May 30, 2019
Arcadia Group,a London-based fast-fashion retailer and operator of the Topshop and Topman brands, filed Chapter 15 in the U.S. Bankruptcy Court in the Southern District of New York on May 23. Chapter 15 is the section of the U.S. Bankruptcy Code that deals with foreign insolvencies. The Company sought Court protection to exit its U.S. operations and begin liquidating inventory in its 11 U.S. stores. The U.S. filing follows a separate insolvency process Acadia began in the U.K., also on May 23. The Honorable James Garrity Jr. is overseeing the U.S. case and has already agreed to grant provisional approval of Arcadia’s Chapter 15 filing. A final hearing is set for June 14. Arcadia stated that it would attempt to sell part or all of its U.S. stores as operating businesses, but if that effort proved unsuccessful, it would begin winding down store operations. The Company is working with Hilco Merchant Resources to liquidate its U.S. inventory. Arcadia said it is also considering closing 23 of its locations in the U.K. and Ireland and is seeking better lease terms for another 194 sites. Subsequent to the bankruptcy filing, reports indicate that the number of stores to close in the U.K. and Ireland will be “substantially higher” than the 23 initially under consideration. In addition to Topshop (click here to request a list of TopShop closures) and Topman, Arcadia’s retail footprint includes Dorothy Perkins, Miss Selfridge, Wallis, Evans and Burton. The reports say that the number of closures will be at least 46, primarily under the Evans and Miss Selfridge brands (there are 107 stores under the two brands). Arcadia owns 2,100 stores and leases another 500.
Department store retailer Stein Mart announced it will install Amazon Hub lockers in nearly 200 stores beginning next month. The lockers are self-serve kiosks that allow Amazon shoppers to execute in-store pickup and returns.
In other news, Amazon disclosed that its portfolio of fulfillment centers has increased globally. In its annual report, the Company said it has more than 233 million square feet of owned and leased space for fulfillment centers, data centers “and other,” up from 209 million square feet in 2017 and 160 million square feet in 2016. Amazon’s overall real estate footprint included more than 277 million square feet of leased space and more than 11 million square feet of owned space globally as of December 31, 2018.
In other news, Amazon reportedly plans to invest around $100.0 million to build an air cargo hub at Lakeland Linder International Airport in Polk County, FL, as part of a 20-year deal that includes the lease of 47 acres to build a seven-jet cargo hangar, with an option to expand on an additional 62 acres. The facility, which is expected to be 223,000 square feet with two adjacent buildings of up to 60,000 square feet, will be Amazon’s largest facility in the Southeast. Amazon has been moving toward building its own in-house shipping and logistics service. A few weeks ago it announced it will invest $1.50 billion on a three million square foot air hub expected to house around a hundred cargo jets. It also has plans for a regional air hub at the Fort Worth Alliance Airport in Texas, which is expected to commence operations this year.
Meanwhile, as Amazon transitions from two-day shipping to one-day for Prime members, it is looking to increase merchandise in its distribution centers. The Company has reportedly sent out an email to sellers, offering discounts of up to 75% on Amazon warehouse storage fees in exchange for sellers storing more of their most popular products with the Company.
Amazon announced plans to open a fourth Amazon Go store in San Francisco, CA in the city’s Embarcadero Center. No opening date has been disclosed. There are currently 12 Amazon Go stores open in Seattle, Chicago, San Francisco and New York City.
Lastly, after abandoning its plans to build a four million square foot headquarters in Long Island City, NY, Amazon is now reportedly looking for office space on Manhattan’s West Side. The Company is said to be in talks with owners of two new skyscrapers a block away from Penn Station and is seeking “at least 100,000 square feet or much more.” Those potential sites include One Manhattan West and Two Manhattan West. It is also considering space in the U.S. Post Office building across the street.
The Creditors’ Committee filed an objection to Sears Holdings Corporation, DIP’s amended Chapter 11 Plan, stating that creditors would be better off if the case was converted to a Chapter 7 liquidation. The Committee stated that “the Debtors rely on unsupportable assumptions regarding the downside risk creditors would face in a Chapter 7, and they artificially inflate the costs associated with conversion. Conversion to Chapter 7 most likely would result in creditors, including PBGC, receiving distributions in excess of those contemplated under the Amended Plan, curtailing the administrative expense burn attendant to the Chapter 11 cases. While pursuing and obtaining confirmation of a Chapter 11 plan often is the preferred course to conclude a Chapter 11 case, here the path to maximize stakeholder recoveries appears to be through Chapter 7.” As previously noted, a hearing to consider approval of the Disclosure Statement is scheduled, and a hearing to confirm the Plan is scheduled for July 23.
Lidl - Strategic Sales Insights
Lidl will complete its second full year in the U.S. in June, and it has been an eye-opening experience. Launched in 2017 with much anticipation and great fanfare as the next Aldi, Lidl planned to have 100 stores opened by the end of summer 2018. However, it stumbled out of the gate on the real estate front and with its merchandising. Competitors upped their game as the long lead-time between Lidl’s announced plans and actual openings allowed retailers like Harris Teeter, Walmart, and Ahold Delhaize to competitively slash their prices to retain market share. In 2018, Lidl regrouped, with parent company CEO Klaus Gehrig defining the go forward strategy, including plans to restart growth with about 20 new stores, and a smaller footprint and product offering. Our report takes a close look at the Company’s operational and competitive status, including market position, real estate and sales trends, and provides visual competitive analyses as well as key real estate metrics like store count, average sales per store and sales per square foot.
