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Walgreens Abandons Rite Aid Bid; Will Instead Buy Nearly Half Of Stores

On June 29, Walgreens Boots Alliance (WBA) and Rite Aid have canceled their merger agreement, originally announced in October 2015, under which WBA would have acquired all outstanding shares of Rite Aid. The decision to terminate the agreement follows feedback received from the Federal Trade Commission (FTC) that led the Companies to believe that the parties would not have obtained FTC clearance to consummate the merger.

In connection with the termination, WBA has agreed to pay Rite Aid a termination fee in the amount of $325.0 million in cash. In light of the termination of the merger agreement, the divestiture agreement with Fred's, Inc. was also terminated, effective June 29. WBA also agreed to reimburse certain of Fred’s transaction costs in an amount not to exceed $25.0 million.

Concurrent with this announcement Rite Aid and WBA announced that they entered into an asset purchase agreement, whereby WBA will acquire 2,186 stores (representing 48% of the chain), related distribution assets and inventory from Rite Aid for in an all cash price of $5.175 billion, on a cash-free, debt-free basis. Under the terms of the agreement, Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA, Walgreens Boots Alliance Development GmbH, at cost, substantially equivalent to Walgreens for a period of 10 years. The 2,186 stores included in the agreement are primarily located in the Northeast, Mid-Atlantic and Southeastern regions of the United States. The three distribution centers included in the agreement are located in Dayville, CT, Philadelphia, PA and Spartanburg, SC. Under the terms of the agreement, Rite Aid will provide certain transition services to WBA for up to three years after the closing of the transaction. The transaction, which is expected to close within six months, has been approved by the Boards of Directors of Rite Aid and WBA and is subject to antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions. Approval of this transaction does not require a shareholder vote. Upon the initial closing of the new transaction, WBA will begin acquiring the stores and related assets on a phased basis over a period of approximately six months, and intends to convert acquired stores to the Walgreens brand over time. Rite Aid expects to use a substantial majority of the net proceeds from the transaction to repay existing indebtedness, significantly reducing its leverage levels.

Click here if you would like to request a list of the acquired stores once they become available.  

The Fresh Market

The Fresh Market announced that CEO and Board member Rick Anicetti has resigned from both positions, effective immediately. Mr. Anicetti joined the Company in September 2015. Apollo Global Management, which acquired The Fresh Market in 2016 in a leveraged buyout, has appointed SVP and CFO Brian Nicholson as interim CEO while it looks for a permanent replacement. Mr. Nicholson has served as CFO since September 2016, and previously served in various roles with the Company from 2004 to 2012, including VP of Business Strategy, Financial Planning, and Analysis.

Leading up to its leveraged buyout, The Fresh Market struggled with declining comps and margins, including the negative impacts from aggressive growth (which ultimately caused cannibalization), increased competition as well as high perceived pricing. Since the takeover, the Company has focused on closing underperforming stores, and a rebranding effort that includes improved pricing and merchandising. However, to date the rebranding effort has been slow to roll-out with only a handful of the chain’s 175 stores seeing the investment.

Click here for The Fresh Market's full store list.

Kroger

At a recent conference, Kroger CFO Michael Schlotman said he is excited to finally start seeing if the preparations his Company made to compete with Lidl will stand the heat. He feels “great about it” and commented that he is “glad their stores are finally open.” On June 15, Lidl opened its first 10 stores in the U.S., in Virginia, North Carolina and South Carolina. Ahead of the openings, Kroger reduced prices at some of its southern stores. 

Meanwhile, CEO Rodney McMullen said at Kroger’s annual shareholder meeting last week that he would not address the possibility of Kroger making a competitive bid to acquire Whole Foods as a way of stopping Amazon from completing its proposed $13.70 billion purchase of that company. Mr. McMullen expressed optimism about Kroger’s ability to compete with Amazon, despite the fact that Kroger’s shares are down 25% in the wake of the Amazon-Whole Foods news and that it reported weak first quarter results a day prior.

Recent reports have also suggested that Walmart does not intend to enter a bidding war for Whole Foods. Walmart saw the largest hit to its market cap from the announced Amazon/Whole Foods deal, but there are many other retail options for Amazon, such as BJ’s Wholesale Club or one of the dollar store chains.

Click here for Kroger’s full store list.

