January 8, 2019
AggData Announces Key Milestones in Concert With 10-Year Anniversary
In celebration of its 10-year anniversary, AggData has announced several key company milestones, including the expansion of its retail location database to include more than 6,000 monitored companies and 5.5 million total locational records. The Company now maintains the largest international database with coverage in roughly 250 countries and territories.
Ahold Delhaize and King Kullen
On January 4, Ahold Delhaize announced that Stop & Shop, its largest retailer brand in the U.S., has agreed to acquire King Kullen Grocery Co. The agreement, financial terms of which were not disclosed, includes King Kullen’s 32 supermarkets, five Wild by Nature stores, and the use of its corporate offices in Bethpage, NY. The acquisition is expected to close during the first quarter of 2019. Ahold has yet to indicate if it will re-banner the King Kullen stores to the Stop & Shop brand, but due to the performance challenges for the King Kullen brand, we anticipate the locations will eventually be re-bannered. Our store overlap analysis shows that 25 of King Kullen’s 32 total locations are within three miles of a Stop & Shop location. Narrowing the distance between stores, the overlap analysis tells us there are six King Kullen locations within one mile of a current Stop & Shop location. We believe that these six stores would be the first to be considered for sale or closure by Ahold following the acquisition.
Store Overlap Map - King Kullen and Wild by Nature locations
Sears Holdings Corp.
Published reports state that a lawyer for Sears Holdings Corp. told the judge at a hearing today that the auction for the 425 Go Forward stores will proceed as planned on January 14, subject to the requirement that ESL Partners, L.P. provide a deposit of $120 million by tomorrow. Last Friday, ESL put in a $4.4 billion bid to buy the retailer with plans to keep 425 stores open throughout the country. However, that bid was previously rejected by an independent board of Sears advisers.
According to published reports, SpartanNash has filed a lawsuit against Gordy’s Markets Inc. (GMI), asking for $46.2 million for unpaid loans. That amount includes a $43.3 million in rebate incentive payments, a $1.0 million note that SpartanNash loaned to GMI in November 2017 and $1.9 million for accounts receivable. According to the suit, GMI is in default under the terms of a “customer supply agreement” from November 2017. The lawsuit affects six of the Gordy’s Markets that GMI retained during a bankruptcy sale last year, but doesn’t involve a seventh Gordy’s Market that opened this summer. All seven of Gordy’s stores are open. GMI has 20 days to respond to the lawsuit.
Wawa, Inc. has announced plans to launch a hiring campaign with the goal of hiring up to 1,000 new associates across Florida during the next three months, with all of Wawa’s 160 stores in Florida looking to add new talent. The hiring campaign will span the first quarter of 2019 and focuses on filling customer-service positions. Wawa continues to expand throughout Florida, with plans to open 25 – 30 new stores each year for the next several years. In 2019, Wawa will launch in the new markets of Ocala and Miami-Dade.
In a recent interview, Starbucks CEO Kevin Johnson said that he is “scaling back” some of his predecessor’s initiatives, including the proposed opening of 1,000 Starbucks Reserve cafes and as many as 30 giant Roastery units. He will focus more on the Company’s core coffee shop business. Mr. Johnson said that his predecessor Howard Schultz’s plans for the upscale stores are very ambitious, and the stores will have to prove themselves before the Company puts significant investment against their growth. Mr. Johnson is also planning to slow growth of Starbucks’ traditional store fleet and focus on improving customer service, developing new drinks and driving traffic.
Ritzman Pharmacies is selling its 20 retail pharmacies to CVS Pharmacy. Ritzman primarily services markets in northeast Ohio. CVS plans to continue operations in two of the stores, while the remaining 18 will close and all pharmacy files will be transferred to nearby CVS stores. The acquisition is expected to be completed by the end of February.
Meanwhile, Ritzman is withdrawing its participation in the joint venture pharmacy with Northeast Ohio Medical University. Ritzman owns a management company, VAR, which will continue its management of Summa’s Home Infusion.
Specialty Retail Shops (Shopko)
Specialty Retail Shops (Shopko), “is expected to file bankruptcy on January 15,” according to McKesson, its pharmaceutical drug supplier. McKesson made the comment in court for a hearing on its request for a restraining order to keep Shopko from selling medications it supplied the Company. McKesson claims it has provided Shopko with $67.0 million in drugs since November 11 but has not been paid since early December. McKesson's lawyers argued the company's ability to recoup that debt would be impaired if Shopko seeks protection from creditors in U.S. Bankruptcy Court.
