Retail News

Ahold Delhaize

Published reports indicate that Ahold Delhaize is suspending its Bfresh brand of smaller-format, urban-focused grocery stores, which it had initially planned to open in Philadelphia as part of a larger national rollout. According to sources close to the matter, the Company still plans to use the Philadelphia real estate that it secured to accommodate Bfresh stores but is rethinking its concept for those locations, which include two ground floor spaces in condominium buildings. The 3,700 square-foot Everything Fresh grocery store that Ahold’s Fresh Formats LLC division opened in December 2014 as a prototype for the smaller-format stores, which the Company plans to close on Saturday.

Meanwhile, the Company’s Bfresh store in Brighton, MA, is also set to close this weekend. It is one of three existing Bfresh locations, all of which are in the Boston, MA area. Plans are reportedly in the works to integrate the Bfresh brand there with Ahold’s Stop & Shop banner. Ahold opened its first Bfresh store in Allston, MA, in September 2015. A Fairfield, CT, shop closed in April 2016, less than six months after opening.

Albertsons

Albertsons Cos. has made an investment in El Rancho Supermercado, operator of 16 Texas stores. The Latino-focused chain will continue to operate as an independent company headquartered in Garland, TX. Albertson’s Chairman and CEO Bob Miller commented, “With El Rancho’s own distribution and manufacturing facilities serving their Texas stores, we can share best practices that will reduce costs and benefit our customers.” President of El Rancho, Salah Nafal, stated that the transaction “will allow El Rancho to accelerate growth and expand into new markets throughout Texas while finding operational efficiencies in all aspects of our business.”

Amazon/Whole Foods

Amazon announced another round of price cuts at Whole Foods, including deeper discounts for Prime members, on holiday staples and a variety of other groceries. The cuts include both national and private-label products. When Amazon acquired Whole Foods in June, it temporarily slashed prices on a few selected items by up to 43%.

In early November, Amazon announced plans to abruptly shut down its Amazon Fresh grocery delivery service in parts of nine states, offering no explanation. Customers in California, Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania and Virginia received notification that the service was closing in certain neighborhoods later this month; however, it will continue in certain areas of large cities such as New York, Los Angeles, Chicago, Philadelphia and Boston. A published report last week, citing people familiar with the matter, claim the Company has privately placed blame on the U.S. Postal Service (USPS) for offering an “unreliable experience to customers with too many late or missed deliveries,” as well as planned increases in delivery rates by the USPS in those areas and the USPS’ inability to deliver groceries in disposable paper bags. The sources also stated that the affected service areas were less densely populated, pressuring the economics of the delivery service.

According to published reports, the Amazon Go checkout-free retail format has finally worked out most of its previous glitches and the concept is prepared for a roll out. Amazon Go premiered last December in Seattle only to employees and initially faced problems tracking more than 20 customers at a time and keeping tabs on merchandise moved from store shelves. As a sign that Amazon Go is ready for prime time, hiring for the Amazon Go team has shifted from the engineers and research scientists needed to perfect the platform to the construction managers and marketers who would build and promote the stores to consumers.

Bon-Ton, Stage Stores and Stein Mart

Last week, Bon-Ton Stores, Stage Stores and Stein Mart all reported third quarter results, which included single digit comp declines at all three companies. Bon-Ton’s management cited unseasonably warm weather for its 6.6% comp decline; Houston, TX-based Stage Stores and Jacksonville, FL-based Stein Mart were both directly impacted by Hurricanes Harvey and Irma, although both noted sales improved in October. Stage Stores estimated that the hurricanes impacted total sales by $3.8 million, or 1.1%, as 130 of its nearly 850 stores were temporarily closed or disrupted. Stein Mart noted one-third of its 293 stores were impacted by closures or reduced hours.

Lower than expected sales forced Bon-Ton to be more promotional, which offset a reduction in expenses and ultimately pushed quarterly EBITDA into negative territory; the Company burned $66.9 million in cash during the TTM period. At Stage Stores, quarterly EBITDA loss widened 17.8% to $11.5 million, and as a result of increased expenses due to higher new store and advertising costs, Stein Mart’s quarterly EBITDA loss widened 91.1% to $15.9 million.

Addressing its underperforming operations, Bon-Ton announced it is closing at least 40 of its 260 stores in 2018, but management provided no specifics about the closings except to say they will all be leased locations. Looking ahead, Bon-Ton lowered its 2017 comp guidance from a 3.5% – 4.5% decline to a 4.5% – 5.5% decline. Management lowered EBITDA guidance from $115.0 million – $125.0 million to $100.0 million – $110.0 million. Meanwhile, Stage Stores narrowed its 2017 guidance, now expecting adjusted loss per share of $0.90 – $1.25, compared to the prior guidance of $0.90 – $1.35. Stein Mart commented on its quarterly conference call that it is scaling back expansion in 2018 and expects to open only three stores while shuttering four locations.

