Openings, Closings, & Other Key Industry Highlights

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Fresh Thyme Farmers Market

Published reports indicate Fresh Thyme Farmers Market plans to slow expansion in 2018. The Company, which operates 66 stores in nine Midwestern states (see store concentration map below), will scale back 2018 expansion to 10 new stores, from 20 new stores in 2017. The Company also previously scaled back its long term expansion goals from 150 stores by 2020 to 123 stores by 2023. After launching three years ago and aggressively growing to $500.0 million in annual sales, Fresh Thyme has not only slowed growth, but has closed two (relatively new) stores and has purportedly offered up the leases for several of its other existing stores. The Company has also focused on expanding its private label, which was first introduced in 2016. It currently has about 1,000 private label items, up from 400 in 2016. 

Albertsons

Albertsons recently debuted a new convenience store concept under the Albertsons Express banner that includes an upgraded fuel center, prepared foods, produce and a drive-thru window. The store is down the street from the Company’s headquarters in Boise, ID and across the street from a full supermarket. The Company is re-entering the fuel market after it sold 300 fuel centers following its acquisition by Supervalu in 2006. The new concept includes 12 gas pumps and a 3,100 square-foot convenience store.

Maurice Sporting Goods, Inc.

In the Maurice Sporting Goods, Inc., DIP Chapter 11 case, the Bankruptcy Court approved the sale of the Company to stalking horse bidder Middleton Management LLC for $39.0 million. The transaction was approved on substantially the same terms as the original bid, which topped a competing offer from Sportsman’s Supply of Fenton, MO.

Kroger

Kroger will expand its Scan, Bag, Go service to 400 stores in 2018 as part of its effort to improve customer experience. Scan, Bag, Go allows shoppers to scan items as they shop, then pay at a self-checkout station. Kroger initially began testing the program throughout Greater Cincinnati about five years ago and has since expanded to 25 locations. Kroger hasn’t revealed which of its stores will add the service first but expects to make an announcement shortly.

Meanwhile, Kroger is investing in its Ruler Foods brand, expanding the number of locations as well as giving the stores a revamped, produce-focused look. The Company recently opened two new, 20,000 square-foot Ruler Foods stores in Illinois that feature the new look for the discount brand. The stores have a new floor plan, logo and re-branding focus that emphasizes the quality of its foods. If the program is successful, Kroger could retrofit all of its stores with the new design. Ruler Foods currently operates 50 locations in Illinois, Indiana, Kentucky, Missouri, Ohio and Tennessee. Kroger is likely paying close attention to the success and interest generated by Aldi and Lidl, especially in the last few years.

According to published reports, Kroger and Ace Hardware are in preliminary talks to form a partnership in which Ace would operate its “store-within-a-store” concept within Kroger stores. For the past five years, Ace has offered local store owners $150,000 to have a 5,000 square-foot or less Ace inside grocery or paint stores.

Camping World/Earth Sports

Earlier today, Camping World Holdings announced plans to purchase Erehwon Mountain Outfitter. Terms of the transaction were not reported. The planned acquisition reflects another step in Camping World’s expansion into the outdoor lifestyle market; over the past nine months, Camping World Holdings has acquired certain assets of Gander Mountain Company (DIP), Overton’s, TheHouse.com, Uncle Dan’s, and W82. The former Gander Mountain stores will be renamed Gander Outdoors; the Company plans to open the initial 15 – 20 Gander Outdoors units by the end of the first quarter of 2018, and an additional 40 – 45 stores during the 2018 second and third quarters. Erehwon sells outdoor gear and apparel, has three stores near Chicago, IL and one unit in Wisconsin, and operates an e-commerce website

 

HD Supply

Earlier today, HD Supply announced it has entered into a definitive agreement to purchase Hartford, CT-based A.H. Harris Construction Supplies, a specialty construction distributor serving the northeast and mid-Atlantic regions, for approximately $380.0 million. The transaction is expected to close in HD Supply’s first quarter of 2018, subject to customary regulatory approvals. The deal strengthens HD Supply Construction & Industrial – White Cap’s position, enhances its market presence in the northeastern U.S., deepens its product expertise, and increases its penetration of value-add service offerings. A.H. Harris operates more than 50 branches across 12 states and generated annual sales of roughly $380.0 million over the last 12 months.