Sobeys has opened two FreshCo stores in Richmond, B.C., as it continues to grow the banner in Western Canada, where it made its debut last month in Mission, B.C. New FreshCo stores were introduced at four locations in London, Ontario last summer. On December 14, 2017, Sobeys said it will convert 25% of its 255 Safeway and Sobeys locations in Western Canada into the FreshCo discount banner over a four-year period. The Company currently operates 91 FreshCo stores, all located in Ontario.
Sprouts Farmers Market will open a new, 30,000 square-foot store in New Port Richey, FL on July 31.
Dollar General has expanded in Pennsylvania with a new 148,000 square-foot cold storage facility in Pottsville, PA, which will distribute to about 300 stores in the Northeast. The Company has been shifting to self-distribution of perishables.
Specialty Retail Shops Holding Corp., DIP filed an amended Plan of Reorganization that settles disputes with the Creditors’ Committee, private equity owner Sun Capital, and lenders, including Wells Fargo, N.A. Sun will pay $15.5 million to settle potential claims against it by the Debtor and the Creditors’ Committee; the Plan also provides for releases to Sun, and its current and former officers and investors, among others. The Committee had previously filed a motion to pursue $67.5 million in claims against Sun related to payment of dividends and fees during the past four years. The request to convert the case to a Chapter 7 will also be withdrawn. While the plan appears to resolve many of the hurdles, there is still resistance among certain creditors, who indicate they will oppose the Plan.
SpartanNash has invested $18.3 million to relaunch 18 Family Fare supermarkets in western Michigan. The relaunch includes a new Family Fare logo, an updated look, and other in-store enhancements. It will also include more competitive pricing, weekly deals, and added convenience. SpartanNash piloted the rebranding at four Family Fare locations last year and completed upgrades at 14 more stores earlier this month.
Yum! Brands’ Taco Bell recently signed its largest master franchise agreement in India with Burman Hospitality Private Limited (BHPL), which committed to developing 600 restaurants there in the next 10 years. With the expansion, India will become Taco Bell’s largest market outside of the U.S (see below for U.S. Future Store Opening Map - click here to request a list).
In addition to India, Taco Bell will continue growing across Asia, with the goal of expanding to five restaurants in Thailand by the end of 2019. Over the next year, it will also open stores in Sydney and Melbourne, Australia for the first time, and is looking to enter Indonesia and Portugal as well.
Hispanic grocer Cardenas Markets opened a new store in Las Vegas, NV that will be the prototype for its “next generation” concept for all future models. The new design has been dubbed the “Keep Life Flavorful” brand. The stores include coffee shops and small-format restaurants to complement full grocery selections. The new store is Cardenas’ fifth in the Las Vegas area, and 56th overall (49 Cardenas stores and seven Los Altos Ranch Markets). It has four other openings planned for 2019, including another Las Vegas store and others in Concord and Victorville, CA, and Tucson, AZ. Cardenas is also building a store in Montclair, CA, which is scheduled to open early next year.
Meijer has partnered with Target’s Shipt to launch its home delivery service in suburban Cleveland, OH.The launch comes a week after Meijer opened three stores in one day, in Avon, Mentor and Stow (suburbs of Cleveland) - click here to request a list of Meijer Future Openings.
Instacart is expanding its footprint by adding another entire floor to its current two-floor space in a building in downtown San Francisco, CA. The Company signed a lease last week and expects to move into the space in the second half of 2020. Including the new space, Instacart will be leasing approximately 90,000 square feet in the building.
Electronic Express, an independent consumer electronics and major appliances retailer, plans to open a 30,000 square-foot store in Florence, AL on July 11. The store will house electronics, appliances, mattresses, and other lifestyle goods. Electronic Express was established in 1983 and is headquartered in Nashville, TN. The new store brings the Company’s store count to 18, including 15 in Tennessee and three in Alabama.
Last Thursday, Starbucks announced that a Company controlled by Thai billionaire Charoen Sirivadhanabhakdi and a Hong Kong-based firm had won an exclusive deal to operate and develop the Company’s retail business in Thailand. The agreement, which it expects to close this month, is with Coffee Concepts, a joint venture between Hong Kong-based Maxim’s Caterers Limited and F&N Retail Connection Co. Ltd, a Company owned by Chareon’s Thai Beverage Pcl. Starbucks began operations in Thailand in 1998 and has 372 stores in the market. Maxim’s Caterers has been Starbucks’ partner in Hong Kong since 2000 and also operates stores in Cambodia, Singapore and Vietnam. Under the agreement, Maxim’s Caterers will oversee the retail operations and new store development in Thailand.
Regis Corporation inked a deal to refranchise 190 Company-owned stores substantially located in Ohio and surrounding areas, operating under the Famous Hair, Best Cuts, Fiesta Salons, First Choice Haircutters, and BoRics Hair Care banners. Franchisee Super C Group will remodel and convert the stores to Supercuts and Cost Cutters over the next several months. The transitions will begin in the Cleveland area next month. Earlier this year, the Super C Group purchased and converted 66 salons in Michigan to Supercuts, making them the largest Supercuts franchisee in the Midwest. This agreement makes Super C the largest Cost Cutters franchisee for Regis.
This information contained in this newsletter is compiled from sources which Market Service Inc. does not control and unless indicated is not verified. Its contents are not to be divulged. Market Service Inc., its principals and writers do not guarantee the accuracy, completeness or timeliness of the information provided nor do they assume responsibility for failure to report any matter omitted or withheld because of their negligence.