Amazon/Whole Foods
On Friday, Amazon announced it would acquire Whole Foods Market for $13.70 billion, in an embrace of brick-and-mortar stores. This represents a dramatic strategic turn for Amazon, which has rolled out food delivery through its Amazon Fresh service for a decade but has not made a major dent in the $1.500 trillion grocery market. Following the news, shares of supermarkets, food producers, payment processors and shopping malls collectively lost at least $35.00 billion in U.S. market value.
With Amazon’s recent announcement of its intention to buy Whole Foods, talk that the Company will eventually move into the drugstore business has once again surfaced. Last month, it was reported that Amazon began hiring people to break into the multibillion-dollar pharmacy market. Many believe it will be difficult for Amazon to compete in the highly regulated pharmaceutical and drug benefit business, but the Whole Foods deal shows it is willing to buy into the industry through acquisition. Should the Walgreens-Rite Aid merger not go through, a decision expected within the next month, Amazon could have an opening.
Last week, Amazon announced that it has launched Prime Now one- and two-hour delivery service in Denver, CO. The service includes two-hour delivery of groceries and fresh items from Sprouts. Prime Now is available in 30 U.S. cities. Now that Amazon is acquiring Whole Foods, it will be interesting to see if it continues to partner with Sprouts.
Lidl
Lidl opened its first ten U.S. stores last week in the Carolinas and Virginia, marking the Company’s entry into the country. Additional stores are expected to roll out this summer, with the Company opening about 100 stores by summer 2018 along the East Coast.
Bass Pro Shops / Cabela's
The FTC may soon render its decision as to whether the proposed Bass Pro Shops / Cabela’s transaction limits competition. The decision could be made by June 28, the end of the 75-day extension of the review period, and it is virtually the last remaining obstacle to completion of the transaction. If the FTC believes that competition would be stifled, for example in a market where the companies compete head-to-head, it could force a divestiture of certain stores. However, there is relatively limited overlap between Cabela’s and Bass Pro.
Only 18 stores overlap within a 20-mile radius, and the two companies have a total of just over 165 units. If store divestitures are required, the FTC prefers that the purchaser is a competitor to achieve the goal of providing meaningful pricing choices to consumers. Finding appropriate purchasers of divested stores may be difficult. Academy Sports is one possibility; however, the bankruptcy of Gander Mountain eliminated it as one of the more likely competitor/purchasers, and Dick’s has a more diverse product mix than Bass Pro / Cabela’s. If the companies and the FTC do not reach a settlement by June 28, two other outcomes are possible: the FTC could block the merger, which is unlikely, or it could issue a further extension of the review period.
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. Our 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.
Southeastern Grocers
On June 14, Southeastern Grocers celebrated the first birthday of its Fresco y Más banner by unveiling seven new locations in Florida. The stores, which were converted Winn-Dixie locations, include five in Miami, and one each in Hialeah and Holly. The new stores bring the banner’s store count to 18 in its first year.
Meanwhile, the Company announced that President and CEO Ian McLeod will resign, effective June 30, to pursue another opportunity. COO Anthony Hucker will assume the positions on an interim basis.
Wawa
Wawa plans to open its first D.C. location later this year. The downtown location will be the Company’s largest store, at 9,200 square feet, offering a sit-down café with outdoor seating but no gas pumps. According to President and CEO Chris Gheysens, Wawa been focusing on suburban markets, where stores are about 5,500 square feet with 16 fuel pumps and around 60 parking spaces. “The Company’s new urban model is a departure from its roots, but also an opportunity to reach new types of shoppers.” Wawa’s expansion to Washington comes as other restaurants and food retailers are entering the area. Eatsa, Honeygrow and Halal Guys have all recently opened in D.C., and Wegmans last month announced it would be opening its first D.C. store in 2022. Non-traditional retailers are also getting into the grab-and-go food business, with new Walgreens and Rite Aid stores stocking a wide range of offerings. Wawa plans to open 25 stores in the Mid-Atlantic and 25 new stores in the Florida market each year for the next several years, including five to 10 stores in the Washington, D.C. market in the next two to three years.
Meanwhile, two more Wawa locations will open in Palm Beach, FL County on Thursday, marking the Company’s continued push into the South Florida market; the Company now has five stores in the county.
Lululemon Athletica
Lululemon Athletica acquired a minority stake in 7mesh Industries, a cycling apparel startup based in Squamish, BC, Canada. The Company indicated that 7mesh would collaborate on new ventures with Lululemon’s research and development division called Whitespace. Management specified that it does not expect cycling apparel to become a big growth driver, as gear for sports like running, basketball and yoga are much more popular since they are frequently worn casually. Lululemon is expecting to have an initial line of product from 7mesh in stores by mid-2018, and it may eventually seek a 100% stake in 7mesh.
Marsh Supermarkets
Marsh Supermarket Holding, LLC, DIP filed a Notice of Successful Bidders with the Court. The Debtors were attempting to sell 44 stores, but only received bids for 26, including 11 by Kroger for $16.0 million and 15 by Fresh Encounter, Inc. for a reported $8.0 million.
