Whole Foods
The first Whole Foods 365 location on the East Coast, and the seventh in the country, opened last week in Brooklyn, NY (Fort Greene). The 365 stores are about one-third smaller than a typical Whole Foods, and offer a more curated, private label-focused selection at a somewhat lower price point. The Brooklyn store includes a café level featuring four venues for ready-to-consume food and beverages. The Company reportedly has 16 more 365 stores in the pipeline slated for markets in Arizona, Northern and Southern California, Florida, Georgia, Illinois, New Jersey, Ohio, Texas and Virginia, however, the Company has the option to develop these sites as traditional Whole Foods stores if it decides to slow 365 expansion again. A heat map of the existing 365 stores is shown below.
As mentioned last month, Whole Foods employees had reported food shortages in stores, resulting in some out-of-stock holes on the shelves. The employees said that the shortages reflect a newly implemented inventory-management system called order-to-shelf, or OTS. During Amazon’s fourth quarter earnings conference call, CFO Brian Olsavsky responded, "Where there's issues, they'll be corrected." Mr. Olsavsky blamed the issues on the weather and heightened demand following its acquisition of Whole Foods in August.
Amazon recently announced that its Treasure Trucks will start coming to Whole Foods locations across the country with new offers and incentives. The Treasure Truck is Amazon’s “deals-on-wheels” program - a truck driving around with discounted products you can buy online and pickup in person. It makes sense to use Whole Foods’ parking lots to park the truck for the day, while attracting shoppers with food-related product deals.
Kroger
Yesterday, Kroger announced a definitive agreement for the sale of its convenience store business unit to EG Group, a privately-held convenience store retailer based in Blackburn, Lancashire, U.K., for $2.15 billion; the companies expect to close the transaction during Kroger’s fiscal 2018 first quarter.
Last week, Kroger announced the expansion of its Scan, Bag, Go shopping technology to 18 operating divisions, with plans to make the service available to customers at 400 stores by the end of the year. Scan, Bag, Go allows customers to use a wireless handheld scanner or the app on their personal devices to scan and bag products as they shop.
On February 1, Kroger noted that its organic produce business achieved $1.00 billion in annual sales. According to data provider IRI, the U.S. organic produce market reached $5.00 billion in 2016 and continues to grow. Kroger currently partners with more than 300 organic produce growers and suppliers.
Albertsons
Albertsons Companies completed the previously announced sale of its 49% interest in Mexico-based food and general merchandise retailer Casa Ley, S.A. de C.V. for approximately $350.0 million. Proceeds from the sale were used to pay holders of contingent value rights issued to former holders of Safeway common stock at the time of Safeway’s 2015 merger with Albertsons.
The Bon-Ton Stores, Inc., DIP
On January 31, the forbearance agreement between The Bon-Ton Stores, Inc., DIP and certain noteholders expired and that the Company issued a new restructuring term sheet which contemplated a Chapter 11 filing. On February 4, Bon-Ton filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court in the District of Delaware. Management said the Company is currently engaged in constructive discussions with potential investors and its debtholders regarding the terms of a financial restructuring plan. Bon-Ton said it intends to use this Court-supervised process to explore potential strategic alternatives to maximize value for the benefit of its stakeholders, which may include a sale of the Company or certain of its assets as part of the Plan of Reorganization. The Company’s stores, e-commerce and mobile platforms are open and operating as usual. As previously announced, Bon-Ton is closing 47 stores in 2018; four stores closed in January, one store is nearing closure, and 42 additional stores began closing sales on February 1, which will run for approximately 10 to 12 weeks. Management said the Company has received a commitment from its existing ABL lenders for up to $725.0 million in DIP financing. Subject to Court approval, management expects that the DIP facility will support the Company’s operations during the financial restructuring process.
Subsequently, Bon-Ton filed the following motions: (i) for approval of the DIP facility on an interim basis, and (ii) to authorize it to pay, in the ordinary course of business, claims for goods ordered prepetition and delivered postpetition. Bon-Ton also made a motion for a sale of the Company, which will be pursued on a dual track basis, simultaneous with a reorganization. Proposed milestones related to a sale include a March 19 designation of proposed stalking horse bids, an April 2 bid deadline, an April 9 auction, and an April 16 sale hearing.
Herb Bauer's Sporting Goods
Herb Bauer’s Sporting Goods, Inc. announced it is closing after 68 years in business, due to the retirement of its owner. Herb Bauer’s single store, located in Fresno CA, sells merchandise and rents sporting goods for hunting, fishing, camping, and skiing. The location will be taken over by Turner’s Outdoorsman. A going-out-of-business sale started February 1.
Ahold Delhaize
Ahold Delhaize’s Giant Food division, which moved its headquarters out of Prince George, MD to Pennsylvania in 1998, is returning to newly renovated headquarters in Landover, MD. Giant is the Washington D.C. area’s 13th-largest employer, operating more than 100 stores in the region. A Company spokesperson said the move back to Landover is part of a larger effort by Ahold USA, Giant's parent company, to focus on customers and be close to their communities.