Ross Stores and Burlington Stores

Ross Stores and Burlington Stores, which continue to grab market share from the traditional department stores, also reported third quarter results in the last week. At Ross, sales were up 7.8% to $3.33 billion, and comps rose 4%. Profit increased 1.22% to $274.4 million. CEO Barbara Rentler commented, “Our third quarter sales and earnings outperformed our expectations despite being up against our toughest prior year comparisons and two major hurricanes during the quarter. We are pleased with these strong results, which reflect our continued market share gains in a challenging retail environment. Operating margin of 13.3% was better-than-expected, mainly due to a combination of higher merchandise margin and leverage on above-plan sales.” Looking ahead, the Company raised its sales expectations for the fourth quarter, now projecting comps to be up 2% – 3%, from prior guidance of 1% – 2% growth. Ross Stores now expects fiscal 2017 EPS of $3.24 – $3.28, up from its prior outlook of $3.16 – $3.23.

At Burlington, sales increased 7.1% to $1.44 billion, and comps were up 3.1%. Comps exclude 19 stores that were closed for seven or more days during the quarter because of the hurricanes, which reduced sales by $17.0 million. As a result of gross margin expansion, adjusted EBITDA rose 22.2% to $133.9 million. In its earnings release, the Company announced that on November 17 it completed the repricing and extension of its senior secured term loan facility, which reduced the applicable interest rate margin from 2.75% to 2.5%, with the LIBOR floor remaining 0.75%. The updated facility is comprised of a single tranche of loans maturing in November 2024 and was used to repay all debt under the previous term loan B facility, which was set to mature in 2021.

Interested in Future Retail Store Closings Streamed In Real-Time?

Click here to learn more

Central Grocers, Inc. DIP

The Court in the Central Grocers, Inc., DIP case issued an order approving the settlement agreement among the secured parties and the Official Committee of Unsecured Creditors (Committee), on behalf of the Debtors. The settlement provides for a $9.0 million payment by the secured lenders to the Debtors’ estates, a carve out of proceeds from the sale of remaining assets preserved and or shared with the Debtors’ estates, and retention of the right to pursue additional potential claims or causes of action (including avoidance actions) for the benefit of the Debtors’ estates. The Committee previously estimated that the value of the settlement to unsecured creditors could be in excess of $23.6 million. According to attorneys for the Committee, certain of the Debtors in the case may be administratively insolvent as their administrative claims may exceed their assets, while others Debtors may be administratively solvent. However, this will not be known until all the assets are liquidated.

The Tile Shop

The Tile Shop opened a retail showroom in Orlando, FL, marking its second location in the metro area, joining an existing location in Altamonte Springs. The 11,000 square-foot store showcases more than 4,000 tile designs. In addition, the Company opened two locations in the Houston, TX market, one in downtown Houston and the other in Willowbrook. Both locations are 12,500 square feet and join existing locations in Webster, The Woodlands and Sugarland opened earlier this year. The Tile Shop operates 130 stores in 31 states.

Petco

Petco has acquired online subscription service PupBox, which delivers customized products and information to new puppy and dog parents. Financial terms of the deal were not disclosed. Petco and competitor PetSmart have been boosting digital offerings to compete with Amazon and other online competitors; in April, Petco acquired digital services company PetCoach and PetSmart acquired pet food and product website Chewy.com reportedly for a price of over $3.00 billion.

Maurice Sporting Goods, DIP

On November 20, Maurice Sporting Goods, DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of Delaware. The Honorable Christopher S. Sontchi was assigned to the case, and the proceedings were assigned case number 17-12481. Documents in the filing state that the Company believes funds will be available for distribution to unsecured creditors. Maurice listed assets of $10.0 million – $50.0 million and liabilities of $100.0 million – $500.0 million. The Company reached an agreement to sell its assets to Middleton Partners, a private investment firm with experience investing in distribution and consumer products businesses. Middleton signed a letter of intent to purchase the Company as a strategic buyer and is currently finalizing an Asset Purchase Agreement. Middleton will act as a stalking horse bidder, and in accordance with Section 363 of the U.S. Bankruptcy Code, other companies will have an opportunity to submit competing offers for the assets. We would not be surprised if other strategic bidders materialize, perhaps partnering with a liquidator. In addition to the availability of cash from ongoing operations, Maurice also received a commitment for up to $20.0 million in debtor-in-possession (DIP) financing from its bank group led by Bank of Montreal. The Company said, “The DIP financing will be used to maintain uninterrupted service and delivery of products to Maurice customers during the completion of the sale transaction, and to ensure payment to vendors for post-petition purchases in the ordinary course.”

