when they showed up at Walmart stores to pick up their deliveries. Walmart said it still partners with seven delivery firms, including DoorDash and Postmates, four of which it signed up in January. Same-day grocery delivery service is currently available in 800 of Walmart’s more than 5,000 stores with plans to add another 800 more this year, according to Walmart. Walmart is creating a rolling showroom that serves as a mini-store from which it can demonstrate its online mattress and bedding brand, Allswell. The showroom will be launched initially in New York, and will head to major cities to introduce the brand. The tiny home on wheels is a four-room, 238-square-foot showroom. It has a living room, bathroom, bedroom, and kitchen area that customers can explore and shop. Allswell is a homegrown digital brand for Walmart, introduced a year ago and until now was only sold through its own website, and on Jet and Hayneedle. In other news, Walmart is going after retailers like Wayfair and Crate and Barrel with a new line of furniture.
Things Remembered
On February 6, Things Remembered, Inc., DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court in the District of Delaware. The Honorable Kevin Gross has been assigned to the proceedings, designated as case number 19-10234. The Company has entered into a stalking horse asset purchase agreement with Enesco, LLC to sell “most of its business.” Enesco is a global leader in the giftware, home décor, and accessories industries. Enesco intends to operate the Things Remembered online, direct mail, and B2B retail businesses, as well as a portfolio of current stores under the Things Remembered brand. Prior to the filing, the Debtors operated 422 stores. Based on a performance evaluation, the Debtors decided to close 37 stores with lease expiration dates of January 31. These stores were vacated and closed as of the petition date. The Debtors also commenced prepetition store closings at 220 stores and 30 kiosks.
Furthermore, the Debtors determined that: (i) 128 of the most profitable stores may generate value in a going-concern sale and should remain open through the post-petition going-concern sale process or the completion of the auction, and (ii) the remainder of the stores are unlikely to be acquired by a going concern buyer and should close as soon as possible. Management said it currently plans to continue its day‑to‑day business operations. The Court issued first day orders on an interim basis, authorizing (i) post petition use of cash collateral; and (ii) closing sales at 220 stores, which commenced January 25, 2019 and will conclude by February 28, 2019. A hearing on final approval of first day orders is scheduled for February 28, 2019. In connection with the bidding procedures motion, the Company proposed the following key milestones: bid deadline (February 28), auction (March 4), sale hearing (March 6), and closing of sale (March 8). Coverage of the proceedings will now be shifted to our Insolvency Support Center.
Shopko Holding
Shopko Holding, DIP received final Court orders authorizing it to assume consulting agreements and approving procedures for store closing sales, establishing bidding procedures for plan sponsors, and use of cash collateral. The judge also will approve an order for the final DIP facility, subject to certain revisions for concessions related to the lien on unencumbered assets (collateral will be available to unsecured creditors once the secured creditors have been satisfied), and a for payment of stub rent, and the Debtor filing an amended order. Earlier last week, Shopko disclosed that it plans to close an additional 137 stores (click here to request the list). To date, the Debtor has announced the closure of 251 stores, which reduces its store count to just over 100. In addition, as part of its reorganization plan, the Debtor expects to have 61 standalone optical stores, including 54 “carved-out” units that will be established as a standalone optical center in the vicinity of a closed Shopko store. The Debtor disclosed that for the twelve months ended December 2018, these assets generated revenue of $851.0 million and 4-wall EBITDA (before corporate overhead) of $99.0 million. For fiscal 2019, the Debtor projects revenue of $799.8 million and EBITDA of $43.8 million. As of the effective date for its proposed Plan of Reorganization, the Debtor estimates total debt of $183.9 million, and accrued administrative costs of $34.1 million. The Debtor also filed an amended budget for the 13-week period ended April 19, which assumes net positive cash flow of $217.1 million, including $50.2 million in proceeds from pharmacy asset sales, and ending DIP facility obligations, including letters of credit, of $149.5 million. Despite the lower-than-expected proceeds from asset sales, net cash flow is approximately $71.0 million higher than the original plan, and ABL obligations are approximately $70.0 million lower. The difference is primarily related to $27.0 million in higher sales, and $97.0 million in lower merchandise disbursements, which we assume is related to the latest round of store closures. In addition, as part of its reorganization plan, the Debtor expects to have 61 standalone optical stores, including 54 “carved-out” units that will be established as a standalone optical center in the vicinity of a closed Shopko store. The Debtor disclosed that for the twelve months ended December 2018, these assets generated revenue of $851.0 million and 4-wall EBITDA (before corporate overhead) of $99.0 million. For fiscal 2019, the Debtor projects revenue of $799.8 million and EBITDA of $43.8 million. As of the effective date for its proposed Plan of Reorganization, the Debtor estimates total debt of $183.9 million, and accrued administrative costs of $34.1 million.