Peak Resorts
Peak Resorts announced it has begun raising funds for additional development projects at its Mount Snow ski resort. The projects are expected to cost approximately $94.0 million for the financing, development, construction and operation of a new hotel-condominium and related amenities, and the renovation and relocation of a residential building at Mount Snow. The Company intends to fund the projects with proceeds of $55.0 million from an offering of limited partnership interests, and the balance will be from debt financing. The Company did not provide further details on the financing sources.
Kwik Trip
Kwik Trip is planning to expand into the Northland of Minnesota and is reportedly eyeing several locations for new stores in the coming years. Kwik Trip began its expansion into the Northland in 2014, when it unveiled plans to open 15 stores in the Twin Ports area in two years. The Company expects to open a store in Rice Lake by the end of October and is pursuing a location in Duluth that could open in 2019. According to VP and CFO Scott Teigen, "We're still looking in the Duluth area for a couple more locations, but where we want to go is just some tough spots." Mr. Teigen said that Kwik Trip's food is delivered daily from La Crosse, WI, and stores are kept within a designated radius to make those deliveries timely. While Mr. Teigen said that eventually the market would reach saturation, "it's going to be a long ways away before that would happen. We're roughly 625 stores now and we could probably double that in our market area, so that's room to grow."
AggData's Future Store Closing Database Currently Contains 100+ Locations Scheduled To Close In The First Half Of 2018
Click here to request a sample
The Sports Zone, Inc., DIP
New Legacy 900, Inc., an affiliate of stalking horse bidder Halifax of Palisade LLC, was declared the successful bidder for the assets of The Sports Zone, Inc., DIP, with an offer of $900,000, including assumption and assignment of the remaining store leases (other than the Georgetown store). The Company operates 11 retail stores in Washington DC, and the Maryland and Virginia suburbs, selling footwear, clothing and accessories.
Natural Grocers by Vitamin Cottage
Natural Grocers reported first quarter sales growth of 10.3% to $202.5 million, driven by a $10.3 million increase in sales from new stores and 4.7% comp growth. Transaction count increased 4.8%, partially offset by a 0.1% decrease in transaction size. Net income was $5.2 million, compared to $2.1 million last year, including a favorable impact of $4.3 million related to deferred income tax assets and liabilities.
During the quarter the Company opened two new stores and relocated one, bringing its store count to 142 stores in 19 states.
The Company adjusted its fiscal 2018 outlook to reflect the recent federal tax reform, and now expects EPS of $0.40 – $0.50, comp growth of 1% – 3% and 8 – 10 new store openings. This compares to previous guidance of EPS of $0.21 – $0.31, and comp growth of 0.5% – 2.5%.
Office Depot
Office Depot announced the makeover of 14 of its stores in the Austin, TX market, part of the integration of its acquisition of CompuCom Systems, Inc. Management indicated plans to phase-in similar makeovers in its approximately 1,400 stores nationwide and that the updated format reflects the next step in the Company’s strategy to transform itself from a traditional office supplies retailer into a purveyor of information technology support services. The new format is bannered as “BizBox: Powered by Office Depot.”
Trader Joe's
Trader Joe's will open a new Fresno, CA store on February 16, replacing a nearby location in Blackstone that will close February 15. The new store, which is about 3.5 miles away from the Blackstone location, will be 3,000 square feet larger at 13,000 square feet.
Wegmans
Construction on a 130,000 square-foot Wegmans store in Virginia Beach, VA, will begin this spring. Wegmans has been operating stores in Northern Virginia since 2004; it opened two in Richmond in 2016.
Tractor Supply
Tractor Supply’s fourth quarter sales increased 1.9% to $1.95 billion. The prior year’s fourth quarter included an extra week as part of the Company’s 53-week calendar in 2016, which negatively impacted the overall sales increase by about 6.7%. Comparable store sales rose 4%, with comp transaction count up 2.7% and average ticket up 1.3%; continued strength in items across the consumable, usable and edible categories along with winter and other seasonal products helped drive comps. Operating income declined 5.5% to $183.8 million, reflecting the impact of the revaluation of the Company’s net deferred tax asset, resulting in a one-time, non-cash charge of roughly $4.9 million. The Company opened 27 new namesake stores and closed seven Del’s stores in 4Q17, compared to 21 new openings and one closure in the prior-year period; additionally, Tractor Supply opened six new Petsense stores in 4Q17, compared to eight Petsense openings and one closure in 4Q16. CEO Greg Sandfort commented, “For the year, I am very pleased with the foundation we have established to build customer loyalty and to significantly enhance our digital capabilities. These initiatives were instrumental in driving traffic and sales…. In 2018, we anticipate balancing investments between new store growth and our ONETractor strategic initiative, while also investing in the day-to-day business, to provide our customers with a seamless shopping experience anytime, anywhere and in any way they choose.” Looking ahead, Tractor Supply expects fiscal 2018 sales of $7.69 billion - $7.77 billion, a comp increase of 2% - 3% and EPS of $3.95 - $4.15.
