October 2, 2018
Kroger and Walgreens
Kroger and Walgreens made a joint announcement earlier today, noting that the companies are collaborating on an exploratory pilot with a new format and concept that combines retail grocery with pharmacy, health and beauty. The format will be a one-stop shopping experience, through which customers can order Kroger grocery items online and pick up their orders at participating Walgreens. In addition, Kroger’s private-label grocery items will be available for purchase at the Walgreens locations. The companies have selected 13 Walgreens stores in Northern Kentucky, near Kroger’s Cincinnati headquarters, to pilot the format over the next several months. Walgreens’ Executive Vice Chairman and CEO Stefano Pessina commented, “We continue to evolve our offerings to meet the changing needs of our customers and provide a more differentiated shopping experience. We’ve been implementing new approaches to promotions, product selection and other areas to deliver greater value in our stores.” The deal is the latest in a series of initiatives designed to give Kroger customers increased access to its products and provide enhanced shopping convenience. Kroger currently operates nearly 2,200 retail pharmacies in 37 states.
Kroger is no longer using the name “ClickList” to describe its click-and-collect service. Three years after it launched the service using that name, Kroger now will call the service “Kroger Grocery Pickup.”The service is available at more than 1,000 stores nationwide, more than one-third of Kroger’s stores. The Company said it changed the name to eliminate any potential confusion. A representative commented, “Moving forward, we are being more descriptive of the service to help our customers better understand our offerings: You will now see Pickup, Delivery and Ship as the methods to receive your grocery orders.”
Last week, Amazon opened a new brick-and-mortar store format in Manhattan’s Soho neighborhood called Amazon 4 Star. The store carries items from some of Amazon’s most popular categories including devices, consumer electronics, kitchen, home, toys, books and games. Only products that customers have rated 4 stars and above, are top sellers, or are new and trending are being offered. Prime members will pay the same prices they would pay online.
In other news, Amazon announced plans for a third fulfillment center in British Columbia. The 450,000 square-foot facility will be used to pack smaller items. The new facility will be Amazon’s tenth fulfillment facility in Canada.
According to published reports, Amazon is diving into the mattress business, offering an Amazon Basics foam mattress starting at $130. The move comes on the heels of significant competitive shifts in the mattress business; Target invested $75.0 million in Casper in May 2017, Walmart launched its own mattress line in February 2018, and Serta Simmons Bedding finalized its merger with Tuft & Needle last week. Amazon currently has more than 120 private-label products across a variety of categories that include kitchen goods, batteries, clothing and electronics. All this, while Mattress Firm, with over 3,000 stores, struggles with performance and is reportedly looking to negotiate its heavy debt load while also potentially facing significant store closures.
Amazon announced that it will be increasing its minimum wage to $15 for all full-time, part-time, temporary (including those hired by agencies) and seasonal employees across the U.S., effective November 1. The new $15 minimum wage will benefit more than 250,000 Amazon employees as well as over 100,000 seasonal employees who will be hired at Amazon sites across the country this holiday.
Amazon is also expanding grocery delivery from its Whole Foods stores via Prime Now to 10 new markets: Milwaukee, Omaha, Detroit, Jacksonville, Madison, Orlando, St. Louis, Ann Arbor, Tampa and Tulsa. It is also expanding its availability in New York City and Seattle.The move brings the total number of markets where Amazon’s Whole Foods delivery service is available to 48. The Company also said it is expanding grocery pickup at Whole Foods stores in Ft. Worth, Kennesaw, Richmond, Sacramento and Virginia Beach, with continued plans for expansion.
We previously reported that Bon-Ton Stores re-emerged online through new owners CSC Generation Holdings, with all of its subsidiary brands launching new websites. We also reported that the Company is in the process of “re-building the business brick-by-brick” and opening new stores in Illinois, Wisconsin, and Colorado. Recently, CSC’s CEO Justin Yoshimura indicated that Bon-Ton plans to open at least 100 stores nationwide over the next few years. New stores will be between 10,000 square feet and 100,000 square feet, smaller than previous stores that were 40,000 square feet – 250,000 square feet. Two-thirds of the stores will be in former locations, and one-third will be located nearby previously shuttered Bon-Ton stores. The Company is in the process of negotiating more favorable lease agreements. While the Company did not purchase any of the liquidated merchandise, it is placing orders with former Bon-Ton vendors. Mr. Yoshimura also said that the Company is looking to attract former Sears’ customers, as Sears continues to shutter locations. It is shifting its merchandise mix away from apparel and adding more categories like electronics and major appliances.
