Sears
On July 7 Sears Holdings announced another 43 store closings (eight Sears and 35 Kmarts), bringing the total closings to approximately 320 during the year-to-date period. The Company also indicated it would be opening additional small-format stores. Commenting on the closures, in a blog post, CEO and Chairman, Edward Lampert stated, “The level of support we have from our vendors is an important factor in defining the size of our business and the number of stores we can operate responsibly going forward. We reached the point in the past 12 months where some of our vendors have reduced their support thereby placing additional pressure on our business. Despite this challenge, we have been working and fighting hard to improve our operational performance and streamline our organization.”
Below is the map of the 43 additional closings; click here to download a complimentary list of the locations.
Meanwhile, Sears announced it has entered into an amendment to its existing Second Lien Credit Facility providing for new financing in aggregate principal amount not to exceed $500.0 million and subject to borrowing base limitations. The new facility is part of the Second Lien Loan agreement which currently has a $300.0 million term loan outstanding.
On June 16, Whole Foods announced that it agreed to be acquired by Amazon for $13.70 billion. A recent Whole Foods filing confirmed that Amazon was among six other companies interested in acquiring it. The document states that “Company X,” confirmed by Reuters to be Albertsons, was valuing Whole Foods at $35 – $40 per share. Though the structure of this potential offer was never specified, it would have been a mix of cash and equity with heavy debt financing. The filing also mentioned interest from another undisclosed company and four private-equity firms. The PE firms were interested in a leveraged buyout and PIPE (private investment in public equity) financing. The discussions with other suitors essentially ended on May 23, when Amazon offered Whole Foods $41 per share with the right to terminate if any rumors about the potential transaction leaked. Additionally, Amazon made it very clear that it did not want to engage in a multiparty sale process. On May 30, Whole Foods countered with $45. Two days later Amazon offered Whole Foods $42 per share, which was accepted.
In other news, Whole Foods Market signed a new lease for a 365 by Whole Foods store in Delray Beach, FL. Whole Foods Market, which is expected to be acquired by Amazon, currently operates four 365 stores located in California, Oregon, Texas and Washington.
Meanwhile, Whole Foods has reportedly delayed the opening of a 30,000 square-foot 365 store in Evergreen Park, IL. It was initially expected to open in November, but the project has stalled and will push into 2018. There is also uncertainty as to whether it will open as a 365 store or a traditional Whole Foods. The stalled expansion of the 365 concept has raised many questions as to its initial performance, while the recent proposed acquisition by Amazon could further cloud its outlook.
Cardenas Market/Mi Pueblo
On July 6, Kohlberg Kravis Roberts (KKR) announced the combination of Cardenas Markets and Mi Pueblo, two Hispanic grocery chains in which KKR made significant investments last year, alongside Victory Park Capital. The combined business will operate as Cardenas Markets LLC. Each grocery chain will continue to operate separately but will be managed under one executive team led by CEO John Gomez (a former EVP at Trader Joe’s). No financial terms were disclosed. Cardenas operates 31 stores in Southern California and Nevada. Mi Pueblo operates 15 stores around the San Francisco Bay Area. The Company has planned a number of new store openings over the next few years and is looking to expand its footprint outside of its existing operating states. Cardenas, along with Northgate Gonzalez, also owns CNG Ranch, which operates seven stores in the Phoenix, AZ area (not included in the merger).
Kroger/Lidl
Kroger is suing Lidl for trademark infringement just two weeks after Lidl opened its first stores in the U.S. The lawsuit filed in the U.S. District Court in the Eastern District of Virginia alleges that Lidl’s house brand, “Preferred Selection,” is too similar to Kroger’s own house brand, “Private Selection.” Kroger claims the close resemblance of the names will cause confusion for customers and allow Lidl to “compete unfairly” with Kroger, because customers could assume that the two brands are associated with one another.