Lidl

Following Lidl’s first 10 store openings in the U.S., the Company revealed that it will open an additional two stores in Virginia (Chesapeake and Culpeper) and two in North Carolina (Havelock and Wake Forest). This will bring the Company’s U.S. store count to 14. It plans to have 100 stores within the year.

In addition, Lidl announced plans for its fourth U.S. regional headquarters and distribution center in Cartersville, GA.

Click here for Lidl’s full U.S. store list.

Staples

Private equity firm Sycamore Partners is reportedly in advanced discussions to acquire Staples, Inc. in a leveraged buyout, after topping a bid from Cerberus Capital Management. The transaction, which could be valued at over $6.00 billion, would be largely financed with debt, and it could close as soon as this week, according to published reports. Last year’s attempt by Staples to merge with Office Depot was blocked by the FTC, which cited anti-competitive issues. The Company continues to be beset by falling demand for office supplies and growing competition from Amazon. Management lacks a strategy to revive the top line; therefore, the retail unit has been contracting by closing underperforming stores and cutting costs. The private equity firms are interested in the commercial side of the business where demand is more stable, but Amazon is also targeting this niche. To its credit the Company’s free cash flow and liquidity remain strong. If an LBO were to occur, the transaction would be funded with debt, which would leverage the relatively strong balance sheet. The additional interest expense could compromise free cash flow, potentially causing it difficulty in making debt service payments in the future. Some of this negative impact could be offset by ongoing cost reductions. In summary, adding debt to the Company as part of an LBO will magnify the risks associated with the retail unit.

Click here for Staples’ full store list.

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.

Fresh Encounter 

Fresh Encounter will manage the 15 former Marsh Supermarkets in Ohio and Indiana acquired earlier this month by Generative Growth II LLC, an affiliated company. The Indiana Marsh stores now under Fresh Encounter management are in New Palestine, Marion, Indianapolis (2), Columbus, Hartford City, Elwood, Tipton, Pendleton, Richmond and Greensburg; The Ohio supermarkets are in Troy, Van Wert, Middleton and Eaton. The newly acquired retail stores will be re-bannered on a regional basis in the near future.

Marsh Supermarkets

Last week, Marsh Supermarkets Holding, LLC, DIP filed notice that liquidation sales being conducted at 18 of the 44 “core stores” that were not sold at auction would end July 20, and the stores would be permanently closed. The Debtors also filed notice that liquidation sales being conducted at the 11 stores purchased by Kroger will end on July 9, at which time the stores will be turned over to Kroger.

Click here for Marsh Supermarkets’ full store list.

Macy's

Macy’s is opening a 16,300 square-foot Macy’s Backstage store in Miami, FL this fall, to be located on the second floor of an existing Macy’s location. The location will be an outlet store, selling merchandise at 20% to 80% off comparable department store prices, similar to TJ Maxx, Ross or Marshalls. However, products will consist of merchandise brought in by a team of buyers, rather than marked down or unsold items from Macy’s department stores. The store will have an expanded selection of home décor, bath and beauty products, toys and technology items, along with apparel, shoes and accessories. This will be the fourth Macy’s Backstage in Florida, and first in Miami, joining locations within Macy’s at Boynton Beach, Altamonte Springs and Fort Myers. Macy’s outlet concept has been growing; there are currently more than 30 stores nationwide and another 30 planned to open by year end. In comparison, Macy’s has closed about 100 full-size department stores nationwide over the last year.

Click here for Macy’s full store list.

Aldi

Aldi is investing more than $36.0 million into its Pittsburgh, PA-area stores. The first mark of Aldi’s investment was the reopening of its remodeled store in Robinson last week. The upgrade includes wider aisles, as well as more fresh produce, meat, dairy and bakery items. The Robinson location is the first of 36 stores in the region due to get a facelift by 2020. Aldi also plans to open new locations in Frazer. The Company disclosed its intention to remodel 37 stores in the St. Louis, MO metro area by 2020 at a cost of more than $49.0 million.

Aldi is increasing its San Diego footprint with a fourth county location already under construction. The Company is also growing in the Greater Washington D.C. area with four new stores expected in 2017; it recently signed a lease for a 19,000 square-foot store in Falls Church, VA.