Dunkin’ Brands recently unveiled its new tradename as Dunkin’ (dropping the Donuts). The change will officially take place in January 2019. Going forward, the new “Dunkin’” logo will be featured on exterior and interior signage on all new and remodeled stores in the U.S. and, eventually, internationally. Dunkin’ Brands said its official move to shorten its name to Dunkin’ is one of many steps to transform the business into the premier beverage-led, on-the-go brand. Although the word “donuts” will no longer appear in the logo or branding, the Company said donuts will remain a significant focus for the brand.
Brinker International completed the sale of two corporate-operated Chili’s restaurants through a sale-leaseback transaction with real estate investment trust Four Corners Property Trust for $5.9 million on initial annual cash rent of approximately $372,000. The properties are located in Florida and Texas, and were part of the transaction originally announced on August 1. Including the 46 properties acquired on August 8, the previously announced transaction is now complete, with a total of 48 properties for $155.7 million on initial annual cash rent of approximately $9.9 million.
On September 17, Moody’s affirmed Brinker International’s Ba1 Corporate Family Rating, Ba1-PD Probability of Default Rating, Baa3 rated guaranteed senior unsecured notes, and Ba1 rated senior unsecured non-guaranteed notes. Brinker’s Speculative Grade Liquidity Rating is SGL-2. The outlook was changed to “negative” from “stable.” According to Moody’s, “The change in outlook to negative reflects Brinker’s weaker than expected operating performance and our view that the Company’s ability to materially improve leverage and coverage will be challenged by an intense promotional environment and still high adjusted debt levels.”
Published reports claim that Chipotle is introducing a new frequent customer program using a points system. The program is reportedly being launched in Phoenix, AZ; Kansas City, KS; and Columbus, OH and will roll out nationally next year. In 2016, the Company tested and ultimately abandoned a loyalty program called Chiptopia. Chipotle is looking to remain competitive and change consumers’ perceptions following a string of food safety issues during the past few years.
AutoZone announced that Bill Graves, EVP of Mexico, Brazil and store development, customer satisfaction, will retire in early January 2019. Mr. Graves began at AutoZone in 1993 and has served in his most recent role since 2015. Domingo Hurtado, currently VP and president of AutoZone de Mexico, was promoted to the newly-created position of SVP, international, customer satisfaction.
J. Crew Group is preparing to unveil a new brand to appeal to a younger, female shopper in an attempt to broaden its customer base. CEO Jim Brett stated in a TV interview in late September, “We see ourselves as having more than two brands. In fact, we’ll be announcing one new brand this year. It is aimed at women, and it’s younger than any of our existing brands.” Mr. Brett declined to provide further details. J. Crew continues to struggle to improve lackluster sales. It is in the process of diversifying its J. Crew brand by offering more size options and price points, which Mr. Brett indicated is showing positive results as it has experienced an increase in new shoppers and the return of customers who had left. Meanwhile, Madewell, which appeals to millennial women, continues to perform well. Madewell boosted comps into positive territory for the first and second quarters this year. J. Crew also partners with Amazon to sell clothing on the Amazon Fashion platform, which has broadened its international reach. Commenting on impacts from the trade war, Mr. Brett indicated that J. Crew doesn’t expect to raise prices, and that less than one-third of J. Crew’s products are sourced from China.
Walgreens Boots Alliance
As part of a settlement with the SEC announced Friday, Walgreens Boots Alliance agreed to pay a $34.5 million penalty to settle charges that it misled investors about the profit potential behind the Company’s combination with European counterpart Alliance Boots. Former CEO Gregory Wasson and Wade Miquelon, former CFO, will each pay $160,000. Neither the Company nor its two former executives acknowledge wrongdoing. Walgreens in 2012 projected a combined, adjusted profit of $9.00 billion – $9.50 billion for 2016. Executives then stuck with that projection even though internal forecasts later revealed significant risks of not hitting that goal. When the Company adjusted that outlook 20% down two years later, shares plunged more than 14% in a day.
BJ's Wholesale Club
Yesterday, BJ’s Wholesale Club closed on a public offering by certain selling stockholders of 28 million common shares at $26.00 per share. Selling stockholders also granted the underwriters a 30-day option to purchase up to an additional 4.2 million shares. BJ’s did not receive any of the proceeds.