Amazon
According to reports, Amazon executives are seriously reconsidering the Company’s decision to build a campus in New York’s Long Island City, as part of its HQ2 plan. This includes bringing 25,000 jobs to the area and $2.50 billion in investment. Amazon has received opposition from a number groups, with people questioning things like the size of the incentives, the impact on local neighborhoods, the expected stresses on the city’s infrastructure, and the Company’s long-held resistance to unionization. NY Governor Cuomo reiterated his support for the Amazon deal, as he warned that local opponents could derail the project. In other news, last week Amazon opened its latest Amazon Go store at the Illinois Center, its fourth in Chicago and 10th overall. The Company also has four in Seattle and two in San Francisco, with plans for a store in New York. The new Go store is 1,950 square feet and features ready-to-eat breakfast, lunch, dinner and snack items, along with grocery essentials, Amazon meal kits, and other convenience items. Amazon has suggested it may consider opening as many as 3,000 Go stores by 2021. Meanwhile, the Company has launched Amazon Cash, a service that allows consumers to purchase products on Amazon without having to use a debit or credit card. There will be two different ways to add cash to an Amazon account. At participating stores, shoppers can either scan their barcode at the cashier or kiosk, or use their mobile number to identify their Amazon account, then add cash. Amazon recently invested in the self-driving car start-up Aurora, which could help it make deliveries. Amazon is already hauling cargo with self-driving trucks. Aurora has raised $530.0 million from investors, including Amazon, Sequoia and the investment arm of energy giant Shell (how much was funded by each was not disclosed). On February 11, Amazon announced that it will acquire a home mesh WiFi system, eero, for an undisclosed sum. With the eero app, customers can set up the system in under 10 minutes which connects all smart devices in a home, share their network, program parental controls, and run speed tests on demand. Additionally, eero communicates with the cloud to receive instructions and updates in real-time and self-improves. Completion of this transaction is subject to customary closing conditions.
United Natural Foods (UNFI)
United Natural Foods’ (UNFI) plans to pursue DC rationalization within the combined network in three markets, the Pacific Northwest, Harrisburg/Lancaster, and Florida, as disclosed in its Investor Presentation. Last week, UNFI announced further details of this plan as it relates to the Pacific Northwest. Specifically, the Company has entered into a long-term lease agreement with a developer in Centralia, WA to construct a 1.2 million square-foot distribution center exclusively for UNFI on approximately 77 acres. UNFI will also expand its Ridgefield, WA facility by 541,000 square feet (to a total of nearly 800,000 square feet). UNFI/SVU currently operates five distribution centers in the Pacific Northwest: a 944,000 square-foot facility in Tacoma, WA; a 323,000 square-foot warehouse in Auburn, WA; 220,000 square-foot and 30,000 square-foot warehouses in Ridgefield, WA; and a 923,000 square-foot warehouse in Portland, OR. Once construction of the new Centralia DC is complete and the expansion of the Ridgefield DC is finished, UNFI plans to close the Tacoma, Portland and Auburn warehouses, as well as reduce its dependency on outside storage and third-party logistics services.
Kroger
On Monday, Kroger announced it has shut down production at its Columbus, OH bakery facility. The closure resulted in 411 layoffs. In a statement, Kroger said that the outdated layout of the plant, opened in 1928, and the age of the equipment were no longer sustainable to remain competitive. Laid off workers are being paid their normal compensation for the next 60 days, followed by severance. In other news, Kroger and Home Chef will expand their in-store meal kit offerings to new cities, bringing the weekly rotating meal solution to 500 additional stores across the country. Home Chef has also launched a customizable meal kit feature for online orders. Kroger introduced Home Chef retail meal kits into its stores last October and plans to have more than 700 stores offering the option.