Yesterday, activist investor Starboard Value LP called on Dollar Tree to explore a sale of its underperforming Family Dollar business and nominated directors to replace a majority of its board after revealing a 1.7% stake in the Company worth about $370.0 million. Dollar Tree bought Family Dollar in 2015 for about $8.50 billion. However, the Company has been struggling and experienced a nearly 15% stock price decline last year. According to Starboard CEO Jeffrey Smith, a sale of Family Dollar would likely fetch less than the price Dollar Tree paid for the business but still urged investors and management to back a sale. In a letter addressed to Dollar Tree CEO Gary Philbin, Mr. Smith said, “The market is likely only ascribing approximately $1.00 billion – $3.00 billion of value to Family Dollar based on the current stock price.”
Starboard said it was also seeking to replace seven directors on the retailer’s 12-member board, effectively giving it majority control. Dollar Tree, however, said its board was equipped with the right “skills and perspectives” to make its business a success, especially after adding four new independent directors since May 2016. The Company also said that Starboard’s nominations came out of the blue, without any prior communication.
Starboard also urged the Company to explore and implement a multiple-price point strategy that would be above the $1.00 ceiling, which Dollar Tree has maintained since its founding 30 years ago.
Shipt has signed a lease for 60,000 square feet in Birmingham, AL in the Well Fargo Tower building. It will become Shipt Tower when its logo is added in 2020. The Company said it will consider Shipt Tower a second headquarters. Its original headquarters is also located in Birmingham. Partial occupancy will occur in April 2019, with full occupancy slated for 2020.
Walmart and Amazon
Walmart and Amazon have joined forces in India to lobby the government on new regulations that would require online marketplaces to treat all vendors equally, effectively barring foreign companies from featuring exclusive products, owning inventory, and being able to influence pricing and offer discounts. Amazon and Walmart have reportedly asked for an extension on a February 1 deadline for implementing those rules.
According to published reports, Amazon has leased 280,000 square feet at Hines’ Summit III tower in downtown Bellevue, WA. In August, the Company signed a lease for all 400,000 square feet in Tower 333 and a 354,000 square-foot Centre 425 building. Both are also located in Bellevue.
Finally, Amazon issued an open letter stating its investment in Long Island City will include 25,000 jobs and more than $27.00 billion in state and local tax revenue over the next 25 years.
Yesterday, Beauty Brands, LLC, DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court in the District of Delaware. The Honorable Christopher S. Sontchi was assigned to the case, which has been designated as case number 19-10031. The Debtors operate specialty beauty stores that provide salon and spa services, and retail and third-party branded beauty products. It currently operates 56 retail locations across Kansas, Texas, Oklahoma, North Carolina, Arizona, Colorado, Illinois, Nebraska, Iowa, Indiana, Ohio, and Missouri, and an e-commerce business. All of the stores are leased. In December 2018, prior to filing a bankruptcy petition, the Company received two competing asset purchase agreements for partial going concern transactions related to a portion of the store operations. However, Beauty Brands determined that neither of the going concern bidders provided an actionable proposal that would result in a greater value for its estate than proceeding with firm-wide store closing sales. Given the continued interest of the two prospective going concern bidders, the Debtors believe that an auction for some or all of the 33 stores (click here to request the list) included in one or both of the going concern proposals may yield additional value for its estate. Bids for the 33 stores to be auctioned will be due by February 4, with a hearing scheduled for February 8. Additionally, on January 4, the Debtors commenced store closing sales at 23 of the stores (click here to see the list) for which no third party indicated any interest in acquiring. The Company filed a motion seeking interim authority to draw up to $6.0 million under a $9.0 million DIP Facility to be provided by PNC Bank, as administrative agent.
Modell's Sporting Goods
Realterm Logistics, a Maryland-based logistics real estate company, completed a $115.0 million transaction for the Modell’s Sporting Goods distribution center in the Bronx, NY. The deal is part of a financing transaction, which gives the Company lease-back rights. An entity controlled by the Modell family owns the distribution center and will receive the proceeds. Management said it does not expect any near-term impact on the sporting goods Company from the deal.