Papa John's International
Papa John’s International declined to comment on a report Wednesday that it has sent out information about an auction to sell itself to other companies. The report, which quoted anonymous sources, said the Company sent out the information this week and expects to receive first-round bids by the end of October. Meanwhile, a spokesman for former Papa John’s Chairman John Schnatter on Wednesday denied a report that he has reached out to private equity firms in trying to buy the world’s third-largest pizza chain. Mr. Schnatter, who owns 30% of the Company, is reportedly looking for help to buy the rest. He was ousted in July after a report that he had used a racial slur during a media training session. It was reported in August that Papa John’s had hired Bank of America and Lazard Ltd. to prepare for a sale.
CVS Health’s proposed acquisition of Aetna still remains subject to federal and certain state regulatory approvals. CVS Health believes the divestiture of some of Aetna’s Medicare Part D assets, announced last week and detailed below, is a significant step toward completing the DOJ’s review of the transaction. CVS Health and Aetna continue to engage in productive discussions with the DOJ and expect the transaction to close in the early part of the fourth quarter of 2018.
On September 26, Aetna agreed to sell its entire standalone Medicare Part D prescription drug plan business to WellCare Health, effective December 31, potentially clearing the way for CVS Health to complete its $69.00 billion takeover of Aetna. The business to be divested had about 2.2 million members at June 30.
J.C. Penney announced that on September 25, 2018, Jeffrey A. Davis informed the Company that he is resigning from his position as CFO to pursue another opportunity. On September 27, the board elected Jerry Murray as interim CFO; both Mr. Davis’ resignation and Mr. Murray’s election were effective yesterday. Mr. Murray has served as the Company’s SVP, finance since 2016. Prior to joining the Company, he served as CFO of Valassis Communications, Inc. (a multimedia marketing firm) from 2014 to 2015. It should be noted that the announcement comes amid recent lower than expected operating results, as well as a search for a new CEO to replace Marvin Ellison, who resigned in May. On the positive side, the Company has been paying down debt, and its nearest debt maturity is the remaining $50.0 million on a Senior Note, due October 2020.
The Michaels Companies
The Michaels Companies is refreshing the children’s segment of its business both in store and online, joining other retailers like Five Below, J.C. Penney and Party City that are looking to fill the void left by Toys “R” Us. Michaels launched MichaelKids.com, rebranded its in-store kids presentation, and expanded its assortment of kids’ toys and activities. As part of the expansion, Michaels added creative toys and activities developed to help kids learn, grow and discover screen-free fun, according to the Company. On the refreshed kids’ website, the Company will provide activity ideas, project inspiration and tools to make the shopping experience easier for parents.
Publix plans to expand its headquarters in Lakeland, FL and add 700 new jobs by the end of 2027. Since the current corporate office was built in 2001, Publix has entered three additional states, more than doubled its annual sales, opened more than 500 new stores and added about 70,000 associates.
Publix also announced a quarterly dividend of $0.26 per share, representing a total consideration of about $192.5 million.
MTY Food Group
MTY Food Group announced on September 26 that it has acquired substantially all assets of the sweetFrog Premium Frozen Yogurt franchise system for approximately $35.0 million. A total of approximately $28.9 million was paid on closing, financed from MTY’s cash on hand and existing credit facilities, while $2.6 million in liabilities were assumed and $3.5 million was held back. At closing, sweetFrog operated 331 franchised/licensed restaurants, of which 323 are located in the U.S. and eight are located internationally. In the last 12 months, sweetFrog generated over $92.0 million in system sales. MTY has consolidated sweetFrog operations and is now running the franchising platform from its U.S. headquarters in Scottsdale, AZ under the leadership of Jeff Smit, the CEO of MTY’s U.S. operations. As part of the deal, 78 locations that have been corporate-owned will transition to franchised locations. MTY, based in Montreal, Canada, franchises over 70 different concepts with about 5,400 locations.
Forever 21 and venture capital fund Upfront are investing $8.0 million into a start-up fashion subscription service called DailyLook, based in downtown Los Angeles, CA. This is the first time Forever 21 is investing in a start-up company. As part of the deal, Alex Ok, Forever 21’s president, will join DailyLook’s board. DailyLook functions similar to Stitch Fix, although the fee is higher ($40 per box instead of $20) and DailyLook customers can choose from seven to 12 items (compared to five for Stitch Fix customers). For both, customers can choose which pieces to keep or send back.