Arby's
Yesterday, Arby's completed its acquisition of Buffalo Wild Wings and created a new Company named Inspire Brands that will run the chains. Inspire Brands will oversee Arby's, Buffalo Wild Wings and R Taco. Arby's has more than 3,400 restaurants, Buffalo Wild Wings has more than 1,200 and R Taco has about 30 locations. Arby's announced in November that it would pay $2.90 billion (including debt) for Buffalo Wild Wings. Inspire Brands, which is controlled by private equity firm Roark Capital, said it will have total annual sales of more than $7.60 billion.
Boot Barn
Boot Barn announced results for its third quarter and year-to-date period ended December 30. Quarterly net sales increased 12.7% to $224.7 million, driven by comparable store sales increasing 5.2% (on top of a 0.2% increase last year), seven net store openings during the year and incremental sales from the recently acquired Country Outfitters website, and four stores acquired from Wood’s Boots. Additionally, management noted that e-commerce sales grew in the double digits but not as fast as store growth; e-commerce is estimated to be 18% of the Company’s total business.
McDonald's
McDonald's reported fourth quarter sales declined 11.4% to $5.34 billion due to the impact of its strategic refranchising initiatives. Systemwide sales increased 8% in constant currencies. Global comps rose 5.5%, reflecting positive guest counts in all segments. U.S. comps were up 4.5%, driven by strong performance of core menu items and delivery. International comps increased 6% and rose 4% in its “High Growth” segment. McDonald's net income fell 41.5% to $698.7 million, reflecting a $1.20 billion tax cost on deemed repatriation of foreign earnings, partly offset by a benefit of $500.0 million due to the tax reform. Meanwhile, operating income increased 4%, reflecting higher franchised margin dollars and G&A savings, partly offset by lower Company-operated margin dollars. For the full year, sales fell 7.3% to $22.82 billion, net income increased 10.8% to $5.19 billion, and global comps increased 5.3%. McDonald's plans to invest $2.40 billion in upgrades in 2018, including the opening of about 1,000 new stores worldwide and additional new self-service ordering systems.
Amazon
Amazon’s fiscal 2017 fourth quarter sales rose 38.2% to $60.45 billion, which included $4.52 billion from the acquisition of Whole Foods Market. Management noted that Whole Foods is performing above their initial projections. North America sales increased 42% and International sales rose 22%; sales of Amazon Web Services’ (AWS) cloud computing division grew 44% reaching a run-rate of over $20.45 billion (approximately 10% of total run-rate sales). Subscription services (Prime membership) rose 47% to $3.18 billion from last year and Amazon “other” sales (includes advertising and co-branded credit cards) re-accelerated 60% to $1.74 billion. Due to strong sales, high margin advertising and AWS segments, EBITDA increased 53.3% to $6.80 billion, and fourth quarter margin expanded 120 basis points to 11.3%.
Looking ahead, Amazon expects 1Q18 sales of $47.75 billion – $50.75 billion, representing an increase of 34% – 42% over the prior year period. Operating income is projected to be $300.0 million – $1.00 billion, compared to $1.00 billion in 1Q17.
Amazon has settled a long-running dispute with French tax authorities, who have been seeking nearly €200.0 million (US$249.0 million) from the online retail giant. The settlement amount was not disclosed. French government has been seeking back taxes, interest and penalties for 2006 to 2010 in relation to "the allocation of income between foreign jurisdictions."
Stitch Fix
On January 29, Stitch Fix executed a third amendment to its lease with Post-Montgomery Associates dated November 10, 2015, for office space located in San Francisco, CA. Beginning June 1, 2018, the amendment adds two floors of office space to the Company’s headquarters, increasing the total leased space from approximately 95,250 square feet to roughly 133,951 square feet. The amendment also provides for a ten-year lease term for the expansion space and extends the lease term of the existing space by 4.5 years, to be coterminous.
Target
On February 1, Shipt and Target announced that they plan to begin same-day delivery of an in-store assortment of groceries, essentials, home, electronics and other products across the Southeast. Target announced it had agreed to acquire Shipt in December for $550.0 million. Beginning on February 8, Shipt will deliver from Target stores in 18 markets across five states including Alabama, Georgia, North Carolina, South Carolina, and Tennessee. The new partnership gives more than 9.1 million households across the Southeast access to delivery of Target products.
Tuesday Morning Corporation
Tuesday Morning Corporation announced results for its second quarter and six months ended December 31. Second quarter revenues were up 1.7%, despite the Company operating 16 fewer stores. Comparable stores sales increased 1.8% (on top of 3.8% last year), boosted by higher customer transactions coupled with stronger sales generated by relocated stores. Ultimately, EBITDA decreased 3% to $14.5 million and dropped 20 basis points on a margin basis for the quarter. Additionally, TTM EBITDA and TTM EBITDA margin remained in negative territory.