Lowe’s Companies plans to hire more than 65,000 workers in 2019. Of the new positions, 50,000 will be seasonal, and 10,000 will be permanent. About 6,000 will be hired as full-time assistant store managers and department supervisors to help improve customer service and leadership. The Company also plans to eliminate some “in-store support functions” to simplify operations. In November 2018, Lowe’s announced it was closing 20 stores in the U.S., along with 30 stores in Canada, by the end of fiscal 2018 (February 1, 2019). It also announced in August 2018 that it would close all 99 Orchard Supply Hardware stores.
Published reports indicate private equity firms Sycamore Partners and Apollo Global Management are interested in buying GameStop, and a deal could be announced by mid-February. Previously GameStop was holding talks with private equity firms about a potential transaction after receiving interest in a buyout. GameStop has faced significant management turnover since September 2017, as well as secular headwinds within the gaming industry (as consumers dramatically shifted from purchasing physical goods to digital items). Over the course of 2018, the Company’s stock price declined 30%. For the third quarter ended November 2018, GameStop’s sales grew 4.8% to $2.08 billion, led by stronger U.S. and Canada sales in software and hardware gaming, slightly offset by 289 net store closures over the past year. While most segments reported positive sales, pre-owned and technology brands witnessed declines due to fewer titles available, the continued shift towards digital adoption, and weaker foot traffic to tech brands. Management noted that although Black Friday and Cyber Monday performed well, overall performance for the remainder of the year was weaker than expected, and the buildup of inventory, which grew 11% in the third quarter, is facing higher markdowns. The Company expects fourth quarter results to decline due to fewer new software game titles, weakness in pre-owned games, and higher promotional activity to offload excess inventory buildup.
Nordstrom closed its full-line location in the Providence Place Mall in Providence, RI on January 4, choosing to end its lease when it came up for renewal. The nearby Nordstrom Rack at Warwick Mall remains open. Nordstrom has closed 20 stores since 1990, while in the same timeframe opened 315 full-line and Nordstrom Rack stores. Boscov’s will take over the Providence location this fall. Headquartered in Reading, PA, Boscov’s operates nearly 50 stores in the Northeast.
Sprouts will open a 30,000 square-foot store in Wellington, FL on March 20 and a 30,000 square-foot store in Las Vegas, NV on March 27. Sprouts’ expansion plans in Florida, where it currently has six stores, includes new stores in Clearwater and Naples expected to open during the first quarter of 2019, as well as eight others, see below for Future Store Opening Map.
Publix is acquiring two leases in Birmingham, AL from Western Market, which is preparing to exit the business and discontinue operations. The acquisition will close in March. Financial terms of the deal were not disclosed. One of the locations will open as a traditional Publix store, and the other will be a GreenWise Market slated to open by the third quarter of 2019. A third Western location is up for sale in East Lake, AL. This will be the Company’s seventh Greenwise store, a specialty/natural foods banner.
Meanwhile, reports indicate that Publix has implemented a new format featuring its deli department at 15 stores located in Alabama (6), Florida (7), Georgia (1) and North Carolina (1). It plans to expand the deli-centric concept to additional stores.
Wegmans Food Markets
Wegmans Food Markets plans to open its first New York City store this fall, a project first announced in May 2015. The Company has begun hiring for the 74,000 square-foot store, which will anchor the $140.0 million redevelopment of the Admirals Row site in the Brooklyn Navy Yard. Wegmans’ Brooklyn store is one of three new locations planned for this year. The others are also in new markets, including a 113,000 square-foot store in Virginia Beach, VA set to open on April 28 and a 100,000 square-foot store in Raleigh, N.C. (no opening date has been announced). The Raleigh store will expand Wegmans’ market area to seven states. The chain currently has 98 stores in New York, New Jersey, Pennsylvania, Maryland, Virginia and Massachusetts. Most recently, it opened a 120,000-square-foot store in Lancaster, PA in late September.
Giant Eagle will close its Willoughby Hills, OH store on February 2. The Company did not specify a reason for the closure.
Piggly Wiggly plans to open a 14,000 square-foot store in downtown Greensboro, NC by this summer.
We Are Tracking Approximately 1,000 Future Fitness Openings In 2019