Price Rite, a member of the Wakefern cooperative, is piloting store designs that include new décor, a market-style produce department, and self-service checkouts, at three Pennsylvania stores in Bethlehem, Allentown and Secane. As part of the remodels, the Company has also reduced prices on hundreds of items, is rolling out weekly deals, and has devoted sections to deals priced at $3 or less, called “Price Rite Marketplace Drop Zone.” Additionally, it has expanded its fresh and private-label offerings. Price Rite said the Bethlehem and Allentown stores will be unveiling brand-new designs at grand reopening events on October 5, while the Secane store was upgraded to the chain’s new look and logo last year and will be introducing additional store enhancements. Price Rite operates 66 supermarkets in Connecticut, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Maryland and Virginia.
Giant Eagle announced plans to acquire Ricker Oil, Co., which operates 56 convenience stores and fuel stations in Indiana. The deal would expand the convenience retail footprint for Giant Eagle; the Company currently has six GetGo convenience store/fuel locations in the central part of the state, and a seventh slated to open in Zionsville, IN this month. Overall, Giant Eagle operates about 200 GetGo locations and about 200 Giant Eagle supermarkets in Pennsylvania, Ohio, West Virginia, Maryland and Indiana.
Barnes & Noble
Barnes & Noble will be hosting a “Hatchimals Day” event in select stores on October 6, where kids will have storytime as well as an interactive demonstration, play activities, and free giveaways. The Company continues to increase its toy merchandise offerings in an effort to capture additional market share within the kids segment. The Company has been pushing its toy initiative aggressively since Toys “R” Us’ demise, and it appointed Kathleen Camprisano as VP of toys & games. Barnes & Noble has experienced low single-digit comp growth of toy merchandise, while all other categories have declined. However, toys remain a low single-digit percentage of total sales.
The Bartell Drug Company
Last week, The Bartell Drug Company appointed Kelly Kennedy as CFO and Kari Escobedo as SVP of IT. Ms. Kennedy most recently served as CFO of Sur La Table. In January 2018, Bartell appointed Kathi Lentzsch as its new CEO, after Brian Unmacht resigned as president and CEO just two years into the role.
The Walking Company
The Walking Company completed an 83,000 square-foot distribution center expansion in Lincolnton, NC, bringing the total size of the location to 312,000 square feet. The distribution center will be fully functional by mid-October. The facility will distribute footwear and accessories for all of the Company’s key brands, including ABEO footwear, Dansko, ECOO, and Taos. It currently employs over 200 associates, and will add an additional 45 jobs to the area. The Company indicated that the expansion would meet increased customer demand and accommodate rapid sales growth at its more than 180 retail stores nationwide, in the international market, and through wholesale/e-commerce.
REI appointed Ben Steele to the newly created position of EVP and chief customer officer. Mr. Steele previously served as chief creative officer for the last four years. In addition, REI named Curtis Kopf as its chief digital officer, also a new position. Mr. Kopf most recently served as SVP, customer and digital experience at Premera Blue Cross.
AMC Entertainment announced that AMC Stubs A-List, which was launched three months ago to stimulate attendance at AMC Theatres, outpaced the Company’s expectations. More than 380,000 attendees are now A-List members, with 120,000 becoming members during the six-week “slow period” of late August and September. While the A-List is still a small percentage of total attendance, it continues to grow rapidly and boost attendance traffic. Movies are on the rebound this year, and AMC noted that it expects U.S. attendance to increase in 2018, after three years of declining attendance.
Last week Home Depot rolled out express same-day and next-day local delivery for more than 20,000 items to 35 major metro areas across the U.S. The new service is part of the Company’s ongoing supply chain upgrade, which includes an expansion of its delivery offerings. The Company is partnering with car and van providers Roadie and Deliv to offer the new delivery options for smaller items, while it continues to expand its supply chain network for faster shipments of large bulk items. The investment calls for additional direct fulfillment centers and more than 100 new distribution sites to further extend the Company’s delivery options.
Last week, Yum! Brands promoted Tony Lowings to CEO of its KFC brand, effective January 1, 2019. He will replace Roger Eaton, who is retiring at the end of 2018.