Stater Bros.

Stater Bros. opened a new 45,700 square-foot store in Norco, CA on November 15. It replaced a nearby store that was half its size (one of Stater’s smallest stores). The Company recently opened other stores in Tustin, Menifee and Rancho Cucamonga, CA and currently operates 172 supermarkets.

Buckle, Cato Corp., L Brands, Gap, Abercrombie & Destination XL

Last week, The Buckle, Cato Corp., L Brands, Gap, Abercrombie & Fitch and Destination XL Group reported third quarter results in which comparable store sales eroded at four of the six companies, with Gap and Abercrombie the exceptions. At Gap, comps were up 4% at Old Navy and up 1% at Gap, while comps slipped 1% at Banana Republic. At Abercrombie & Fitch, comps were up 8% at Hollister, but fell 2% at Abercrombie; U.S. comps rose 6%, but international comps were flat.

At The Buckle, where sales have been declining over the past year, including double digit decreases, year-to-date comps were down 9%. Management indicated during its conference call that the Company is working on growing its private-label offerings to help offset the declines.

Clearly disappointed with results, Cato’s CEO John Cato said, “Consistent with our previous releases, pressure on merchandise margins and profitability persist as we continue to work through our merchandise missteps. The negative sales trends are below our expectations and, consequently, we continue to expect our full year earnings to be significantly below last year.” The Company opened six new stores during 2017, down from its original plan to open 13 new stores; it currently expects to close 26 stores, compared to its original plan of 19 stores. As of October 28, the Company operated 1,370 stores in 33 states.

Commenting on its better than expected results, Gap’s CEO Arthur Peck noted, “We are happy to report our fourth consecutive quarter of positive comps, reflecting the continued momentum in key parts of our business.” After opening 50 new stores and closing 53 underperforming locations during the quarter, the Company ended with 3,639 stores operating in 46 countries.

Reflecting on its progress during the quarter, Abercrombie & Fitch’s CEO Fran Horowitz said, “We are pleased by the clear progress across all brands, delivering another quarter of sequential comparable sales improvement, and a return to positive comparable sales. This sales performance in combination with disciplined expense management drove profit growth, despite the promotional environment.” Looking ahead to the fourth quarter, the Company expects to open four new full-price stores, on top of the three full-price and two outlet stores opened so far this year. The Company anticipates closing up to 60 stores in the U.S. by year end through natural lease expirations, including 14 that have closed to date.

Pointing to the negative impacts on its sales, Destination XL’s CEO David Levin stated, “Unseasonably warm weather, disruption from Hurricanes Irma and Harvey, and no incremental marketing support all contributed to a 5% decline in store traffic. However, improvements in conversion and average transaction value allowed us to deliver essentially a flat comp for the quarter. On a positive note, store traffic has picked up considerably in the last two weeks of October and the first two weeks in November.” So far this year, the Company has opened 19 DXL stores, including two in Ontario, Canada, and one DXL outlet store, ending the quarter with 344 stores in operation.

Weis

Last week, Weis opened a 56,800-square-foot store in Brunswick Crossing. The city had been without a supermarket for four years and residents were traveling approximately 15 miles to get groceries in Frederick or Charles Town, WV.

Demoulas

Demoulas will open its second Market Basket store in Maine located in Westbrook. The store will be 80,000 square feet and will include a café and an expanded produce section. It is expected to open in the fall 2018 or spring 2019. Westbrook currently has two other large supermarkets, including a Hannaford and a Shaw's. Market Basket operates 79 stores across New England.

DSW, Foot Locker & Shoe Carnival

Three footwear retailers, DSW, Foot Locker and Shoe Carnival, also reported third quarter results in the last week, and all three pointed to the catastrophic hurricanes that affected their businesses. DSW’s sales increased 1.7% to $708.3 million, but comps were down 0.4%; the comp decline included a negative impact of 50 to 60 basis points from hurricane disruption. Operating income plummeted 94.6% to $3.4 million, as the Company recorded a non-cash impairment charge of $52.7 million related to Ebuys’ goodwill and intangible assets. CEO Roger Rawlins stated, “Much of our core business performed in-line with expectations this quarter, despite an unusually severe hurricane season which impacted comps and earnings. Additionally, cold weather related product struggled to gain the traction we had anticipated; however, tight inventory management protected our bottom line from excessive markdowns and we ended the quarter with inventories below last year.”