Meanwhile, Aldi will reopen three remodeled suburban stores this week in Illinois, located in Skokie, Bolingbrook and Harwood Heights. In total, Aldi intends to remodel 130 stores in the Chicago area by 2020 at an investment of nearly $180.0 million.

These plans are part of a $1.60 billion nationwide undertaking to remodel more than 1,300 U.S. stores in the next three years.

Click here for ALDI’s full store list.

Dick's Sporting Goods

On June 20, Dick’s Sporting Goods announced the opening of a new Dick’s Team Sports HQ office in San Diego, CA to serve as a West Coast technology and innovation center. The office will provide cloud administrative infrastructure, management solutions, analytics and communications to many of the largest youth sporting associations in the U.S. The West Coast technology and innovation center houses the former Affinity Sports, acquired by Dick’s in 2016. Dick’s Team Sports HQ also has offices in New York, Atlanta and Pittsburgh, and it serves youth sports governing bodies representing over nine million young athletes.

Click here for Dick’s Sporting Goods’ full store list.

                                             

Alimentation Couche-Tard

Earlier this week, Alimentation Couche-Tard announced that it has obtained clearance from the FTC for the acquisition of CST Brands.  CST stockholders will receive US$48.53 in cash per share, without interest, representing a total enterprise value of US$4.40 billion, including the assumption of debt.

Once the transaction is completed, Couche-Tard would control the general partner of CrossAmerica Partners LP (CAPL: a master limited partnership) and own 100% of CAPL’s Incentive Distribution Rights (partnership interests that provide for special distributions associated with increasing partnership distributions) and approximately 21% of CAPL’s outstanding common units. CAPL distributes branded and unbranded road transportation fuel to approximately 1,200 locations in the U.S.

In recent months, Couche-Tard has worked closely with the FTC and the Canadian Competition Bureau to gain clearance for the deal. It has agreed to divest 70 sites in the U.S. to Empire Petroleum Partners, LLC, which should close by September. It continues to work with the Bureau to obtain clearance for the transaction in Canada, which is expected to be announced later this week.

Central Grocers

The bid deadline for Central Grocers, DIP’s assets expired earlier this week; the Debtor did not file notice of any bids in court documents. As previously reported, Albertsons’ Jewel Food chain was the “stalking horse” bidder for 19 Strack & Van Til locations and inventory, with an offer of $100.0 million. The Debtor previously indicated it was evaluating proposals to acquire its one million square foot distribution center in Joliet, IL, and six additional real estate assets. An auction for the assets is scheduled for June 29. Meanwhile, about $20.0 million in food inventory held in its distribution center is being sold off, and frozen foods and a selection of meat and produce are being offered at up to 50% off wholesale prices. Central Grocers is winding down operations under Chapter 11 bankruptcy.

Golub Corporation

Golub Corporation opened a new Market 32 in Clifton Park, NY, the first to be built from the ground up. At 54,000 square feet, it is nearly twice the size of the Price Chopper it replaced and is the second Market 32 in Clifton Park. Market 32 stores feature a more open space concept and offer customers Wi-Fi-equipped cafes, drive-thru pharmacies and expanded prepared food offerings. According to Golub, “It’s our intent to continue converting Price Chopper stores, evaluating each opportunity as we progress forward. In the meantime, many of the merchandising and customer service initiatives that have excelled in our Market 32 stores are being implemented in our Price Chopper stores.” Price Chopper is now converting stores in Brunswick and Plattsburgh, and will be converting the East Greenbush store soon.

Click here for Golub’s Price Choppers’ full store list.

Albertsons

Albertsons broke ground on a new flagship store in Boise, ID, expected to open next summer. The store will be adjacent to Boise State University and will be the first new Albertsons in its home state of Idaho since 1999. Chairman and CEO Bob Miller said that the new flagship is just the beginning of a “multi-million-dollar” investment in the Treasure Valley. The Company also announced it will open a 100,000 square-foot store in Meridian, at the site of a former Shopko, set to open in 2018. According to the Company, it is aiming to make the store “unlike anything this market has seen … a destination for foodies; a place of food exploration, adventure and education.” It will feature an expanded prepared food selection and will offer indoor and outdoor dining.

Click here for Albertsons’ full store list.