In other Lidl news, the Company announced another seven store openings. In addition to four sites already expected to open July 13, Lidl will open another three stores on July 20 (Norfolk, VA; Rockingham, NC; and Spartanburg, SC) and four in the Richmond, VA market on July 27. The openings will increase Lidl’s store base to 21. Things are heating up in Spartanburg where, as mentioned, Lidl is preparing to open its second store; Aldi recently opened its third store, and the Fresh Market will unveil a refreshed store tomorrow in the metro market.
Kroger will close a Harris Teeter store in Greensboro, NC on July 29. The store, which opened in July 1999, is one of 11 Harris Teeter locations in the market. According to Nielsen, as of January 2017, Harris Teeter ranked third in the market with an 18.4% market share, trailing the market leader Walmart (16 stores and a 35.2% market share) and Ahold Delhaize’s Food Lion chain (36 stores and a 28.5% market share). Despite the closing, Harris Teeter opened 10 new stores in 2016 and expects to open six new locations in the Carolinas and Maryland this year.
Dick's Sporting Goods
Dick’s Sporting Goods is working on a retrofit of a former Sports Authority location in Belleville, IL that has been closed since July 2016. The Company now expects the store to be ready for an October 2017 opening. Dick’s has five stores in the greater St. Louis area, but this will be the first on the east side of the metro area.
Cabela's/Bass Pro Shops
Today, Cabela's Incorporated announced that its shareholders have approved the previously announced acquisition by Bass Pro Shops. The transaction is expected to close in the third quarter of 2017, subject to regulatory approvals, and customary closing conditions. The most significant hurdle was overcome, when the FTC said that it will not block the merger, nor will it require store divestitures. The only remaining issue surrounds the sale of Cabela’s credit card unit. Synovus Financial Corp. will act as a middleman in the transaction by acquiring the assets and assuming certain liabilities of the Bank, including deposits totaling $1.20 billion. Synovus will then sell the Bank’s credit card assets and related liabilities to Capital One Financial Corporation.
With roughly 4,000 major retail chain store closings last year and up to another 10,000 expected in 2017, brick-and-mortar retailers are scrambling to remain relevant. Out 20-page Store Activity and Retailer Health Analysis report includes a list of retailers adding and closing stores in 2017 and provides insight into companies expanding into new markets. Click here for more information.
Aldi
Aldi opened its 100th store in Texas last week in Fulshear (near Houston). The Company entered the state in 2010. According to an Aldi representative, the new store is one of 14 scheduled to open in Texas this year. It also plans to invest about $100.0 million in renovations in the state over the next two years, including $33.0 million on 24 stores in Houston by 2018 and $66.0 million on 54 stores in Dallas-Fort Worth by 2019.
Academy Sports + Outdoors
Academy Sports + Outdoors opened a new store in Rockwall, TX on July 7. The 56,000 square-foot store joins 19 other locations in the Dallas-Ft. Worth area. The Company operates 231 stores, including 98 in Texas.
Abercrombie & Fitch
Abercrombie & Fitch announced yesterday that talks to sell itself have stalled, as management has been unable to come to acceptable terms with suitors. The Company reported in May that it was in “preliminary discussions with several parties,” including competitors Express and American Eagle Outfitters, according to published reports. Sycamore Partners was also reportedly involved in talks, but has since announced a deal to acquire Staples. Shares of the Company fell 21% to $9.59 on Monday on the news. Looking ahead, the Company plans to focus on “the rigorous execution of our business plan,” according to executive chairman Arthur Martinez. Abercrombie & Fitch has been closing stores, lowering prices and revamping its marketing strategy to increase store traffic; however, revenue has declined for four consecutive years.
Lowes Foods
Lowes Foods will open its second store in Lexington, SC on July 21. It opened its first unit there on May 24, about six miles away. The two stores are virtually identical except the first one has a fuel center. Both feature Lowes Foods to Go, an online ordering service where customers can pick up their orders curbside.
There are five competing food retail stores within three miles of the new store, including two Food Lions, an Aldi, BI-LO and Publix. Lidl has also announced plans to open a new store in Lexington.