Subsequently on June 14, Marsh filed notice that it planned to commence store closing sales as soon as last Thursday for the remaining 18 of its 44 “core stores” that were not sold at auction. Liquidation sales were also being conducted at the 11 stores that Kroger agreed to purchase.
In addition, the Court issued a final order on the Debtors’ motion to reject an additional six unexpired leases, including four leases effective May 24 and two leases effective May 11.
The North West Company
The North West Company closed its previously announced acquisition of North Star Air Ltd., an Ontario-based cargo and passenger airline. The C$31.0 million deal was initially announced on April 28. At the time, the Company announced plans to make immediate follow-up investments totaling C$14.0 million to expand North Star Air’s hub capacity and purchase an additional airplane. Management expects the acquisition and subsequent investments to generate approximately C$8.0 million in annualized EBITDA, in addition to C$2.0 million in savings from expected carrier cost increases it will avoid.
Bon-Ton
The Bon-Ton Stores announced more than 1,250 artists, designers, makers, artisans and entrepreneurs submitted applications to the Company’s First Sourcing Fair. The number far exceeded expectations, as the Company continues to cultivate partnerships and source new merchandise to sell in its expanding number of “Close to Home” shops. The Company launched its first Online Sourcing Fair in March as part of an ongoing effort to provide more locally made products. Bon-Ton will consider about one-third of the applicants and begin introducing new product selections in its stores in June. Bon-Ton opened its first 45 “Close to Home” shops in the fall of 2016 and has since tripled the number to 148 in 14 states.
Supervalu
Cub Foods, a division of Supervalu, renovated three stores in the suburbs of Minneapolis, MN, in Champlin, Brooklyn Park North and Brooklyn Park South. The renovated stores feature updated signage and design, expanded produce departments and organic selections, and more grab-and-go options.
Kroger
Kroger will open a new Harris Teeter in Charlotte, NC today. The 53,000 square-foot store will include an extensive fresh foods department, a wine and beer bar, and a pharmacy.
Orgill
Orgill announced that its Post Falls, ID distribution center is fully operational, as of earlier this month. It has begun serving retailers in five states throughout the Northwestern U.S. (Montana, Idaho, Oregon, Washington and Alaska) as well as customers in Western Canada. The Company had acquired the facility in August 2016 and has been renovating it ever since. The facility is expected to provide faster and more efficient service to its customers. Orgill distributes products to customers in all 50 states, 10 Canadian provinces and over 50 countries globally. The Post Falls facility is its seventh distribution center, joining locations in Tifton, GA; Inwood, WV; Sikeston, MO; Hurricane, UT; Kilgore, TX and London, ON.
Walmart
On June 15, Walmart announced a cash tender offer for $2.00 billion and £500.0 million of certain of its outstanding debt securities. The offer expires on July 13. The next day, Walmart announced it entered into an agreement to acquire Bonobos, Inc., a men’s online apparel retailer known for its custom fitting pants, for $310.0 million in cash. This continues the Company’s expansion of its e-commerce business and follows its acquisition of Jet.com, ShoeBuy.com, Moosejaw.com, and Modcloth. The Bonobos brand will be offered on Jet.com.
Lowes Foods
Lowes Foods will open a new supermarket in Kernersville, NC tomorrow. The 49,000 square-foot store replaces a nearby location that will close. The store offers an assortment of organics, prepared foods, and bulk foods.
Buffalo Wild Wings
Buffalo Wild Wings will open its first B-Dubs Express small-format locations in the Minneapolis, MN suburbs of Edina and Hopkins later this summer. The format will include take-out booths, counter service and delivery options, along with a smaller menu. Each location will be 2,500 square feet, with seating for up to 50 people. The Company plans to explore the Denver market as well as Los Angeles, Atlanta and Dallas in the near future, for additional small-format restaurants.
Meanwhile, the Company yesterday identified the 83 Company-owned Buffalo Wild Wings restaurants it is aiming to sell to franchisees this year. It was the formal launch of the sale the Company first announced in January. The locations are in the Northeast U.S., Canada and South Texas. The sale follows activist investor Marcato Capital Management winning three seats on the Company’s board last month. Marcato has pressed Buffalo Wild Wings to franchise nearly all its locations by 2020 in order to save costs. Buffalo Wild Wings CEO Sally Smith also announced at the Company’s annual meeting on June 2 that she would resign at the end of the year.
Williams-Sonoma
West Elm, a subsidiary of Williams-Sonoma, will open its first location in Phoenix, AZ on June 29. The 11,000 square-foot store will include an assortment of local products from 10 Arizona-based makers and designers. West Elm operates 99 retail stores in the U.S., Australia, Canada and the U.K.
Ignite Restaurant Group, Inc., DIP
A bid of $55.0 million to purchase Ignite Restaurant Group, DIP’s assets was submitted by Landry’s, Inc. The amount is $5.0 million higher than the $50.0 million stalking horse bid previously submitted by KRG Acquisitions, a unit of San Diego private equity firm Kelly Companies. Additionally, the Court set September 1 as the bar date for filing proof of claim forms.
