May 8, 2019
Lidl US recently announced its first of several waves of openings on Long Island, NY. The Company said it will open stores in Plainview, Babylon, Huntington and Center Moriches by early 2020 - see below for Future Store Openings Map. The stores in Babylon and Huntington will be remodels of Best Markets, while the Plainview and Center Moriches locations will be new. The store in Plainview will replace the Best Market store currently located in Hicksville. The Company acquired 27 Best Market locations in late 2018. Click here to request a list of future openings.
Hudson’s Bay Company announced it is pursuing strategic alternatives for the Lord & Taylor operating business, including a possible sale or merger. This action is related to the Company’s strategy to focus on the Hudson’s Bay and Saks businesses. Earlier in the year, HBC completed the sale of the Lord & Taylor flagship store in NYC. The Company previously announced it will close its Home Outfitters business in Canada in 2019 and up to 10 Lord & Taylor locations. HBC has retained PJ Solomon as its financial advisor for the review of the Lord & Taylor operating business.
Strategic Sales Insights
On April 16, Smart & Final announced a definitive merger agreement with funds managed by affiliates of Apollo Global Management whereby Apollo will acquire all the outstanding shares of Smart & Final stock at $6.50 per share, representing a total valuation of $1.12 billion. The transaction is expected to be completed by the third quarter of fiscal 2019. After rapid store growth began to cannibalize sales in fiscal 2017, Smart & Final slowed growth and opened just seven locations (three net new locations) in fiscal 2018. The Company instead invested in digital platforms including a new supply chain and new financial and analytics systems. 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.
On May 1, Kona Grill, Inc, DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court in the District of Delaware. As of the petition date, the Debtor operated 27 restaurants, down from 42 as of December 31, 2018. The Debtor stated that the goal of the proceedings is to “enter into an asset purchase agreement with a stalking horse buyer.” The Company said its restaurants will remain open and operating as usual during the Chapter 11 process. The Debtor filed a motion for interim approval of a $6.0 million DIP Term Loan to be provided by KeyBank National Association and Zions First National Bank. Proceeds will be used to roll up $2.5 million in prepetition loans and for working capital purposes.
Subsequently, Kona Grill received interim court approval to honor $3.5 million in gift cards and begin tapping financing during its bankruptcy. The judge said he is “a little concerned” about whether Kona can meet certain milestones set by its lenders.
On April 30, Carrols Restaurant Group completed the acquisition of 165 Burger King and 55 Popeyes restaurants from Cambridge Franchise Holdings, LLC in 10 Southern and Southeastern states. Carrols, which operates 1,010 Burger King and 55 Popeyesin 23 states following the acquisition, is the largest franchisee of Restaurant Brands International.
According to Biglari Holdings’ (dba Steak ‘n Shake) 10-Q report filed on March 3, the Company has temporarily closed 44 Company-owned restaurants until such time that a franchise partner can be found. Biglari previously announced last August that it was seeking franchise partners for all 413 of its Company-owned locations and that the refranchising process would take about three years to complete. Sales declined 10.4% to $173.8 million during the first quarter of 2019 and comparable restaurant sales decreased significantly by 7.9% (on top of a 1.7% drop in the prior-year period) primarily due to falling traffic. As of quarter-end, the Company still operated 367 Steak ‘n Shake restaurants, while franchisees operated 213 restaurants.
CVS is partnering with Target’s delivery service Shipt to offer customers delivery of both prescriptions and other products throughout the country from some 6,000 CVS stores. Terms of the deal were not disclosed. Target seems a natural partner for CVS, as the drug chain bought Target’s pharmacy business for $1.90 billion in 2015 and now runs the in-store pharmacy departments and health clinics in hundreds of Target stores.
Walmart is testing out a new employee structure within its stores in an attempt to cut the size of its store management staff. The Company is attempting to have fewer mid-level store managers to oversee workers. These workers would have greater responsibility, and their pay would be increased. Walmart has been trying to trim its labor costs but still needs to retain workers and attract talent.
In other news, Walmart’s e-commerce firm Flipkart is reportedly in talks to buy Indian grocery chain Namdhari’s Fresh. Namdhari’s operates over 30 stores in the southern city of Bengaluru, and the acquisition will help Flipkart expand its food and grocery segment. Walmart acquired 77% of Flipkart for about $16.00 billion last year.