Lowe's Companies

Earlier this week, Lowe’s Companies completed its previously announced acquisition of Maintenance Supply Headquarters for $512.0 million. Maintenance Supply, based in Houston, TX, distributes maintenance, repair and operations (MRO) products serving the multifamily housing industry; it operates 13 distribution centers serving customers in 29 geographic areas in the western, southeastern and south central U.S. This comes after its November 2016 acquisition of Central Wholesalers, an MRO distributor in the Mid-Atlantic and Northeast. With these two acquisitions, Lowe’s multifamily MRO business now includes 16 distribution centers, generating more than $400.0 million in annual sales.

Click here for Lowe’s Companies’ full store list.

Publix

Publix Super Markets will make its Virginia debut when it opens a store in Glen Allen on July 15. The Company said it would enter the state back in 2016, after signing a lease for the 49,000 square-foot store as well as another 54,000 square-foot store in Bristol. Virginia is Publix’ seventh operating state, after entering North Carolina in 2014 where it now has about 25 stores. Publix currently has plans for up to 12 Virginia stores, including 10 former Martins stores acquired last year. There are seven competing food retail stores within three miles of the new store, including four Food Lions, two Krogers, and one Aldi.

Click here for Publix’s full store list.

Brookshire's Grocery

Brookshire’s Grocery will close three underperforming stores in Wylie, Ennis and Forest Hill, TX in late July. The Company cited competitive pressures and said the closures will allow it to “reinvest in higher-potential markets as it continues its expansion efforts.” In a memo sent to employees, CEO Brad Brookshire commented, “Competition is fiercer than it has ever been. Amazon.com just announced the purchase of Whole Foods for $13.70 billion, which will have enormous implications for the retail grocery industry. The German chains Aldi and Lidl are expanding in the U.S., and Wal-Mart, drugstore chains, dollar stores, restaurants, online markets and others are all competing for food dollars.” The memo also stated, “This week Brookshire Grocery Co. conducted the grand opening of a new Super 1 Foods store in Scott, LA. Another new store is under construction in south Louisiana and will open in late 2017.… The Company continues to focus on growth and has increased its retail footprint substantially since August, when it opened 25 Spring Market stores in Texas and Louisiana.”

Click here for Brookshire Grocery’s full store list.

Wakefern Food Corp.

A new Price Rite store opened this week in Utica, NY. The Company said that the 32,000 square-foot facility is the Company’s 12th to open in the state and it is looking to further expand in Utica. Price Rite is a banner of Wakefern Food Corp. It currently operates 63 grocery stores in Connecticut, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Maryland and Virginia. Earlier this month, Aldi opened a competing store in Utica. There are five competing grocers within three miles of the new store, including Price Chopper (2), Aldi, Hannaford, and Save-A-Lot.

Click here for Wakefern’s full store list.

The Finish Line

The Finish Line’s first quarter sales slipped 0.1% to $429.8 million, and comps were down 1.1%. Sales of Finish Line shops within Macy’s stores increased 13.6%. Profit fell 15.4% to $8.1 million. CEO Sam Sato said, “We delivered earnings in line with our expectations despite some unanticipated headwinds late in the quarter. Following low-single digit comparable sales growth for the combined March/April period, weak traffic trends, and a difficult product launch comparison in May resulted in comps coming in below plan. We offset pressure on our top line and protected profitability with disciplined expense management resulting from the work we’ve done creating a more nimble and efficient organization.” During the quarter, the Company closed two underperforming stores, ending with 571 stores in operation.

Click here for The Finish Line’s full store list.

Raley's

Raley’s will open a new 40,000 square-foot store in Rancho Cordova, CA, its second area supermarket opening in the past two months. In April it opened a nearby 35,000 square-foot Raley’s, which was its first new store in six years. Raley’s also has plans for a 35,000 square-foot store in Truckee. The Company operates more than 120 stores in Northern California and Nevada.

Click here for Raley’s full store list.

Yum! Brands

Australian restaurant-operator Collins Foods is buying 28 KFC locations from Yum! Brands. Collins will acquire the stores, which are located in Tasmania, South Australia and Western Australia, for 110.2 million Australian dollars (US$83.41 million) in cash.