Sears Holdings
Last week, the Bankruptcy Court approved the $5.20 billion going concern bid submitted by ESL Investments Inc. (ESL) for the go-forward assets of Sears Holdings Corporation, DIP. As part of the bid, ESL will acquire 425 stores. The ruling means the Court rejected arguments from the Creditors’ Committee that the sale process was unfair and that store operations would continue to flounder under ESL’s control. Last evening, ESL announced that its affiliate, Transform Holdco LLC, has completed its acquisition of substantially all of the go forward assets. The new Sears (the Company) will comprise 223 Sears and 202 Kmart stores, along with brands and operating businesses, including Kenmore, DieHard, Craftsman, Sears Home Services, Sears Auto Centers and Innovel. Management said, “As of the closing of the acquisition, the new Sears had more than $400.0 million in excess availability on its new asset-backed credit facility, which provides a significant runway to pay assumed liabilities, execute go-forward initiatives, including investments in new, smaller stores to expand the Company’s reach in the hardline category, pursue renewed marketing efforts, foster new partnerships that unlock value and invest in the Company’s unique services and delivery offerings. The new Sears has a plan to be EBITDA positive in fiscal 2019. Transform Holdco will ensure a seamless transition, with no disruption to the member and customer experience and continuation of Sears’ member programs, warranties and protection agreements. Vendors and suppliers will continue to be paid in the ordinary course for all goods and services under agreed upon terms.” The new Sears will be led by the management team that constituted the Office of the Chief Executive of Sears Holdings, consisting of CFO Robert A. Riecker, Chief Digital Officer Leena Munjal, and President of Softlines Greg Ladley. The Company said it intends to conduct a search for a CEO with a record of success in managing platform businesses and effectuating large-scale dynamic transformations. ESL provided the following attributes of the new Sears:
• A footprint of profitable retail stores and a robust digital platform;
• A healthier capital structure, including a reduced debt load;
• Initiatives to drive margin and EBITDA growth, including technology investments, inventory optimization and Sears Home Services enhancements;
• Significantly reduced SG&A expense;
• Shop Your Way—a sophisticated rewards, analytics and marketing platform with more than 20 million active members and the Shop Your Way Mastercard partnership with Citibank.
On a related topic, ESL said it plans to sell $200.0 million a year in real estate and over $900.0 million in total assets, according to testimony at last week’s Bankruptcy Court hearings. ESL did not provide details on how many stores it would need to close to meet those goals. The stated plans for real estate are open-ended as to timing, and the amount of total assets to be disposed represents over 17% of the $5.20 billion purchase price. More importantly, when a “new” owner states on “day one” that it plans to dispose of a meaningful portion of the assets it just acquired, it raises speculation as to whether the plan is to actually revitalize the business or instead to monetize the assets on a piecemeal basis. Regarding ESL’s previous claim that the stores are “four-wall EBITDA positive,” it will be interesting to see if the entire enterprise can achieve this goal, taking into account distribution and other shared overhead costs.
Natural Grocers
Natural Grocers reported first quarter sales growth of 9.4% to $221.5 million, driven by 5.5% comp growth and an $8.3 million increase in new store sales, partially offset by a $400,000 decrease in sales from a store it closed during the quarter. Comp growth reflects a 2.3% increase in transaction count and a 3.2% increase in transaction size. Operating income jumped 84% to $4.0 million. Net income was $2.2 million, down from $5.2 million last year, driven by the impact of the $4.3 million non-cash re-measurement of the Company’s deferred income tax assets and liabilities as a result of U.S. tax reform. During the quarter, the Company opened four new stores, relocated one store and closed one store, bringing the total count to 151 stores in 19 states. Since the end of the first quarter, it has opened one new store and relocated one store. In addition, it has two signed leases for new stores in North Dakota and Oregon that are slated to open during fiscal 2019 and beyond. Looking ahead at fiscal 2019, Natural Grocers expects EPS of $0.33 – $0.44, and comp growth of 2% – 4%. Capex is expected to be $27.0 million – $32.0 million. The Company plans to open 7 – 9 new stores and relocate 5 – 6 in the year.