Foot Locker’s sales decreased 0.8% to $1.87 billion, and comps were down 3.7%. Operating income fell 28.2% to $168.0 million. The Company noted that it incurred $7.0 million of hurricane-related costs during the quarter, the majority of which were for damaged or lost inventory. During the quarter, the Company also completed a workforce reorganization and incurred a $13.0 million charge as a result. CEO Richard Johnson commented, “The reduction and reorganization of our corporate and division staff during the quarter, while a difficult decision, was a critical step in positioning us for success as we navigate through the tremendous disruption affecting our customers and the retail industry in general. We are adjusting our course proactively, including creating new initiatives with key vendors and making critical investments in our digital platforms and supply chain, to ensure that Foot Locker will continue to thrive at the center of sneaker culture and, more broadly, youth culture.” During the quarter, the Company opened 12 new stores, remodeled or relocated 41 stores, and closed 22 stores, ending with 3,349 stores in 23 countries.

Shoe Carnival’s sales increased 4.7% to $287.5 million, and comps were up 4.4%. Operating income rose 15.7% to $17.9 million. CEO Cliff Sifford stated, “During the quarter, our traffic was down low single digits, particularly due to the three hurricanes affecting Texas, Florida and Puerto Rico. Despite the inclement weather in these regions, we experienced solid increases in both units per transaction and conversion, which helped drive a 4.4% increase in comps for the quarter. These increases, combined with our ongoing commitment and ability to effectively manage expenses, resulted in a 22% year-over-year increase in quarterly EPS.” During the quarter the Company opened seven new stores, completing its store opening plan for the year, which included 19 new stores; it closed one underperforming location, its 10th closure of the year, and plans to close another 16 stores during the fourth quarter.

Fareway Stores

Fareway Stores recently opened a new meat market in Lincoln, NE. The 6,400 square-foot store offers a full-service meat counter, along with seafood, a selection of cheeses, wine and craft beer, as well as other specialty and exclusive items.

Hibbett Sports

Hibbett Sports reported third quarter sales increased 0.3% to $237.8 million, reflecting the addition of 15 net new stores, partially offset by a 1.3% decrease in comps. For the quarter, Hibbett opened 13 new stores, expanded one high-performing store, and closed 11 underperforming stores, bringing the store base to 1,082 in 35 states as of October 28. As a result of more promotional activity and an increase in markdowns to sell slow moving inventory, EBITDA and EBITDA margin decreased 35.2% and 420 basis points, respectively. Interest coverage fell but remains very strong due to low levels of debt and interest expense. Looking ahead, the Company updated its guidance for fiscal 2018, and now expects EPS of $1.42 – $1.50, up from previous guidance of $1.25 – $1.35. Comps are projected to be in the negative mid-single-digit range, which compares with previous guidance in the negative mid to high single-digit range.

Smart & Final

Smart & Final’s third quarter sales increased 4.5% to $1.46 billion on a 1.5% comp gain, but profit dropped more than 25% to $5.1 million. Net sales for Smart & Final banner stores rose 2.9% to $1.11 billion, and comp growth for the banner was 1%; net sales for Cash & Carry banner stores jumped 10% to $342.1 million, and comp growth for the banner was 3.4%. Net income was $5.1 million, including the effect of store development expenses, compared to $7.0 million for the prior-year period. During the quarter, the Company opened one new Smart & Final Extra! store and completed two conversions of legacy Smart & Final stores to the Extra! store format, including one store relocation. The Company also opened two new Cash & Carry banner stores during the quarter. As of October 8, the Company operated 316 stores, including 183 Smart & Final Extra! stores, 70 legacy format Smart & Final stores, and 63 Cash & Carry stores.

The Company lowered its fiscal-year guidance to sales growth of 5% - 5.2%, from previous guidance of 5.5% to 6%; comps of 0.8% - 1%, from prior guidance of 1% - 1.5%; and adjusted net income of $32.5 million - $33.5 million, from previous guidance of $39.0 million - $41.0 million. The Company expects to open seven more new Smart & Final stores in the fourth quarter; year-to date it has opened seven Smart & Final and four Cash & Carry stores. After opening over 65 stores over the past three years, the Company is pausing its store growth with just three to five new stores under each format planned for fiscal 2018. The Company will also expand or relocate four to six stores to the Smart & Final Extra! format.

