July 17, 2018
Sprouts Farmers Market
Sprouts Farmers Market will open a new store in El Paso, TX on July 25. The 30,000 square-foot store is its third location in the city. Meanwhile, the Company’s first Orlando, FL-area store will open in Winter Park on October 24. The 30,000 square-foot unit will feature expanded organic and prepared food offerings. Sprouts currently operates five stores in Florida and has announced plans to expand there with plans to add stores in Clearwater, Deerfield Beach, Naples, Oviedo, Riverview, Trinity and Wellington.
Amazon is hosting its fourth Prime Day, which began yesterday at 3pm. Last year, Amazon expanded Prime Day to 30 hours, up from 24 hours. This year the window will be further expanded to 36 hours for its 100 million Prime members. Analysts are expecting Amazon to rake in $3.60 billion in sales, up 50% from $2.40 billion last year, due to the extra hours and heavy promotions. During the first three hours of the event, shoppers reportedly spent 54% more than last year, despite technical glitches. This is the first time Prime Day will include Whole Foods. Amazon is offering a number of cross promotions between Amazon and Whole Foods, including gift cards and cash back.
Albertsons posted an unimpressive 0.2% increase in first quarter comps, driven by higher fuel prices. However, a stronger gross margin pushed EBITDA up 5.7%; gross margin excluding fuel grew 60 basis points due to lower advertising costs, improved product mix and lower shrink. Some of the gross margin gain was offset by higher integration costs, as the Company continues to transition stores to the Safeway IT system. During its analyst call discussing its results, President and CEO Jim Donald said Albertsons is looking to improve efficiency at its distribution centers and lower costs over time. Mr. Donald added “We’ve seen improvements in our pricing, the perception of quality of our meat and produce and the speed of checkout.” Bottom-line loss shrank to $17.7 million, compared to a loss of $204.9 million the prior-year period. Although interest expense declined from lower borrowings, the heavy leverage kept the bottom-line in the red, while the prior-year results were also negatively impacted by higher one-time costs. As previously disclosed, Rite Aid shareholders will vote on the merger on August 9.
Whole Foods Market 365
Whole Foods Market 365 will open its first store in Houston and tenth store nationwide on August 22. The 30,000 square-foot unit will feature a wide variety of natural and organic products, prepared foods, and two onsite restaurants, Peli Peli Kitchen and Juice Society. The restaurants are part of the Friends of Whole Foods Market program, which allows businesses to operate under their own banner within a Whole Foods Market 365.
Coborn’s announced plans to close an underperforming store in Montevideo, MN on July 30. The pharmacy closed on July 10, and files were transferred to a nearby Thrifty White. Despite the closing, Coborn’s remains committed to growth, with the upcoming introduction of newly constructed “new concept” Cash Wise stores in South Fargo, ND and St. Cloud, MN. Both stores are expected to be completed later this month.
Today, FreshDirect announced the opening of its FreshDirect Campus (FDC), a new facility in New York City’s Harlem River Rail Yards in the Bronx. Representing an investment of $112.6 million, the 500,000 square foot facility on a 16-acre parcel will house FreshDirect’s food manufacturing and distribution operations. The Bronx facility doubles FreshDirect’s space and will allow it to expand offerings such as meal kits and prepared foods. In early 2016, in connection with the construction of its new headquarters, FreshDirect sold its 276,700 square-foot warehouse in Long Island City, Queens for $48.0 million to developer Atlas Capital Group LLC. The Company has been leasing back the space while the new facility was under construction. According to FreshDirect CEO Jason Ackerman, the Company is expected to post revenue north of $800.0 million this year and is planning to expand to Boston.
Last Thursday, Target’s Shipt confirmed it plans to maintain and expand its headquarters in Birmingham, AL. The Company expects to add 881 new jobs in the area. The growth will significantly expand its presence in the city. Shipt already has more than 300 employees in Birmingham, not including its Shipt shoppers.
Weis Markets upgraded its wireless infrastructure to better meet front- and back-end demands. Overall, the network connects 11.5 million square feet of retail store, warehouse and distribution center space. Weis operates 205 stores in Pennsylvania, Maryland, Delaware, New Jersey, New York, Virginia and West Virginia.