Yum! Brands
Yum! Brands reported fourth quarter sales fell 1.2% to $1.56 billion. Excluding currency exchange, sales were up 6%. Worldwide same-store sales increased 3%, with KFC up 3%, Pizza Hut flat, and Taco Bell up 6%. During the quarter, the Company refranchised 331 restaurants, including 227 KFC and 104 Taco Bell units, for proceeds of $380.0 million. As of quarter end, the Company’s global franchise ownership mix increased to 98%. Net income was down 23.4% to $334.0 million, including an investment expense of $171.0 million related to the chain in fair value of its investment in Grubhub. Operating profit was $741.0 million, compared to $1.22 billion last year, negatively impacted by $14.0 million due to currency exchange. For the full year, sales fell 3.2% to $5.69 billion (up 5% excluding currency exchange), and worldwide comps rose 2% (+2% at KFC, flat at Pizza Hut and +4% at Taco Bell).
During fiscal 2018, the Company opened 1,757 net new units and added 1,282 Telepizza units, for 7% net unit growth.
Meanwhile, it was announced that Taco Bell is now delivering nationwide through Grubhub, one year after beginning the partnership.
L Brands
L Brands reported a 25% decrease in sales to $780.0 million due to the calendar change and a 1% decline in combined comps. Comps at Bath & Body Works were flat compared to last year due to lower promotional activity, which improved merchandise margin. Bath & Body Works is opening new stores, click here to request a list. Victoria’s Secret (VS) comps were down 1%, driven by declines in the Lingerie and PINK businesses. Continued promotional activity at VS lowered merchandise margin “significantly” compared to last year.
Chipotle
Chipotle’s fourth quarter revenues increased 10.4% to $1.20 billion, driven by a 6.1% increase in comp restaurant sales and 40 new restaurant openings. Comps improved primarily as a result of an increase in average check, which includes a 3.3% benefit from menu price increases and a 2% increase in transactions. Digital sales grew 65.6% and accounted for 12.9% of sales. Net income was down 26.9% to $32.0 million, impacted by restaurant closure costs, corporate restructuring, and other costs.
For the full year, sales increased 8.7% to $4.90 billion, and comps increased 4%, net of a 0.8% decline in transactions. Digital sales grew 42.4% and accounted for 10.9% of sales. Net income rose 0.2% to $176.6 million.
Looking ahead at fiscal 2019, the Company expects comp growth in the mid-single digit range, and 140 – 155 new restaurant openings, compared to 137 during fiscal 2018. See below for Future Opening Map - click here to request a list.
National Stores
In the National Stores, DIP case, the Court issued an order converting the Chapter 11 cases to Chapter 7. This follows the sale of substantially all of the Debtors’ going concern assets, including 85 of its 269 stores, to Pegasus Trucking, LLC. We previously reported that Michael Fallas, who is an owner of the Debtors, also has an ownership interest in Pegasus. The previous motion to convert the case noted that the Debtors’ estates are administratively insolvent.
Payless ShoeSource
Payless ShoeSource Inc. is planning to initiate a formal Court-supervised restructuring as soon as mid-February 2019, according to historically reliable sources. As part of the proceedings the Company will reportedly attempt to seek a going concern buyer, while concurrently taking steps to liquidate stores if a sale does not materialize.
The Company previously filed Chapter 11 on April 4, 2017 and emerged from those proceedings in August 2017, after shuttering 673 stores and shedding more than $435.0 million in debt. A group of creditors, including hedge fund Alden Global Capital, took over ownership. The Company currently operates approximately 3,600 stores worldwide with reported sales of about $1.70 billion.
Cato
Cato’s salesfell 18% to $44.5 million due to the calendar change that offset a 2% increase in comps. Comps compared favorably to last year’s 6% decline. CEO John Cato stated: “January same-store sales benefited from favorable weather this year compared to last year. Without this benefit, same-store sales would have been slightly negative.” The Company closed five stores in January, following the closure of 33 stores in December 2018.
Urban Outfitters
Urban Outfitters reported fourth quarter sales increased 3.7% to $1.13 billion, and comps rose 3%, driven by double-digit growth in the digital channel, partially offset by negative retail store sales. By brand, comps increased 4% at Free People, 4% at Urban Outfitters, and 2% at Anthropologie. Wholesale segment sales increased 3%. For the fiscal year ended January 31, sales increased 9.3% to $4.00 billion, and comps rose 8%.
The Company opened 18 new stores during the year, including six Free People stores, five Urban Outfitters stores, four Anthropologie stores, and three restaurants; it also closed 11 underperforming stores, including four Urban Outfitters and one Free People. The Company will release full fourth quarter results on March 5.