Meanwhile, Walmart Canada plans to invest $200.0 million in its retail network to remodel 31 stores nationwide. In addition to an updated look, the Company will offer expanded fresh foods. More locations are being converted to the Supercenter format and the Company will be investing in its omnichannel offerings such as online ordering and in-store pickup. Walmart noted that over the last five years it has invested more than $1.00 billion in its Canadian store network, including a $175.0 million plan to upgrade 23 stores last fiscal year. That effort also focused on fresh and omnichannel enhancements. Walmart Canada currently operates about 410 locations; it opened more than 20 stores over the past four years.
PriceSmart’s April net merchandise sales increased 0.9% to $242.5 million. Foreign currency exchange rate fluctuations negatively impacted sales by $9.6 million, or 4%, compared to April 2018. April comps fell 0.5%. For the year-to-date period, sales increased 0.4% to $2.07 billion, and comps fell 1.3%.
PriceSmart also announced that on May 1 it opened a new warehouse club in Santiago de Veraguas, Panama, bringing its store count to 42. It is the Company’s sixth warehouse club in Panama and is smaller than its traditional warehouse clubs.
Ford is partnering with Amazon to allow delivery of packages to cars for Prime members when they are not home. The “Key by Amazon In-Car delivery” offering will be available for owners of select Ford 2017 and later model vehicles equipped with connectivity service, as well as for owners of Lincoln 2018 and later model cars.
Last Tuesday, Amazon launched a new Middle East marketplace, two years after buying the Dubai-based e-commerce company Souq.com for $580.0 million. The Company rebranded Souq.com to Amazon.ae, and users will be automatically redirected.
On April 30, Amazon announced it will expand its Denver Tech Hub. To accommodate the creation of 400 new high-tech jobs, Amazon will open a new office in downtown Denver, joining its Boulder office which opened last fall, and allowing the Company to more than double its tech workforce in the Denver area. Amazon has invested over $1.50 billion in Colorado over the last three years alone, including infrastructure, compensation and Whole Foods.
Amazon has reached out to a select number of Israeli retailers to enable them to sell directly to customers in Israel using its online platform. Joining Amazon’s local delivery programs will allow firms to use their current Amazon seller accounts to fulfil orders directly to customers in Israel, using local inventory.
According to published reports, Amazon has launched a freight brokerage platform and is testing it online in Connecticut, Maryland, New Jersey, New York, and Pennsylvania. The service enables shippers to get instant quotes and match with a freight service. Amazon isn’t providing capacity on its own vehicles as part of the platform but rather is brokering access to trucking partners on its network. The move is expected to put pressure on margins of existing freight brokers as Amazon shifts to free one-day shipping for its Prime members.
Our in-house retail industry experts recently released their analysis on the financial performance and store activity trends of the below retailers. To request more information, please click here.
Home Depot announced that Carol Tomé will be retiring as the Company’s EVP – Corporate Services and CFO, effective August 31. Richard McPhail will be promoted to EVP and CFO following Ms. Tomé’s retirement. Mr. McPhail joined the Company in 2005 and has held various senior level positions, most recently SVP finance, control and administration. Prior to joining Home Depot, he served as EVP of corporate finance for Marconi Corporation plc in London, leading business development efforts in Europe and North America. The Company reported strong fiscal 2018 fourth quarter and full year revenue, up 10.9% and 7.2%, respectively. It expects fiscal 2019 revenue growth of 3.3%, as it focuses its efforts on its digital footprint, with only five new stores planned for the year.
Duluth Holdings opened its 51st store, in Jacksonville, FL on May 2, its first location in the state of Florida. Last month, Duluth announced plans to open 15 stores this year, growing from 46 stores at the end of 2018 to 61 stores at the end of 2019. It previously opened four stores in March and April in Friendswood and Katy, TX; Wichita, KS; and Spokane, WA. The stores in Kansas and Washington were the first to open in each state, while the two Texas stores bring the total to five in Texas. Later this month, the Company is opening stores in Danbury, CT and Rogers, AR - click here to request a list of future openings.