Dine Brands Global
Dine Brands Global has expanded its franchise portfolio with the addition of Louisiana Apple LLC, through the acquisition of 18 Oklahoma, Arkansas and Kentucky-area Applebee’s restaurants. Louisiana Apple LLC purchased the restaurants from Apple Gold Group. Terms were not disclosed. As of March 31, there were 1,923 Applebee’s franchise restaurants in the U.S., Guam and 13 other countries. Meanwhile, Dine Brands IHOP chain has partnered with DoorDash for delivery at more than 300 U.S. restaurants beginning today. Another 600 to 700 will offer DoorDash by the end of the year.
Last Wednesday, published reports indicated that Walmart would sell its Japanese supermarket chain Seiyu and had approached major retailers and private equity funds, with a deal likely to raise $2.70 billion to $4.50 billion. The Company responded, “Walmart has not made a decision to sell Seiyu. We are not in any discussions with prospective buyers, and we continue to build our Japanese business towards the future to meet the changing needs of customers there.” Earlier this year Walmart announced it was launching an online grocery delivery service in Japan with e-commerce firm Rakuten. Walmart said last month it had sold an 80% stake in its Brazilian operations to private equity firm Advent International, exiting an underperforming business, in its third major international deal since April. Walmart is looking to invest in higher growth markets like China and India.
Meanwhile, last week Walmart said it plans to close three underperforming stores next month in Louisville, KY, including a 127,000 square-foot Supercenter and two Neighborhood Marketplace stores ranging from 40,000 square feet to 52,000 square feet. Walmart has about a dozen locations in the Louisville metro area. Walmart is also closing stores in Lexington and Hatfield.
As part of a $200.0 million investment in Florida, Walmart unveiled another renovated, tech-forward store in the Tampa area on Friday. A Pickup Tower has been added to the location, which acts as a giant vending machine for online orders, along with 10 self-checkouts. Walmart has renovated several stores across the region, with 12 additional renovations planned for this year.
Walmart also opened a new convenience store concept in Plano, TX last Wednesday. The concept is called “Walmart Fuel Stations” and was initially piloted last year with two stores in Rogers, AR and Crowley, TX. The fuel station in Plano is about 2,900 square feet and has eight fuel pumps. The walk-in store features a variety of prepared foods, beer and a coffee station. The Company expects to build three more North Texas stores from the ground up by the end of this year in Lake Worth, Arlington and The Colony, as well as one in Ohio. All of these fuel stations will be located in Walmart Supercenter parking lots that previously did not have fuel pumps or smaller grab-and-go, vendor-type shops. This is not Walmart’s first foray into the c-store channel; its Walmart Express concept, averaging around 12,000 square feet, rolled out in 2011 but ended in 2016 with the closure of 102 stores, mostly in the Texas area.
Last week, Meijer opened a new 155,000 square-foot Supercenter in Hudsonville, MI. It is the Company’s sixth new store this year and 117th in the state. The store offers produce, groceries and other merchandise, and features a full-service pharmacy. It also includes a Spectrum Health walk-in clinic, where patients can receive care for non-life-threatening health issues.
Sears Holdings Corporation
Sears Holdings Corporation announced that it has laid off an additional 200 employees, most at its corporate headquarters, as it continues to cut expenses to offset declining sales. The Company previously announced it was closing at least 100 stores in 2018. Those are on top of the 428 locations (30% of the store base) closed in fiscal 2017. Despite the significant expense cuts, cash burn (nearly $2.20 billion in the TTM period) continues to accelerate.
Meanwhile, on Sunday Sears closed its last store in Chicago, IL, ending its operations in the city. Sears still has several stores in Chicago’s suburbs.
Last week, Dollar Tree opened its 23rd distribution center, located in Warrensburg, MO. The Company invested about $110.0 million in the DC, which will service the Company’s Midwestern U.S. stores across 11 states. Dollar Tree also recently broke ground on its 24th distribution center in Morrow County, OH, scheduled to open in summer 2019. This new facility will be 1.2 million square feet.
Meanwhile, Family Dollar (owned by Dollar Tree) has applied for more than two dozen liquor permits to sell beer and wine in the four-county Greater Cincinnati region. It is awaiting approval for 28 liquor permits, which would allow 14 stores to sell packaged beer and wine to go. The Company has already obtained permits to sell beer and wine in nine Cincinnati-area locations since September of last year.
Target plans to open an 80,000 square-foot store at the Cape Cod Mall in Hyannis, MA next year. The store will be replacing a Sears. Plans were filed earlier this year to subdivide the 123,500 square-foot Sears store into two retail spaces. The Target store will sell apparel, toys, home décor and seasonal items.