The Company has been expanding in South Carolina, opening two stores in Greer and one in Simpsonville last year. It plans to open a store in Columbia in mid-2018, Summerville, Mt. Pleasant and a third location in the Greenville area. The chain currently operates about 90 supermarkets (including 13 Just$Save Foods) in the Carolinas and Virginia.
Alimentation Couche-Tard
Yesterday, Alimentation Couche-Tard announced it had signed an agreement with Holiday Companies to acquire all of the issued and outstanding shares of Holiday Stationstores, Inc. and certain affiliated companies. Holiday Stationstores’ assets include over 500 Company-operated (374) and franchised (148) convenience store locations; a food commissary that provides fresh and frozen food to all stores and delivers additional fresh products to stores in the Twin Cities metro area; and a fuel terminal in Newport, MN, which supplies one third of its fuel stations. The operations to be acquired are located throughout the Upper Midwest, including Minnesota, Wisconsin, Washington, Idaho, Montana, Wyoming, North Dakota, South Dakota, Michigan and Alaska. The transaction, anticipated to close in spring 2018, is expected to generate annual EBITDA of US$180.0 million – US$190.0 million, before synergies. The transaction, terms of which have not been disclosed, will be financed through available cash and existing credit facilities. Couche-Tard intends to continue Holiday’s operational base at Holiday’s corporate headquarters in Bloomington, MN.
The announcement comes just days after Couche-Tard finalized its deal to acquire CST Brands’ whose operations in the U.S. and Canada consist of close to 1,300 stores, including 666 locations in Texas. Couche-Tard President & CEO Brian Hannasch commented, “This acquisition, and the added value it will bring to our existing network of 14,000 stores, confirms our capacity to continue to grow by acquisition all the while targeting continued organic growth through food sales and other key categories."
Central Grocers
The July 6 auction related to the sale of Central Grocers, Inc., DIP’s Joliet, IL distribution center has been adjourned without a specific date. The hearing to discuss the approval of the sale of the facility has been adjourned from today to July 25. In addition, the auction related to 11 stores operated by Central Grocers under the Ultra Foods banner has been adjourned without a date. On July 6, an auction was held for the Strack & Van Til stores, but no bidders were deemed successful, and the auction was adjourned to today (July 11). As reported, Jewel Food Stores, Inc. (Jewel-Osco) was named as the stalking horse bidder for the 19 Strack & Van Til stores.
The Home Depot
The Home Depot inked a $265.0 million cash deal to acquire Compact Power Equipment, an equipment rental and maintenance services business based in Charlotte, NC. Compact provides rentals at more than 1,000 stores and sells maintenance services to a number of customers, including Home Depot. The deal is expected to be completed by the end of July, and going forward Home Depot plans to grow Compact’s maintenance services business. This marks Home Depot’s first significant purchase in two years; in July 2015, it acquired Interline Brands for $1.625 billion.
The Fresh Market
On July 12, The Fresh Market will unveil six refreshed stores in North and South Carolina with expanded offerings and new interactive sampling stations. The stores are located in Asheville (2) and Hendersonville, NC; and Greenville (2) and Spartanburg, SC.
Lumber Liquidators
On June 30, the U.S. Bankruptcy Court for the Southern District of New York approved a deal under which Tom Sullivan, founder, former chairman and interim CEO of Lumber Liquidators, would acquire Manhattan luxury home retailer Gracious Home, DIP for $4.0 million. Gracious Home filed Chapter 11 in December 2016 for the second time in a six-year period. Mr. Sullivan, also the founder of furniture retail store chain Cabinets to Go and clean energy business Proton OnSite, worked with Gracious Home CEO Rob Morrison at Lumber Liquidators between 2006 and 2012. Looking ahead, the two executives plan to open a handful of retail stores in select markets across the U.S., but will primarily focus on driving sales growth online. Gracious Home previously operated four stores in Manhattan that were shuttered during the Chapter 11 process; in May 2017, Gracious Home reopened a scaled down version of one store on the Upper East Side, a 3,000 square-foot location compared to the previous 55,000 square-foot location.
