Albertsons
Published reports claim that almost two years after Albertsons postponed its IPO, management and the Company’s private-equity backers, Cerberus Capital Management, have put renewed plans for a listing on hold again. According to people familiar with the matter, in the months before Amazon’s June 16 proposed acquisition of Whole Foods, Albertsons had been considering reviving its IPO plans and going public by the end of the year. The sources also indicated that if Albertsons had gone through with the IPO, it planned to relaunch with a narrower price range and go straight to investors that showed interest in the deal in 2015. Its own failed purchase of Whole Foods and Blue Apron Inc.’s weak IPO performance have further complicated options. Grocery stocks have been hammered over the last year and specifically in the last month with sagging sales and increased competition.
Target
As a result of improved traffic and sales trends through the first two months of the second quarter, Target updated its comp and EPS guidance. It now expects a modest increase in comps and EPS to be at above the high end of its previous guidance range of $0.95 – $1.15. Target plans to report its second quarter 2017 financial results on Wednesday, August 16.
Brian Cornell, chairman and CEO, commented, “The launch of Cloud Island in May was a success, and our team will be rolling out four more exclusive brands across Home and Apparel in the next few months, in support of our plan to launch 12 new brands by the end of 2018. We are also pleased with initial results of the Twin Cities rollout of Target Restock, providing next-day delivery of a shopping-cart-sized shipment from an assortment of more than 10,000 essential items.”
On the news, Target’s stock was up 4.8% to close at $53.31 Thursday and closed at $53.74 yesterday.
In other news, Target plans to open a 48,000 square-foot small-format store in Haddon Township, NJ in July 2018. It will be Target’s third small-format store in the state of New Jersey and will include a CVS Pharmacy.
Additionally, Target will open a new small-format store anchoring a mixed-use development project in Chapel Hill, NC on July 23. It will be the Company’s first university-targeted, urban store in the Triangle, with 22,000 square feet of retail space. According to the Company, the store’s merchandise will include grab-and-go grocery items, dorm and apartment essentials, apparel and accessories, and an assortment of health and beauty products. It will also have a CVS Pharmacy, Starbucks counter and order pickup space. Target will open a second small-format store in Raleigh in October.
Southeastern Grocers
According to published reports, Southeastern Grocers plans to convert seven Winn-Dixie stores to its discount Harveys Supermarket brand in Florida. Locations include Tampa (first Harveys there), Orlando, Jacksonville, Cocoa, Ocala (2) and Winter Haven. The conversions are expected to take place in early August. Following the transition, Southeastern will operate 480 Winn-Dixie stores (not including liquor stores) and 81 Harveys stores.
Meanwhile, the Company has also been converting locations in South Florida to the Fresco Y Mas banner, which caters to Hispanic consumers. The banner currently comprises 18 stores; interim CEO Anthony Hucker recently said there are plans to expand it throughout Florida. The Company is banking on its private-label brands and price-freezing many staples to help differentiate it from the competition. Mr. Hucker was named interim president and CEO of Southeastern Grocers in June after former CEO Ian McLeod abruptly resigned to take a job with an Asian grocery chain. Mr. Hucker may soon become the permanent CEO, pending final approval by the board.
Kroger
After reporting last week that Kroger will close a Harris Teeter in Greensboro, NC on July 29, the Company announced an additional closure in Cary, NC expected September 16. Harris Teeter currently operates eight other stores in Cary, a market that is seeing a surge of grocery stores. Publix operates two in the area and has plans to open more, and Wegmans recently announced plans to build two stores. Lidl has begun opening stores in the state, debuting in Havelock and Wake Forest on July 14.
Ross Stores
Ross Stores opened 21 Ross Dress for Less stores and seven dd’s Discounts locations across 15 states during June and July. The openings are part of the Company’s plans to add 70 Ross and 20 dd’s locations this year. The Company grew within its newest market, the Midwest, as well as existing markets in California, Texas and Florida. Ross believes it has the potential to grow to 2,000 Dress for Less stores and 500 dd’s locations. Currently, there are 1,384 Ross Dress for Less locations in 37 states and 205 dd’s Discounts stores in 16 states.