In other news, Target has expanded its “Drive Up” service to 200 additional stores across the Midwest and select other states. With the latest round of expansion, more than 800 Target stores in 25 states now offer curbside pickup; expansion to more markets is planned for late August. According to the Company, nearly 1,000 Target stores will offer the service by the holidays.
Meanwhile, Target is going head-to-head with Amazon, announcing its own one-day sale touting “no membership fee required,” in the middle of Amazon’s Prime Day. Besides the usual price breaks on various merchandise, Target is using its sale to promote its Shipt delivery service. Customers who spend $100 or more on July 17 will get a free six-month membership with Shipt.
Target isn’t the only retailer running its own promotions against Prime Day. Kohl’s and Walmart are both holding summer sales, and eBay has a no-membership-required week of shopping deals.
At an investor conference earlier this month, Nordstrom laid out a five-year growth plan to become the “best fashion retailer in a digital world.” The Company discussed several ongoing initiatives, including expanding Nordstrom Rack into Canada, opening additional Nordstrom Local stores in Los Angeles and New York, and using its first men’s store in Manhattan, NY and adjacent women’s outpost, coming fall 2019, to generate increased sales in New York. According to the Company, Nordstrom sees a $700.0 million sales opportunity in Manhattan. Kenneth Worzel, chief digital officer and president of Nordstrom.com, said, “New York is already our No. 1 market for online sales. But we also know from experience that when we add to a digital-only experience, a flagship store experience, it not only generates four-wall sales, it generates a big lift in our digital business with customers.” Mr. Worzel also noted that New York and Los Angeles combined represent over 25% of its full-price business, with Los Angeles alone generating $1.00 billion in full-price sales. During the conference call, Nordstrom maintained its fiscal 2018 guidance, sales of $15.20 billion – $15.40 billion (fiscal 2017 sales were $15.10 billion) and EPS of $3.35 – $3.55, overall comps are expected to increase 1.5%. It also revealed a new five-year compound annual growth rate of 3% – 4%, which reflects $2.00 billion in investments and $1.00 billion in growth of its core business. The Company also projected EBITDA to grow 5% – 6% on an average annualized basis from 2017 – 2022. Nordstrom expects sales to reach $18.00 billion by 2022 and digital sales penetration of about 40% by 2022, compared with 26% in 2017.
Also as part of its five-year plan, Nordstrom said it expects free cash flow to increase from $600.0 million in 2017 to roughly $800.0 million by 2020 and $1.00 billion by 2022, as its investments in HauteLook, Trunk Club and Canada mature. Looking ahead, management is aiming for growth to be more balanced between full-price and off-price. Nordstrom’s off-price businesses, HauteLook and Nordstrom Rack, generated a 13% compound annual growth rate between 2012 and 2017.
J.C. Penney refreshed its Arizona Jean Co. private-label brand ahead of the back-to-school season, incorporating more fast-fashion and trend-right pieces into the collection, revitalizing the in-store presentation, and introducing new social channels aimed at engaging teens. Management indicated that one in three J.C. Penney customers buys the Arizona brand, making it the Company’s largest private brand and a key traffic driver.
In other news, J.C. Penney will open a 75,000 square-foot store in Brooklyn, NY on August 10; the store will include 2,000 square feet dedicated to Sephora products. The Company indicated that another Brooklyn location, opened in 2014, “has consistently been one of our top performers since it opened.”
Dick's Sporting Goods
Dick’s Sporting Goods opened two new locations this month, one in Richmond, VA and the other in Fort Collins, CO. These two stores bring Dick’s total store count to 728 locations nationwide. The Richmond area includes two other Dick’s Sporting Goods as well as three Hibbett Sports stores. The Fort Collins area includes one Big 5 Sporting Goods store and an REI location. Dick’s operates 30 stores in Virginia and 15 stores in Colorado.
Gander Outdoors opened a store in Rockford, IL on July 10. The 31,000 square-foot store is one of three Gander locations in the state. The Company now operates 55 stores and has plans to open another 12 by the end of the summer. The chain’s parent, Camping World, is expanding its RV strategy by opening RV dealerships in Gander Outdoors locations. The Company is also co-locating Camping World stores with Gander Outdoors locations in 14 of those spots. They will sell RVs, parts, accessories and services, along with Gander’s sporting goods assortment. Four of the co-branded stores are planned for Michigan, two for Wisconsin, and one each in Pennsylvania, Alabama, Texas, Indiana, Ohio, North Carolina, Kentucky and Illinois.