Stater Bros.
Stater Bros. will open its third supermarket in Menifee, CA. The 45,000 square-foot store features expanded fresh food and organic food offerings, and a café with a seating area. There are three competing food retail stores within three miles of the new store, including Aldi, Ralphs and an existing Stater Bros.
Natural Grocers by Vitamin Cottage
Natural Grocers by Vitamin Cottage will relocate a store in downtown Denver to the city’s River North neighborhood, an area deemed a “food desert.” The store will have the chain’s first Cottage Wine and Craft Beer nook. It marks the first time the Company has sold alcoholic beverages. Natural Grocers operates about 140 stores in 19 states.
Liberty Interactive/HSN, Inc.
On July 6, Liberty Interactive Corporation and HSN, Inc. entered into an agreement whereby Liberty will acquire the remaining 61.8% of HSN it does not already own in an all-stock transaction. Terms of the deal imply a total enterprise value for HSN of $2.60 billion, an equity value of $2.10 billion, and consideration of $40.36 per HSN share, representing a premium of $9.06 per share or 29% to HSN shareholders, based on HSN’s closing price on July 5. The acquisition of HSN is expected to be completed by the fourth quarter of 2017. Approval by Liberty Interactive stockholders is not required and is not being sought. Upon closing, the Liberty Interactive board will be expanded by one to include a director from the HSN board; this director will be selected by Liberty Interactive. We estimate the combined entity would have pro-forma annual revenue of $14.00 billion (with $7.50 billion coming from e-commerce) and annual EBITDA of $2.12 billion (15.2% EBITDA margin) before any potential synergies, which the Company estimates at $75.0 million to $110.0 million per year, excluding potential capex savings. The Company believes the acquisition will enhance QVC Group’s competitive position by increasing its exposure to e-commerce in a rising digital shopping environment. The combined companies will operate five U.S. cable television channels, selling 22,000 brands through 17 multi-platform networks, and have about 23 million active customers. The Company will be the third largest ecommerce and mobile commerce retailer behind Amazon.com and Walmart. We estimate a pro-forma credit rating for the combined Company to remain at Liberty Interactive and HSN’s current C2, should the transaction close as described above.
Starbucks
Starbucks plans to invest $120.0 million to expand its Augusta, GA soluble plant. The expansion, which is slated for completion in fall 2019, will add 140,000 square feet to the existing 180,000 square feet and will allow the Company to make packaged coffee for retail locations and Starbucks cafes.
Freshii
Freshii has announced expansion of the brand into New York City through its partnership with Walgreens. The partnership has led to more than eight Freshii stores since launching in 2016. Other Freshii Walgreens locations include Miami, Chicago and Boston.
bebe stores
On June 29, bebe stores signed an agreement with Monday Properties Investments, LLC to sell its Los Angeles, CA Design Studio for approximately $35.0 million. The Company retains a right to lease back up to 12,000 square feet for up to four months after closing, with the ability to terminate this right with 30 days prior written notice. The sale is expected to close in mid-August, subject to customary closing conditions.
Bartell Drugs
Bartell Drugs is expanding with the opening of three new stores. They include a 14,600 square-foot store in Arlington, WA expected to open during the first quarter of 2018, and two others expected to open in the coming weeks located in Green Lake and Snoqualmie Ridge, WA. The new stores will bring the Company’s count to 68 in the state.
On July 6, Sears Canada, DIP filed motion materials with the Ontario Superior Court of Justice seeking the Court’s approval of a sale and investment solicitation process (SISP). This will be conducted by its financial advisor, BMO Capital Markets and under the supervision of the Monitor, FTI Consulting, and the Special Committee of the Board of Directors of Sears Canada. The purpose of the SISP is to seek proposals for the acquisition of, or investment in, the Sears Canada Group’s business assets and/or leases and to implement one or a combination of proposals. October 4 is the deadline for Sears Canada to obtain Court approval of successful bid(s), and the SISP has an anticipated completion date for all transactions by October 25. The Company also seeks to extend the stay period provided by the initial order up to and including October 4. The Company is also seeking Court approval for the suspension of payments towards the defined benefit component of the Sears Registered retirement plan, post-retirement health and dental benefits and post-retirement life insurance premiums. A hearing is scheduled for this Thursday, July 13, to rule on the motions.