Bob Evans Farms
On April 28, the Company completed the sale of Bob Evans Restaurants to Golden Gate Capital. The results of operations of that unit have been separated out and reported as discontinued operations. Fourth quarter sales from continuing operations fell 2.4% to $99.9 million; excluding an extra week in 4Q16, sales increased 4.9%. The increase was driven by double-digit growth in its high-margin refrigerated side-dish business. Pounds sold increased 7%, while average net selling price per pound fell 2.3%. An 11.5% increase in side-dish pounds sold, a 9.2% increase in sausage pounds sold, and a 11.5% increase in food service pounds sold were partially offset by a 5.1% increase in trade spending and a 17% decline in frozen product pounds sold. Net income from continuing operations rose 13.9% to $6.8 million.
On May 1, the Company completed the previously announced acquisition of Pineland Farms Potato Company. President and CEO Mike Townsley commented, “With the sale of BER complete, we can strategically expand our food service sales effort, leveraging Pineland Farms’ strength in this large channel of distribution.”
The Company reiterated fiscal 2018 guidance for net sales of $470.0 million at the midpoint of its range, and EBITDA of $105.0 million at the midpoint of its range. It also provided fiscal 2018 EPS guidance of $2.06 – $2.24.
At Home Group
At Home Group opened its first Massachusetts location, in Seekonk, last week, as part of 25 store openings the Company has planned for the year. The 130,000 square-foot store sells more than 50,000 home items, from furniture, rugs, art and housewares to tabletop, patio and seasonal items. At Home currently operates 132 stores in 31 states; it reported a 23% sales increase and a 37% profit rise during the first quarter ended April 30.
Bartell Drugs
A CareClinic by Kaiser Permanente at Bartell Drugs opened last week in the Gig Harbor and Key Peninsula area of Washington State. In December 2013, the Company unveiled a partnership with Group Health Cooperative (acquired by Kaiser Permanente in February 2017) to begin adding CareClinic in-store health clinics at Bartell stores. Kaiser Permanente and Bartell Drugs now operate 13 CareClinic locations and plan to add two more at stores in Snoqualmie Ridge and Redmond Town Center by the end of the year.
Walgreens
Florida Hospital Express Care clinics have opened at 15 Walgreens drug stores in the Tampa Bay, FL area. Walgreens and Florida Hospital announced plans in January to open the clinics by the summer. Florida Hospital is a health system comprised of 26 hospitals throughout the state. Later this year, Walgreens is slated to open a pharmacy at Florida Hospital Tampa.
Rite Aid
Earlier today, Rite Aid opened a new store in Harrisburg, PA, which replaced a nearby location. The new 14,000 square-foot store offers the Company’s Wellness store format, which is now featured in about 2,500 Rite Aid stores nationwide.
Sports Direct International / Finish Line
Sports Direct International PLC has been acquiring shares of The Finish Line, Inc. and is now Finish Line’s largest shareholder. As of June 6, Sports Direct has increased its ownership interest in Finish Line to 18.9% (7.57 million shares) up from 17.4% on June 2 (7.02 million shares). Sports Direct informed the SEC that it acquired the shares for investment purposes and that it may take further actions, including, “making proposals to The Finish Line with respect to changes to the assets, business operations, capitalization or corporate structure.” Sports Direct is a U.K. sporting goods retailer which operates approximately 800 stores in the U.K. and Europe. The Company made its initial entry in the U.S. sporting goods market last month when it closed on its purchase of the assets of Bob’s Stores and Eastern Mountain Sports (EMS), which it acquired at the bankruptcy auction of Eastern Outfitters, LLC, DIP. Bob’s and EMS have been perennial underperformers, having previously contributed to the bankruptcy of their former owner Vestis Retail Group, LLC, DIP. Sports Direct reportedly made an unsuccessful attempt to enter the U.S. market in mid-2016 when it and Modell’s Sporting Goods pursued the acquisition of up to 200 of Sports Authority, DIP stores at that Company’s bankruptcy auction. Sports Direct appears to be ambitious about future expansion within the U.S., although it will be tested in its handling of Bob’s and EMS, which were a challenge to their former owners.
Future Retail Store Closings
AggData monitors upcoming retail store closings throughout the day and maintains an active database of store locations and anticipated closing dates. Here is a sample of recently announced store closings.
Click here to view future retail store closings.
2017 Mergers & Acquisitions Report
After three consecutive years of increases, 2016 global merger and acquisition (M&A) activity fell to $3.840 trillion, from the 2015 record high of $4.660 trillion. Analysts are predicting 2017 will keep pace, as companies and investors remain receptive to building scale. The Merger & Acquisition Activity report includes a list of all significant M&A activity including notable asset sales within the retail / wholesale food, convenience store, foodservice, retail / wholesale drug, casual dining / restaurant, mass merchandise, electronics / office products, home improvement / building materials, sporting goods, department stores / apparel / footwear / jewelry, and e-commerce sectors. Click here for more information.