Fastenal’s second quarter revenue increased 13.1% to $1.27 billion, driven by higher unit sales related primarily to continued strength in underlying market demand, and contributions from industrial vending and Onsite locations, the Company’s primary growth drivers. Sales of fastener products (35.4% of total sales) grew 11.1%, and sales of non-fastener products (64.6% of total sales) grew 14.8%. Operating income rose 13.3% to $269.0 million, and operating margin was 21.2%, unchanged from the prior-year period. The Company signed 5,537 industrial vending devices during the quarter, an increase of 13.4%, bringing its installed device count to 76,069. The Company also signed 81 new Onsite locations (defined as dedicated sales and service provided from within or in close proximity to a customer’s facility), an increase of 19.1% and bringing its active sites to 761. The Company is aiming to reach 360 – 385 Onsite locations.
Beacon Roofing Supply
Beacon Roofing Supply added six new locations with its acquisition of Atlas Supply, a leading distributor of sealants, coatings, adhesives and related waterproofing products in the Pacific Northwest. Financial terms were not disclosed. Founded in Seattle in 1917, Atlas operates branches in Tacoma, Spokane and Mountlake Terrace, WA, as well as Portland, OR and Boise, ID. Owners Jan Siers and John Ittes are retiring, while four members of Atlas’ management team — Tony Mazza, Todd Bennett, Jessica McIntosh and T.J. Cheney — will remain on board. In May, Beacon Roofing Supply acquired Tri-State Builder’s Supply of Duluth, MN, a dealer of roofing, siding, windows, and doors in Minnesota, northern Wisconsin, and Upper Michigan.
Tractor Supply Company
Tractor Supply Company opened a new store in Clearlake, CA. The Company, which currently operates approximately 1,700 stores, opened more than 100 stores last year and plans to add 80 more in 2018.
ABC Supply added its 12th store in Pennsylvania yesterday, with the announcement that it has acquired the assets of Alliance Wholesale Supply, a roofing dealer with a single location in Johnstown, PA. Financial terms of the deal were not disclosed. The news follows ABC Supply’s announced acquisitions of siding dealer Robosson Supply in March and roofing products dealer G & F Roof Supply in June.
Fabletics is planning to open 75 new stores across the U.S. and overseas, bringing its total store count to 100. This is an aggressive growth strategy for a company that has only been operating for five years. One of the stores slated for opening later this year in Bellevue, WA experiments with a new design, a high-tech payment processing system, a leggings bar, and a selfie wall for photo-ops. Overseas, where the Company has a presence in 10 countries, it is planning to open its first stores in the Philippines this fall, followed by other international markets beginning next year. The Company has yet to provide a timeframe for the rest of the openings. Fabletics indicated that it has “rapidly surpassed $300.0 million in annual revenue” and achieved comp growth of 20% year over year. It also reduced the time it takes to make and deliver clothing from eight to six weeks. The growth plan comes amid increased competition in women’s athletic wear. Nike plans to invest more in the category, Gap is looking to grow its athleisure line Athleta, and start-ups like Outdoor Voices and Alo Yoga are debuting unique designs. Fabletics is privately held, owned by ShoeDazzle and JustFab parent company TechStyle Fashion Group.
Cineplex is adding at least five more virtual-reality experience centers in Canada over the next several years. The VOID Experience Centres combine virtual reality technology and sensory effects, like touch and smell, to give users an immersive experience incorporating move franchises, like Star Wars and Ghostbusters. Cineplex already operates one of the centers at its Toronto Rec Room location and says the second will open at its West Edmonton Mall location. Cineplex and The VOID have signed an expansion agreement that gives Cineplex exclusive rights to operate the centres in Canada. The companies did not disclose the financial terms of the agreement. The deal comes as Cineplex looks to expand its offerings beyond movies, opening arcade and restaurant spaces with its Rec Room and Playdium offerings.
At Home Group
At Home Group opened a new location in Plano, TX on June 27 and will open one each in Garland and Mansfield, TX by early fall. Each store, at about 100,000 square feet, will offer over 50,000 home décor items. These locations will bring At Home’s store count to 11 in Dallas-Fort Worth and 33 in Texas. The Company also operates a 590,000 square-foot distribution center in Plano adjacent to its corporate headquarters, and a 420,000 square-foot warehouse in Garland, TX.