 

EZ-Mart

EZ-Mart Stores reached an agreement to sell its 273 convenience stores located in Texas, Oklahoma, Louisiana and Arkansas, to GPM Investments LLC. The acquisition is expected to close in the second quarter of 2018. Financial terms were not disclosed. E-Z Mart is currently the 31st largest chain in the U.S.; after the acquisition it will become part of the sixth biggest player in the country. GPM Investments operates or supplies fuel to more than 1,100 stores. The acquisition will allow GPM to expand its existing portfolio of stores into the Southwest.

The Home Depot

The Home Depot announced its acquisition of The Company Store, an online retailer of textiles and home décor products, from Hanover Direct. The deal, financial terms of which were not released, closed on December 19. Earlier this month Home Depot said it would more closely link its store with online services and home delivery; this marks the Company’s first foray into “soft home” products and represents efforts to grow its online presence to better compete with retailers like Amazon. Décor-oriented merchandise like flooring, lighting and window treatments account for approximately $25.00 billion or about 25% of Home Depot’s 2016 sales, but décor alone is just $2.90 billion, or 3% of sales. Home Depot CEO Craig Menear commented, “The acquisition of The Company Store provides product development and sourcing capabilities to help us expand our online decor business into broader categories across the entire home.” The Company Store’s five brick-and-mortar locations were not included in the deal.

Dollar General

On December 27 Dollar General announced plans to build a new distribution center in Longview, TX. The one million square-foot facility, which will serve 1,000 Dollar General locations in Texas and the Southeast, will be its second in Texas; the other opened in 2016 in San Antonio. Construction is expected to begin in early 2018. Financial details of the project were not disclosed. The Company currently has 15 distribution centers and one under construction in Amsterdam, NY.

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Target

Published reports indicate that Target plans to open its smallest store, standing at 12,800 square feet, in the Chicago neighborhood of Wicker Park this July. The smaller stores are designed for urban areas, dense suburban neighborhoods and college campuses, where traditional full-sized Targets don’t fit. The typical Target store averages 133,670 square feet. Earlier this year, Target announced plans to open a total of 30 small format stores this year, 22 of which had opened as of the end of its 3Q. Those small format store average 50,000 square feet. 

Recent speculation has surfaced predicting Amazon will acquire Target in 2018. Reports state, "Amazon believes the future of retail is a mix of mostly online and some offline. Target is the ideal offline partner for Amazon for two reasons, shared demographic and manageable but comprehensive store count." An acquisition would add to Amazon’s physical presence, and help it compete with Walmart. The combined Amazon/Target entity would have approximately $176.00 billion in U.S. sales and 2,300 locations, compared to Walmart’s 5,400-plus stores and approximately $315.00 billion in U.S. sales. 

Mattress Firm

A published report last week claimed that Mattress Firm plans to close about 200 underperforming and duplicate stores in the next 18 months. During a lender presentation to stakeholders of Steinhoff International Holdings, which acquired the Company in 2016, Mattress Firm Chairman Steve Stagner outlined plans to reach $4.00 billion in revenue over the next five years, in part through store rationalization. Mr. Stagner commented, “As a result of putting together 1,500 stores over most recent years through acquisitions, we have recognized that there are approximately 300 underperforming or duplicative stores. Over last year, we’ve already gotten out of about 90 locations.” He also said Steinhoff’s lenders would need to invest $200.0 million in the Company in 2018; Steinhoff invested $300.0 million in Mattress Firm in 2017 to rebrand stores and form a partnership with Serta Simmons after terminating its deal with Tempur Sealy. Steinhoff has approximately $11.00 billion in debt, about $200.0 million from its U.S. brands, including Mattress Firm, which currently operates roughly 3,400 U.S. locations.