Barnes & Noble

Barnes & Noble’s fourth quarter sales declined 6.3% to $821.2 million, driven by a 6.3% drop in comps and seven net store closings. Online sales grew just 2.9%, a relatively low rate compared to other retailers. Despite the lower top line, quarterly EBITDA and net loss improved due to significant cost-cutting measures, particularly in e-commerce and advertising. B&N’s retail business generated EBITDA of $8.2 million compared to ($11.1 million) in the prior-year period. The NOOK business narrowed its EBITDA loss to ($4.3 million) compared to ($14.9 million) during the same quarter last year. Fourth quarter net loss also narrowed to ($13.4 million) compared to ($30.6 million) last year. Looking ahead to fiscal 2018, the Company expects comps to decline in the low single digits and full-year consolidated EBITDA to be approximately $180.0 million. Management anticipates retail EBITDA of $190.0 million, flat compared to 2017, and NOOK EBITDA loss of $10.0 million, a $7.3 million improvement.

Click here for Barnes & Noble’s full store list.

Darden Restaurants

Darden Restaurants reported fourth quarter sales growth of 8.1% to $1.93 billion. Consolidated comps increased 3.3% and consisted of growth of 4.4% for Olive Garden, 3.5% for LongHorn Steakhouse, 0.5% for The Capital Grille, 3.3% for Eddie V’s, 0.1% for Yard House, 1.4% for Bahama Breeze and a decline of 1.3% for Seasons 52. Net income from continuing operations rose 5.8% to $148.8 million. Earlier this week, the Company increased its quarterly dividend 12.5% to $0.63 per share, payable on August 1, to shareholders of record on July 10. Darden added a net of 159 new stores, 140 of which were from the Cheddar’s acquisition, bringing its total store count to 1,695.

Looking ahead at fiscal 2018, Darden expects comp growth of 1% – 2%, new restaurant openings of 35 – 40, total sales growth of 11.5% – 13%, total capital spending of $400.0 million – $450.0 million, and EPS of $4.38 – $4.50 (compared to $4.02 in fiscal 2016).

Click links above for full store lists.

Sears

On June 22, Sears Canada filed for protection under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice. Sears Holdings owns 11.7% of Sears Canada’s stock with Edward Lampert, through ESL Investments and affiliates, owning approximately 45% of the stock. In the filing, Sears Canada indicated it intends to reorganize and would like to exit CCAA protection by the end of the year. FTI Consulting has been appointed the Monitor for the case and has oversight authority; it would potentially supervise the sale of assets, not Sears Holdings or ESL.  However, the filing should have a minimal impact on Sears Holdings.

Last week, Sears announced another 20 store closings (18 Sears and two Kmart), bringing the total closings to approximately 275 during the year to date period. Interestingly all 20 locations were leased from Seritage, and per the terms of the Master Lease with Seritage, Sears must pay rent for the next 12 months, plus one year of estimated operating expenses on the vacated properties. The below map includes year to date 2017 closings at Sears and Kmart, inclusive of this week’s 20 additional closings.

Meanwhile, Sears has opened a freestanding store concept dedicated to two of its strongest categories. Sears debuted its first store under the Sears Appliances & Mattresses banner in Pharr, TX. The format expands the concept of the Sears Appliance store, which opened in Ft. Collins, CO in 2016. The 20,000 square-foot Sears Appliances & Mattresses store features interactive displays of home appliance brands in kitchen vignettes.

Click here for Sears’ full store list.

Target

Last week, Target completed the renovations and reopened eight North Texas stores. Renovations included a top-to-bottom overhaul, along with expanded prepared food offerings and additional self-checkout lanes. The Company previously announced plans to invest $220.0 million to renovate 28 stores in the Dallas-Fort Worth area. This is Target’s largest remodel investment in a single market in 2017 and part of its plan to reimage hundres of stores across the country over the next three years. While Target is still trying to figure out its food offering strategy and niche, it may have the most to lose as Amazon’s acquisition of Whole Foods draws near. 

Click here for Target’s full store list.

Costco Wholesale

Costco Wholesale broke ground on its first poultry processing plant, hatchery and feed mill facility, location in Fremont, NE. Projected to open in April 2019, the $300.0 million facility is expected to generate an overall economic impact of $1.20 billion annually and connect Costco to a network of producers in eastern Nebraska. The facility will utilize the latest technology to process an expected two million chickens per week for sale in Costco stores.

Click here for Costco’s full store list.

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.