Revolve, an online women’s apparel retailer, filed documents with the SEC to raise up to $100.0 million in an initial public offering. The Cerritos, CA-based Company, founded in 2003, had $447.0 million in sales for the 12 months ended June 30, 2018. It plans to list its IPO on the NYSE under the symbol RVLV. In other news, Revolve will open a 1,000 square-foot pop-up store and branded hotel suite inside the Palms Casino Resort in Las Vegas, NV in the second quarter of fiscal 2019. So far the Company has just one physical store, the invitation-only Revolve Social Club in Los Angeles, CA.
Qurate Retail Group
Qurate Retail Group appointed Jeffrey A. Davis as CFO, effective October 15. Mr. Davis will assume the CFO responsibilities at the Group level, in addition to serving as CFO for QVC, Inc., a position that has been empty since May 17, 2018, when QVC’s previous CFO, Ted Jastrzebski, stepped down. Most recently, Mr. Davis served as the EVP and CFO of J.C. Penney, and previously as CFO at Darden Restaurants.
On September 27, Camping World amended its credit agreement dated November 8, 2016 with Goldman Sachs Bank USA as administrative agent. The amendment increased the total leverage ratio from “3.00 to 1” to “3.75 to 1” through December 31, 2019, and from “2.75 to 1” to “3.50 to 1” for the period beginning March 31, 2020 and on the last day of each fiscal quarter ending thereafter. As of June 30, 2018, the Company had no outstanding borrowings and $2.8 million in letters of credit outstanding under the $35.0 million secured revolving credit facility, leaving remaining borrowing availability of $32.2 million. The revolver matures on November 8, 2021.
In other news, Camping World promoted Brent Moody to president. Most recently, Mr. Moody served as the Company’s chief operating and legal officer. Since joining the Company in 2002, he has served in a variety of executive roles, including chief administrative and legal officer, EVP/general counsel and business development, and VP and general counsel.
After an initial launch earlier this month, on October 11 Weis Markets will expand its online grocery delivery through its partnership with Shipt to 16 new metro markets in Pennsylvania (6), Maryland (4), New Jersey (4), New York and Washington D.C.
According to published reports, Wegmans is adding curbside pickup to two Syracuse-area stores, in DeWitt and Clay, NY. The Company recently made the service available at its stores in Buffalo, Rochester, Ithaca, Johnson City, southern New Jersey, Virginia and southeast Pennsylvania. Curbside pickup, which is free with a $10 minimum order, is offered in partnership with Instacart, which also handles Wegmans’ grocery delivery service.
Tailored Brands appointed Carrie Ask as brand president, Men’s Wearhouse and Moores. Ms. Ask joins the Company from Levi Strauss & Company, where she was EVP and president, global retail. Scott Norris will step into the position of chief merchandising officer of Men’s Wearhouse and Moores. Mr. Norris has been with the Company since 1995 and became brand president of Men’s Wearhouse and Moores in 2014.
Treasure Island Foods, Inc.
Treasure Island Foods, Inc. announced that it is permanently shutting down its remaining six grocery stores on October 12. In a note sent to employees, President and CEO Maria Kamberos commented, “Unfortunately, given the current industry conditions, it has been impossible for us to continue to operate without losing money.”
Stein Mart is opening two Chicago, IL locations, a 33,600 square-foot store at Deerbrook Mall and a 31,200 square-foot store at Willowbrook Town Center. The two stores bring Stein Mart’s presence in Chicago to seven locations. Stein Mart currently operates 289 stores across 30 states. During the first half of fiscal 2018, the Company closed four locations, and it expects to close another three by year-end. The two Chicago stores fulfill Stein Mart’s store opening plans for the year.
In other news, Stein Mart announced its CFO, Gregory W. Kleffner, plans to retire from the Company next spring. Mr. Kleffner will continue in his current role until his successor is appointed. After that he will serve in an advisory role to ensure a smooth transition. The Company retained an executive search firm to assist with an external search.
H&M is piloting a store in its hometown of Stockholm, Sweden, which features merchandise and services that cater to local tastes. The new concept differs from its traditional stores in that the layout and merchandise is based on the expectations of local customers, rather than offering relatively standardized assortments. There’s a higher concentration of clothes from H&M’s upscale lines “Trend” and “Premium Quality,” which are usually only available online. The pilot store also offers shoppers espressos and invitation-only events. The move comes as the Company struggles with stagnant sales and shares that have lost nearly two-thirds of their value since 2015. The Company’s stock price was up 10% last week after management said third quarter sales increased 8.3%, however gross margin was negatively impacted by markdowns, and profit declined on costs associated with problems implementing its new logistics systems. On a bright note, the Company said it would not need more price cuts to shift unsold merchandise for the fourth quarter. The Company had a net increase of 102 new stores during fiscal 2018 to date, ending with 4,841 stores in operation, including 247 locations operated by franchise partners.