Central Network Retail Group, a multi-format, multi-brand retailer currently operating 104 hardware stores, home centers and lumberyards across 14 states, announced plans to open seven stores in California. The stores are all in former Orchard Supply Hardware locations. The locations will operate under a new banner called Outdoor Supply Hardware and will sell CNRG’s merchandising assortment. To appeal to former Orchard Supply customers, the stores will offer many of the same products and services. Orchard Supply was founded in 1931 and purchased by Lowe’s Companies in 2013; in 2018, Lowe’s closed all 99 Orchard Supply stores to focus on its core banner. The stores are expected to open this fall.
Ahold Delhaize’s Food Lion opened a new store in Huntersville, NC on May 1, its third in the city. The store offers expanded fresh and prepared foods and features the Company’s new ‘Food Lion to Go’ online delivery service.
Giant Food Stores (also a banner of Ahold Delhaize) will open a new supermarket in Walnutport, PA on May 17. The 55,000 square-foot store will feature expanded fresh and produce offerings as well as prepared foods. Meanwhile, Giant opened its 100th fuel station on May 3 in Bethlehem, PA. Click here to request a list of future openings and closings.
Amazon’s Whole Foods is opening another store in San Francisco, CA. It recently signed a lease for a 56,000 square-foot space in a former Best Buy in City Center, expected to open in 2020. Whole Foods operates seven stores in the city and now has three additional stores planned, not including a Whole Foods 365 which is no longer part of the equation. Other stores in the works include a 45,600 square-foot location in the Stonestown Galleria mall opening later this year and a 55,000 square-foot store in Mid-Market opening in 2021.
Wegmans has finally set an opening date of October 27 for its first New York City location, a 74,000 square-foot store in the Brooklyn Navy Yard. See below for Future Store Openings Map - click here to request a list of openings.
United Natural Foods opened a new Cub Foods store in Minnehaha, MN this week. At 46,000 square feet, it is the smallest store operating under the banner. It will have fewer center store items (room-temperature packaged and canned food), while expanding grab-and-go concepts and fresh foods. The store will feature a walk-up window to order coffee and ice cream.
In conjunction with UNFI’s 2018 acquisition of SVU, it announced its plan to sell Supervalu’s retail operations. As of January 26, the Company operated 101 retail stores under the Shopper’s and Cub Foods banners. Mike Stigers, the new CEO of Cub Foods, recently commented that even though UNFI would like to sell all 70 of its Cub stores in one deal, “the Company won’t let the sale process get in the way of its plans to update stores and improve offerings.” Mr. Stigers says that “we’re looking at which stores are going to get remodeled next fiscal year. There’s no slowing down the growth of this brand as we look for the correct suitor in the future.”
Captain D’s recently signed a new franchise development agreement with StarChain USA for it to develop 15 new restaurants throughout Arkansas and the Carolinas over the next several years. Additionally, the group will acquire four existing Captain D’s restaurants in the Greenville-Spartanburg, SC market and five in the Little Rock, AR region.
Nordstrom is opening a flagship store in Manhattan this fall, joining the men’s store that opened there last year. In addition, it will open two small Nordstrom outposts in the West Village and on the Upper East Side under the Nordstrom Local banner. Those stores will not carry merchandise, but will serve as hubs for online pickups and returns, as well as services like tailoring and personal styling. By year end, there will be six Nordstrom locations in Manhattan: the flagship store, the men’s store, two Nordstrom Racks, and two Local hubs.
Trader Joe’s plans to open a store in Greensboro, NC at the Brassfield Shopping Center. The store will take the space once occupied by drug store chain Pharm-Mor. An opening date has not been set. Trader Joe’s has nine stores in seven North Carolina cities and nearly 500 stores nationwide. Click here to request a list of future openings.
Kroger’s Harris Teeter will open a new store in Hampton, VA. The 44,420 square-foot store is one of 10 former Farm Fresh stores purchased in 2018 to open under the Harris Teeter banner. It will feature expanded fresh and prepared foods, Starbucks, and ExpressLane Online Shopping.
ASG (Associated Supermarket Group) (Port Washington, NY) recently added two independent Fresh concept supermarkets: a 12,500 square-foot Met Fresh store in Whitestone and an Associated Fresh on NYC’s Upper East Side.
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.