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.
Loblaw
Yesterday, Loblaw announced the completion of the sale of its gas station operations to Brookfield Business Partners L.P. for C$540.0 million. The deal was initially announced on April 19 and includes 213 retail gas stations and associated convenience kiosks located adjacent to Loblaw-operated grocery stores across Canada. The gas stations will be rebranded as Mobil stations in accordance with a separate agreement between Brookfield and Imperial Oil; these will represent the first Mobil stations in Canada.
Grocery Outlet
Last week, Grocery Outlet opened a 45,000 square-foot Bargain Market in Imperial Beach, CA. Before the opening, the area had two grocery options that included a Wally’s Marketplace directly across the street and a nearby La Posta. Grocery Outlet is targeting approximately 25 – 30 new stores annually, with a major focus on the Southern California region.
Sportsman's Warehouse
Sportsman’s Warehouse announced 2018 expansion plans, which include the opening of a store in Sheridan, WY, its fifth in the state, and a store in Walla Walla, WA, its 12th in Washington. Both locations will be smaller-format stores, following in the Company’s 15,000 square-foot format for smaller markets, compared to its standard 30,000+ square-foot format for large metro areas. Following the anticipated openings, Sportsman’s Warehouse will operate 89 stores in 22 states. Most recently, the Company opened stores in Eureka, CA (June 22), Everett, WA (June 8), Henderson, NV (May 20) and Yuma, AZ (May 11). The Company expects to open 12 new stores this year and five to nine stores in 2018.
Whole Foods
Whole Foods will open its first 365 store in Ohio, in Akron, on September 14. The 30,000 square-foot store will be the sixth under the format to open in the U.S.
Golub Corp./Price Chopper
Golub Corp. plans to close a 19,000 square-foot, underperforming Price Chopper store in Glenn Falls, NY on July 29. The Company operates another Price Chopper about two miles away and a new Market 32 store less than five miles away. Over the next eight to nine years the Company plans to rebrand nearly all of Price Chopper’s stores into Market 32 stores, which will be renovated to expand product selection and dining options. The initiative began in November 2014.
Alimentation Couche-Tard
Alimentation Couche-Tard (ACT) reported fourth quarter revenue growth of 30.1% to $9.62 billion, mainly attributable to a higher average road transportation fuel selling price, acquisitions, comp growth and the impact of an extra week in the quarter, partly offset by less favorable foreign currency exchange translation. Comp merchandise sales increased 1.6% in the U.S., 2.7% in Europe, and fell 0.9% in Canada. Fiscal 2017 revenues rose 11% to $37.90 billion, and U.S. merchandise comps rose 2%. Net income increased 36.1% to $277.6 million and 1.5% to $1.21 billion for the fourth quarter and fiscal year, respectively.
On June 28, ACT completed its acquisition of CST Brands Inc., for a total enterprise value of $4.40 billion, including assumed debt. On the same day, it sold to Parkland Fuel Corp. a significant portion of CST’s Canadian assets for C$986.0 million. The disposed assets were mainly comprised of CST’s dealer’s and agent’s network, its heating-oil business, 159 Company-operated sites, as well as its Montreal head office. As a result, Couche-Tard retained 157 of CST’s Company-operated sites in Canada. As per the requirements of the FTC, it also sold 70 Company-operated sites to Empire Petroleum Partners, LLC. The transaction is expected to close in 2Q18. Once the transaction with Empire is completed, the CST acquisition will have added 1,263 sites to its North American network, for a value of approximately $3.70 billion.
Subsequent to quarter end, ACT acquired 53 Company-operated sites under the Cracker Barrel banner in Louisiana, including 11 quick-service restaurants. On July 10, it entered into an agreement to acquire all issued and outstanding shares of Holiday Stationstores, which operates a network of 374 corporate stores and 148 franchisees in the U.S. Midwest and in Alaska.