O'Reilly Automotive
O’Reilly Automotive’s fourth quarter sales increased 5.7% to $2.32 billion, and comps were up 3.3%. Gross margin increased to 53.3% from 52.9%, but SG&A expenses rose 7%. Operating income was up 6.3% to $428.0 million. CEO Greg Johnson said, “Our solid top-line performance, combined with our relentless focus on profitable growth, resulted in a 6% increase in operating profit dollars for the fourth quarter.” The Company opened 206 stores during 2018, ending with 5,219 stores in operation.
The Container Group
The Container Group’s third quarter sales decreased 0.6% to $221.6 million, and comps slipped 0.8%. Gross margin was 58.7%, an increase of 10 basis points, primarily due to lower cost of goods, partially offset by higher promotional activities. Adjusted EBITDA fell 14.7% to $21.8 million. CEO Melissa Reiff commented, “We had mixed performance in the third quarter. We were very pleased with our Custom Closets business which once again delivered strong results, generating 180 basis points of positive comps, and our other product categories outside of holiday also generated positive comp growth. However, our three holiday departments, which represent a disproportionate amount of our sales in this quarter but only a small portion of our annual sales, underperformed resulting in our comp decline for the quarter.” During the quarter, the Company relocated its store in Tysons Corner, VA on October 20, 2018, and its Cherry Creek store in Denver, CO on November 10, 2018.
Indigo Books & Music
Indigo Books & Music’s third quarter sales decreased 1.7% to $426.0 million, driven partially by the residual impact of delayed renovations, and more meaningfully by the Canada Post strike. The Company indicated that prior to the strike it had a strong online growth trend that reversed dramatically once the strike began. CEO Heather Reisman referred to the results as “challenging.” The strike contributed to higher costs and lower margins from clearance strategies, and as a result operating income dropped 53.3% to $26.0 million. During the quarter, the Company opened three new stores and renovated four others, bringing its total count to 24. In mid-October, the Company opened its first U.S. location, a 30,000 square-foot store at the Mall at Short Hills in New Jersey, and management indicated that the concept is resonating well with customers.
Boot Barn Holdings
Boot Barn Holdings’ third quarter sales increased 13% to $254.0 million, driven by a 9.2% increase in comps, the sales contribution from acquired stores, and sales from new stores added over the past 12 months. Gross margin was 33.7%, up from 32% last year, due to increased sales and an increase in merchandise margin rate. The higher merchandise margin was driven by more full-price selling and growth in exclusive brand penetration. Operating income rose 20.1% to $29.3 million, representing more than 60 basis points of operating profit margin improvement. The Company opened two new stores during the quarter (and a net eight stores during the year-to-date period), bringing the total count to 234 stores in 31 states.
Store Activity
Camping World
Camping World plans to open a new Gander Outdoors store in Marion, IL in a former Gander Mountain building. The former store was expanded to include space to sell RVs. An opening date is not yet available. Gander operates 62 stores, including two existing stores in Illinois; about 16 Gander stores also sell RVs. As shown in the below map, Camping World has additional future store openings planned - click here to request a list.
Ahold Delhaize
Ahold Delhaize’s Giant Food Stores plans to expand in Philadelphia, PA, with the opening of three more GIANT Heirloom Market stores during 2019. The stores will be located in the University City, Northern Liberties, and Queen Village neighborhoods and will open in the summer, fall and end of 2019, respectively. Its first, 9,500 square-foot Heirloom store opened on January 25 in downtown Philadelphia; the Company also operates one Giant supermarket in the city that opened in 2011. The Heirloom concept is significantly smaller than a conventional Giant supermarket, and it is designed to accommodate compact urban spaces and provide shopping selections and features tailored to the neighborhoods they serve. Click here for a list of the Company’s planned new locations.
Jo-Ann Stores
Jo-Ann Stores, Inc. announced that its CFO and interim CEO, Wade Miquelon, was appointed to a permanent role as CEO of the Company and member of the board. Mr. Miquelon began his career at Jo-Ann in March 2016 as CFO. Since then, he was appointed as the Company’s interim CEO in October, on top of his duties as CFO following the resignation of Jill Soltau who took a job as CEO of J.C. Penney. In addition, Jo-Ann Stores announced that COO Matt Susz will take over Mr. Miquelons’s duties as CFO. Mr. Susz joined the Company in 1996 and served in various organizational roles. Jo-Ann has been privately held since its acquisition by affiliates of Leonard Green & Partners, L.P. in 2011 and currently operates 871 locations with additional future store openings planned (as shown in the below map) - click here to request a list.