On July 10, published reports indicated two major U.S. shareholders in Sears Canada, ESL Partners LP and entities affiliated with Edward S. Lampert, hired Fairholme Capital Management to explore potential proposals for Sears Canada. The two shareholders together own 45.3% of Sears Canada, and Fairholme owns about 20.8%, altogether making up roughly two thirds of the Company’s total common stock.
Amazon
Amazon announced the launch and sale of a new wine brand produced by King Vintners, a subsidiary of Oregon’s King Estate Winery. The new wine brand is described on its site as “the first wine ever developed from conception to release with Amazon Wine.”
Yesterday, the Company announced plans to open a new fulfillment center in Orlando, FL in 2018. The 850,000 square-foot facility in Lake Nona will distribute small items such as books, electronics and consumer goods.
Amazon’s annual Prime Day, in which the Company offers “hundreds of thousands of deals,” is being held today. Last year Prime Day marked Amazon’s biggest sales day ever, with orders increasing more than 60% above average. Prime Day also marks the first major use of Amazon’s Prime Air freight network. Amazon said its Prime Air cargo planes are “fueled and ready to support Prime Day in the U.S. for the first time.” The Prime Air network includes approximately 40 Prime-branded Boeing 767-300s operated by Amazon’s cargo partners Atlas Air and ATSG. The cargo planes will provide supplemental shipping capacity for Prime Day orders and additional flexibility as Amazon’s Prime subscription service grows. Amazon is also expecting the cargo network to help with its skyrocketing shipping costs, which increased more than 40% in 2016. Amazon currently uses a combination of delivery services from the U.S. Postal Service, UPS and FedEx to carry out shipments.
Amazon has secured approval to stock and sell food and groceries in India. Amazon did not disclose further details, but a source familiar with the matter said Amazon planned to invest $500.0 million in the food segment, over and above the $5.00 billion it had already committed to investing in India. Currently, Amazon offers food products in India via Amazon Pantry, and same-day grocery delivery on its Amazon Now app through partnerships with Indian retailers Big Bazaar, Star Bazaar and Hypercity.
Eloquii
Eloquii, a plus-size fashion e-commerce retailer, is opening its first physical location in Arlington, VA, followed by its second in downtown Chicago, IL and a third in Columbus, OH due in September. The Company had previously tested operating physical locations with a 2,600 square-foot pop-up store that operated temporarily in March at the same Arlington, VA location. It featured an assortment of apparel and accessories, including the Company’s first designer collaboration and swim line; tablets were placed throughout the store for customers to shop the full collection online. Management indicated the pop-up was so successful that the Company was asked to stay permanently. Looking ahead, management is targeting up to 40 stores over the next three to four years, starting with five in 2018, 10 in 2019 and 15 or more annually after that. Eloquii was launched by The Limited in 2011 but was shut down during the Company’s restructuring, opening later as an independent e-commerce business.
PriceSmart
PriceSmart reported third quarter sales growth of 3.7% to $730.3 million. Net income rose 11.9% to $18.8 million.
The Company also reported June net warehouse club sales increased 4.1% to $230.1 million, and comps rose 1.5%. For the year-to-date period sales increased 3.1% to $2.43 billion, and comps were up 1.4%. PriceSmart added a net of one new club over the past year, bringing its store count to 39. The Company also announced that last month it acquired land in Santo Domingo, Dominican Republic for a new warehouse club it expects to open in spring 2018. It will be the Company’s fourth location in the country.
Below is a sample of future store closings; our full database lists closings through December 2017.
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