During its conference call, President and CEO Brian Hannasch said, “We are committed to deleveraging, and a piece of that is really evaluating our lower-tier stores, our nonstrategic stores that we don’t feel comfortable either putting our new brand on long term or that will be competitive long term. So you’ll see some ramped up activity looking at paring the lower-hanging fruit in our network … and the highest and best use of real estate. That’s part of the overall plan that we had since we signed CST to make sure that we meet our deleveraging targets.”
In other news, Moody’s assigned Baa2 ratings to ACT’s proposed $3.00 billion senior unsecured notes offering. The Company plans to use the proceeds to repay a portion of the term loans drawn to complete the CST acquisition. Moody’s expects ACT to “maintain a strong liquidity profile, supported by balance sheet cash of around $500.0 million, annual free cash flow of about $1.00 billion, around $1.00 billion of availability under its $2.525 billion unsecured credit facility that matures in December 2021, and good headroom under its leverage and interest coverage covenants (more than a 35% cushion).”
Central Grocers
On July 12, Strack & Van Til President and CEO Jeff Strack announced that he, the Strack family, the Van Til family and other undisclosed investors were the successful bidders for 20 stores and other assets, including the Strack & Van Til headquarters, in the Central Grocers, Inc., DIP bankruptcy auction. The supermarket chain’s new ownership group includes the families that previously owned Strack & Van Til before it was sold to Central Grocers and is called the Indiana Grocery Group (IGG). The purchase price to be paid by IGG represents a total value of $74.8 million, adjusted for certain closing amounts including the value of inventory and certain assumed liabilities (employee costs, gift cards, taxes). IGG has agreed in principle with four out of five unions affected by the sale, and the pension plans are not expected to object to the sale, which would avoid litigation. A hearing to approve the sale is scheduled for today. IGG has committed to close the sale between August 2 and September 11. If IGG closes the sale on August 2, it will be entitled to an $8.0 million credit, which will be reduced by $200,000 for every day after that date. IGG also said it entered into a supply relationship with Associated Wholesale Grocers (AWG). Many of Central’s former customers have already migrated to AWG.
Sears Hometown and Outlet Stores
Sears Hometown and Outlet Stores will open a Sears Hometown store in Sumrall, MS on July 20. This is the ninth Sears Hometown store to open this year. Sears Hometown stores average 8,000 square feet and generate an average of $1.7 million in annual sales per store. There are more than 1,000 Sears Hometown and Outlet stores operating nationwide, including nearly 800 under the Sears Hometown banner.
Brennan's Market
Brennan’s Market, operator of five retail stores and a cheese warehouse and packaging facility in Wisconsin, will close all of its stores on September 30. The Company cited changing consumer habits and increased competition. Its Brookfield store is being sold but will remain open with the other stores. As of now, there is no buyer for the remaining properties.
Marsh Supermarkets
On July 10, a judge in the Marsh Supermarkets Company LLC, DIP bankruptcy entered two orders approving the debtors’ key employee retention plan and a settlement between them and a handful of CVS entities. CVS has the right to enforce, through January 31, 2018, the covenants prohibiting the operation of a pharmacy or drugstore by Marsh, or Topvalco Inc. and Generative Growth II LLC, which purchased a portion of the debtors’ stores, within a ten-mile radius of pharmacy stores the debtors previously sold to CVS. Per the settlement, the CVS entities will return a holdback amount of $750,000 to Marsh Drugs LLC, and another $250,000 will be governed by the terms of the pharmacy asset purchase agreement between the debtors and CVS. Additionally, the debtors will pay the CVS entities $35,000 for legal fees. With the approval of the key employee retention plan, the debtors will retain 16 key employees that Marsh claims are essential to winding down its operations.
True Value/Ace Hardware
According to published reports, True Value is considering a sale that could value the Company at about $800.0 million. The reports say the Company is working with an investment bank to examine strategic options, and Ace Hardware is reportedly interested in making a bid. Ace CEO John Venhuizen commented, “It is our understanding that True Value is evaluating or conducting a formal auction process for the sale of its business. At this point, we have received no contact to participate in that auction process. If contacted, we would have interest in exploring it.” True Value responded to the rumors saying, “True Value remains committed to our long-term strategic plan, and we are continuously assessing and evaluating many opportunities in an effort to create maximum value for all of our retailers.” True Value reported 2016 revenue of $1.51 billion, up 1.1% from the prior year. True Value is a cooperative of nearly 4,400 stores located across 58 countries; in comparison Ace has roughly 5,000 stores within its cooperative. True Value operates 13 distribution centers, while Ace has 17 facilities.