Sportsman's Warehouse

Sportsman’s Warehouse’s third quarter sales increased 0.4% to $218.1 million due to the opening of 11 new stores since last year, partially offset by a 7% decrease in comps. The drop in comps reflected continued softness in firearm demand, which declined 12.4% for the quarter, and even more pronounced weakness in ammunition demand, which was down 19.4% for the quarter. EBITDA margin fell 0.2% reflecting higher costs associated with the store openings, partially offset by an improvement in gross margin. TTM EBITDA margin was 9.2%, down from 10.1% at the same time last year. TTM interest coverage was acceptable at 5.5x.

Natural Grocers by Vitamin Cottage

Natural Grocers reported fourth quarter sales growth of 9.7% to $198.5 million, primarily due to a $13.7 million increase in sales from new stores. Comps increased 2.1%, with a 1.2% increase in daily average transaction count and a 0.9% increase in average transaction size. Net income fell 15.7% to $1.2 million. For fiscal 2017, sales rose 9% to $63.5 million, comps increased 0.1% and net income fell 39.9% to $6.9 million.

During fiscal 2017, the Company opened 14 new stores and relocated two, bringing the total store count to 140 stores in 19 states. Since October 1, it has relocated one store in Colorado and opened one new store in Utah. The Company has eleven signed leases for stores that are planned to open in fiscal 2018 and beyond in Colorado, Iowa, Missouri, Oregon, and Texas.

Best Buy

Best Buy’s third quarter sales increased 4.2% to $9.32 billion, due to a 4.4% increase in comps, which came on top of a 1.8% increase last year, partially offset by the closing of 59 underperforming stores during the year. The closures included 18 big box stores, with the rest consisting of mobile stores. Appliance comps increased 13.5% on top of a 3% increase last year, and now constitute 10% of the revenue base. Management attributed the expanding appliance sales to improvements in the housing market. Online sales increased 22% to $1.10 billion, which is 13% of domestic revenue. Overall revenue improvements were tempered by two issues: (i) mobile sales were materially lower than expected, due to a delay in the release of the iPhone X until November, which is in the fourth quarter, and (ii) the unfavorable impact of the hurricanes. Quarterly EBITDA and EBITDA margin increased 8.8% and 30 basis points; the margin improvement reflected the leveraging impact of the higher sales base, despite a slight decrease in gross margin.

CKS Restaurants

CKE Restaurants signed a 15-year, $900,000 lease in August with plans to open a 4,400 square-foot flagship Carl’s Jr. restaurant in Midtown Manhattan, its first in New York City. The restaurant is targeting a January 2018 opening date. According to the Company’s real estate brokers, CKE is looking to add more Manhattan locations and is slated to open in Coney Island, Brooklyn in the near future. CKE has more than 3,300 restaurants globally across multiple brands, including Carl’s Jr. and Hardee’s.

.

Ace Hardware

For the third quarter of fiscal 2017, Ace Hardware’s revenue grew 9.1% to $1.34 billion as a result of a 7.1% increase in comparable store sales and 31 net new stores. Higher sales were noted across all departments with outdoor living as well as lawn and garden showing the largest gains. Retail revenues from Ace Retail Holdings were $65.5 million in the third quarter of 2017, an increase of $5.6 million, or 9.3%, from the third quarter of 2016. The increase was the result of new retail stores added since the third quarter of 2016 and positive comps of 2.9%. Ace added 43 new domestic stores in the third quarter of 2017 and cancelled 34 stores. This brought the Company’s total domestic store count to 4,366 locations at the end of the third quarter of 2017, an increase of 31 locations from the same time last year. Additionally, net earnings grew 7% to $53.8 million.

Target

Target’s third quarter sales rose 1.4% to $16.67 billion, reflecting a 0.9% comp increase combined with the benefit from sales in non-mature stores. Comp digital channel sales grew 24% and contributed 0.8% to comp growth. Profit dropped more than 20% to $480.0 million, and segment earnings before interest expense and income taxes (EBIT) fell 17.8% to $869.0 million. The current quarter included a $123.0 million charge related to the early retirement of debt, partially offset by the benefit of lower average debt balances.

Dollar Tree

Dollar Tree reported third quarter sales growth of 6.3% to $5.32 billion. Enterprise comps increased 3.2%, consisting of 5% growth at its Dollar Tree banner and 1.5% growth at its Family Dollar banner. The comp growth was driven by increases in average ticket and comparable transaction count. Net income surged 40% to $239.9 million. During the quarter, the Company opened 169 stores, expanded or relocated 23 stores, and closed six stores.

The Company raised its fiscal 2017 guidance and now expects sales of $22.20 billion – $22.31 billion, up from $22.07 billion – $22.28 billion (the full year includes a 53rd week). This estimate is based on a low single-digit comp growth and 3.7% square footage growth. It also raised EPS guidance to $4.64 – $4.73, up from previous guidance of $4.44 – $4.60.