Hy-Vee
Yesterday, Hy-Vee opened its first Fast & Fresh store in the Des Moines, IA metro area. The 10,000 square-foot store includes a Starbucks with a drive-thru, prepared foods, a small-scale grocery store, and 14 gas pumps. The store will also have Hy-Vee Aisles Online grocery pickup. According to the Company, the scaled-down stores are meant to be a quick stop for people who need to pick up a few groceries while traveling or heading home from work. Hy-Vee opened the first of its Fast & Fresh stores late last year in Davenport and currently has several more in development. The Company plans to open two more metro stores later this year, located in Des Moines and West Des Moines. Meanwhile, Hy-Vee is reportedly considering opening a new store in Decorah, IA, in a former 25,000 square-foot Quality Foods that closed in December.
Natural Grocers by Vitamin Cottage
Natural Grocers by Vitamin Cottage will expand its Cottage Wine and Craft Beer concept to three stores in Oklahoma located in Norman, Edmond, and Tulsa. The new department will offer shoppers a wide selection of specialty alcoholic beverages. Natural Grocers first unveiled the Cottage Wine and Craft Beer concept in Denver in August 2017, and since then has expanded the concept to Oregon.
Lidl
Lidl used the better part of 2018 to re-tool its proposition, fine-tune its offering and reevaluate its real estate situation. In late 2018, it bought the 27 Best Yet Market locations, mostly Long Island based, and is now better situated to compete in New York. On February 8, it announced it was bringing one of its senior executives, Roman Heine, to the U.S. as chairman of Company operations. Mr. Heine is an experienced executive in the discount grocery arena, having managed Aldi’s U.K. expansion. These actions appear to put Lidl on a positive trajectory for 2019.
Dollar Tree
Dollar Tree announced tentative plans for a new distribution center project in Rosenberg, Fort Bend County, TX, bringing the Company’s U.S. DC count to 13. The Company plans to invest approximately $130.0 million in the new 1.2 millionsquare-foot distribution facility that will provide service directly to Dollar Tree and Family Dollar stores. Construction is planned to commence in April to May 2019, with the facility expected to be operational by summer 2020. Dollar Tree is still waiting on approvals from the city before it finalizes the plans.
Hudson's Bay Company
On February 11, Hudson’s Bay Company announced it closed the sale of its Lord & Taylor Fifth Avenue building to WeWork Property Investors for C$1.10 billion, or US$850.0 million. As a result, HBC has eliminated the $400.0 million Lord & Taylor mortgage and reduced borrowings under its asset-based revolving facility. WeWork converted $125.0 million of the transaction value into a preferred equity interest in the building held by HBC through a joint venture structure.
While Lord & Taylor’s flagship is gone from New York City, Macy’s continues to maintain its Herald Square flagship, and Neiman Marcus is planning to open a flagship in Hudson Yards. Meanwhile, Saks Fifth Avenue recently unveiled the redesigned main floor of its New York flagship. The first floor now focuses on handbags, with that department tripling in size, and it will initially have more than 100 exclusive products. Makeup and perfumes were moved to the second floor in May 2018, and the lower level is its new jewelry destination, opening later this year.
Performance Bicycle
Published reports indicate Performance Bicycle is shuttering all 60 of its remaining stores by March 2. The Company’s parent, Advanced Sports Enterprises, DIP (ASE), was acquired by BikeCo, LLC, a joint venture consisting of Tiger Capital Group and Advanced Holdings Co. Ltd. The winning bid, approved by the Bankruptcy Court on February 1, exceeded $23.0 million. ASE, which also owns Nashbar and a number of bike brands, had already been liquidating all its locations but had indicated that certain stores may reopen as part of the restructuring. Amain.com, an online retailer of radio-controlled vehicles and performance cycling products, will continue to operate the Performance and Nashbar websites; it acquired the trademarks and web domains for $1.25 million. BikeCo acquired ASE’s wholesale business, including its bike trademarks for Fuji, Kestrel, Breezer and SE, and will continue to operate those brands. K&B Investment Corporation agreed to purchase ASE’s property and buildings in North Carolina and Philadelphia.