Publix
Publix recently opened its 1,000th pharmacy, located in its new store in Arcadia, FL. Overall, Publix operates 1,147 supermarkets in Florida, Georgia, Alabama, South Carolina, Tennessee and North Carolina.
Captain D's
Captain D’s announced the signing of franchise development agreements that will expand its presence in four states. This growth will bring five new restaurants to San Antonio, TX; one to Jackson, TN; and four to the Mobile, AL/Pensacola, FL market over the next several years. Captain D’s has about 520 restaurants in 21 states.
Gymboree
On July 11, The Gymboree Corporation, DIP announced that it intends to close 350 stores across the Gymboree, Gymboree Outlet and Crazy 8 brands. The closings will leave the Company with a total of 930 locations. The Company said it has partnered with Great American Group and Tiger Group to help manage store-closing sales, which are scheduled to begin today. Please click here to view the locations of 330 of the 350 closing stores from documents the Company filed with the Bankruptcy Court. The Company has not indicated when it will provide details on the other 20 stores.
Panera Bread Company
Earlier today, JAB Holdings completed its acquisition of Panera Bread Company. Under the terms of the transaction, Panera shareholders will receive $315 per share in cash. Panera’s common stock will cease trading as of today.
In other news, Pan American Group LLC acquired 34 Panera Bread bakery-cafe locations in Kansas and Missouri. The locations were acquired from Original Bread Inc. Financial terms were not disclosed. The acquisition increases Pan American’s Panera Bread store count from 96 to 130 locations across eight states, which makes it the second-largest Panera Bread franchisee.
Barnes & Noble Education
Barnes & Noble Education’s fourth quarter sales increased 16.3% to $342.8 million, and comps were up 1.4%. The Company recorded a profit of $227,000, compared to a loss of $2.8 million last year. Fourth quarter results include nine weeks of operations from MBS Textbook Exchange, LLC, which was acquired in February 2017. The Company opened 38 new stores during fiscal 2017, generating an estimated $118.0 million in annual sales and bringing the total store count to 769 locations. The Company currently has contracts to open 23 new stores with estimated annual sales of $50.0 million in fiscal 2018. MBS opened 80 virtual stores with estimated annual sales of $17.0 million, and has contracts to open 46 virtual stores with estimated annual sales of $8.0 million in fiscal 2018.
Patrick Industries
Patrick Industries completed the acquisition of the business and certain assets of Wire Design, an Elkhart, IN-based manufacturer of wire harnesses for the RV, marine and industrial markets. Wire Design’s TTM revenue through June 2017 was approximately $10.0 million, and the total cash consideration paid for Wire Design was $10.9 million. The Company expects the acquisition to be immediately accretive to EPS. The acquisition included accounts receivable, inventory, prepaid expenses and machinery and equipment; it was funded under the Company’s existing credit facility. Patrick will continue to operate the business on a standalone basis under the Wire Design name in its existing facility.
The Tile Shop
The Tile Shop’s second quarter sales increased 6.2% to $89.5 million, and comps were up 0.5%. The Company indicated that comps grew in the mid-single digits over the two-month period of May and June, but this was mostly offset by a decline in April. Profit rose 12.8% to $7.7 million. CEO Chris Homeister said, “Despite the topline shortfall, we were pleased to deliver solid growth in EPS in the quarter, generate significant free cash flow to reduce debt to the lowest level in five years and continue to successfully open new stores, with seven stores opened year to date and an additional seven to eight scheduled to open in the second half of the year.” The Company opened four new stores during the second quarter (Fort Worth, TX; Denver, CO; Nashville, TN; and Atlanta, GA). As of June 30, the Company operates 130 stores in 31 states and Washington D.C.
Below is a sample of future store closings; our full database lists closings through December 2017.
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