Walmart

According to published reports, Walmart is testing a shopping service geared toward affluent urban consumers and technologies that could be used to deploy cashier-less stores. The website reports that Walmart’s Store No 8 division, its Silicon Valley-based innovation center, is testing new digital initiatives. One of the initiatives, dubbed Code Eight, reportedly seeks to provide a personal shopping service for “busy New York City moms.” The Code Eight service would allow shoppers to receive product recommendations and make purchases through text messages. Household items would be delivered for free within 24 hours. The service is currently being tested at no cost to users, but Walmart is considering charging a membership fee. The other initiative, called Project Kepler, appears to be developing technology that could eliminate the need for cashiers to scan products at checkout, similar to the technology that Amazon is testing at its Amazon Go convenience store in Seattle.

Toys "R" Us, Inc., DIP

Toys “R” Us, Inc., DIP submitted its monthly operating report for the period from October 29, 2017 to November 25, 2017. During the period, the Company incurred a net loss of $183.0 million. As of November 25, 2017, the Debtor reported total assets of $5.19 billion, liabilities of $1.36 billion, long-term debt of $1.50 billion, and liabilities subject to compromise of $4.34 billion.

For the three months ended October 28 (third quarter), sales fell 7.5% to $2.11 billion, with domestic comparable store sales down 7%. Adjusted EBITDA was negative $89.0 million, compared to positive $21.0 million for the same period last year, and net loss totaled $623.0 million, compared to a loss of $156.0 million in the same quarter last year.

The Court issued orders: (i) extending the exclusive periods within which the Debtors may file a Chapter 11 Plan and solicit acceptances thereof by approximately 180 days, through and including July 15, 2018, and September, 13, 2018, respectively. The current exclusive periods for filing a Plan and soliciting acceptances was set to expire on January 16, 2018, and March 17, 2018, respectively; (ii) extending by 90 days (through April 16, 2018) the time period within which the Debtors must assume or reject unexpired leases. The initial 120-day period to assume or reject unexpired leases will expire on January 16, 2018; and (iii) establishing March 30, 2018 as the deadline to file proofs of claim based on prepetition claims, including requests for payment under section 503(b)(9) of the Bankruptcy Code.

The Court also approved a motion by the Creditors’ Committee seeking discovery of the Debtor’s pre-bankruptcy debt-funded transactions, including several transfers of intercompany notes, the 2005 LBO, and fees paid to its private-equity sponsors. The Debtors’ have consented to the request and have already started to comply with requests for evidence.

Vitamin World, DIP

On December 22, the Bankruptcy Court approved the sale of Vitamin World, DIP to China-based Feihe International Inc. for $28.0 million. The transaction is expected to close on January 19. Vitamin World will initially be capitalized with $5.0 million and will have no debt. Feihe will acquire Vitamin World’s 156 stores and will pay the Company’s rent for the month of January.

Amazon

According to e-commerce analytics firm One Click Retail, private label grocery items and certain private label baby products were among the best private-label performers on Amazon this year. Sales through Amazon of the 365 Everyday Value brand from Whole Foods Market totaled $10.0 million in just three months. The brand had average weekly sales gains of 9%. The 365 Everyday Value brand was consistently the No. 2 performer in sales volume behind Amazon’s main private label, AmazonBasics, during the short time it was available.

According to marketing firm GBH Insights, Amazon picked up 45% – 50% of all online holiday retail sales, up from 38% last year. e-Commerce sales increased about 18% year-over-year, according to GBH estimates. Prime membership accounts for about 88 million accounts, with subscribers spending 22% more this holiday season versus last. According to Amazon, Echo Dot and Fire TV Stick were the top-selling products across all categories.

Meanwhile, Amazon said it shipped over five billion items worldwide via its Prime service in 2017 while adding more new members than ever before. This is the first time the Company has revealed its Prime shipment numbers. It did not give comparable 2016 numbers.

In other news, Amazon has acquired Blink, an Andover, MA-based company that makes internet-connected home security cameras. Financial terms of the deal were not disclosed.

Lewis Drug

Lewis Drug recently opened a “next generation” store in Sioux Falls, SD. The 25,000-square-foot store replaces the 27-year-old Southgate store just a few blocks away. According to CEO Mark Griffin, the new store features the latest designs in product display, lighting and customer flow. Lewis is developing two more stores in Sioux Falls. Lewis currently has 55 stores and two long-term care facilities in South Dakota, Iowa and Minnesota.

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