Nordstrom opened its second Nordstrom Local store in Los Angeles, CA on September 28, and plans to open its third in downtown Los Angeles at The Bloc on October 12. Both stores will be furnished by Anthropologie Home (subsidiary of Urban Outfitters), which is collaborating with Nordstrom to provide the stores with home goods and accessories. In March, Nordstrom announced a deal with Anthropologie to introduce more than 200 items from Anthropologie Home at 15 Nordstrom stores and on its website. Nordstrom opened its first Local store in October 2017 in Los Angeles (Melrose Avenue), offering consultations with personal stylists, buy-online-pick-up-in-store service, alterations, curbside pickup and returns from Nordstrom.com and other online third-party retailers. The new stores will also feature Truck Club services, refreshments and gift-wrapping in partnership with Paper Source. Each Nordstrom Local is tailored to meet the needs of the location’s customers. The 1,200 square-foot Brentwood store focuses on styling and alterations; the 2,200 square-foot downtown store will offer an on-site concierge and barber services, as well as shoe, handbag and luggage repair services, and grab and go food options.
With the new stores, the Company is introducing a new feature called “Get It Fast” on its website, where mobile app customers can view inventory available no later than the next day, order for pick up at a Local or full-line location, or have it shipped next day for free.
In other news, Nordstrom rebuilt its two-story, 138,000 square-foot store in San Juan, Puerto Rico, following storm damage caused by Hurricane Maria last fall. The store, which has been closed for the past year, will reopen on November 9.
A new 92,000 square-foot H.E. Butt supermarket that was expected to open in Houston, TX in 2018 has been delayed and is now expected to open in early 2019. The Company said the delay was due to permitting issues.
Stater Bros. plans to build a new 44,700 square-foot store in Ontario, CA. The Company expects the store to open in fall 2019. It will be Stater Bros.’ fourth store in Ontario.
Southeastern Grocers has reopened its latest remodeled Winn-Dixie in Pasco County, FL. The store is the eighth Winn-Dixie in the Tampa Bay area to open with the Company’s updated look, which includes a new store design and expanded fresh and prepared foods.
Birkenstock opened its first physical store in the U.S. in the SoHo neighborhood of lower Manhattan, NY. The store features a full range of products for women, men and kids, including shoes, boots, socks, bags, belts, and a natural skin care line. The store also has a gallery of limited-edition styles from designer collaborations. Birkenstock operates 47 stores globally and has been distributing product in the U.S. for over 50 years.
Sprouts Farmers Market
Sprouts Farmers Markets will open a new 30,000 square-foot store in Las Vegas, NV on October 3. The store is the Company’s eighth location in Las Vegas Valley and 13th in the state.
Perfumania Holdings opened a new prototype location in Thorton, CO, a 900 square-foot space designed to be an interactive fragrance hub. This is the first new location Perfumania has opened since it emerged from Chapter 11 nearly one year ago. The Company indicated that the new location is the Company’s “vision for our future retail locations.” The store has an expanded product lineup of both designer and niche brands, a “Discovery Hub” that includes a digital program for customers to browse products, and a “Scent Gallery,” for customers to test fragrances and take home samples of their favorites.
A Walmart Pickup location is being proposed in Lincolnwood, IL, about a dozen miles north of downtown Chicago, at a vacant Dominick’s supermarket site.The pickup depot would be the first such Walmart installation in Illinois and would feature two dozen stalls, where customers could pick up orders placed online.If approved by local authorities, the Walmart Pickup would open in spring 2019.
Natural Grocers by Vitamin Cottage
Natural Grocers by Vitamin Cottage will open its relocated 20,850 square-foot store in Santa Fe, NM, on October 4. The Company operates five of its 150 stores in the state.
According to published reports, South Korean retail operator Shinsegae is planning to open a new 52,000 square-foot store called PK Market in downtown Los Angeles. It will offer traditional groceries along with casual dining experiences and will compete with a Whole Foods located down the block.
Rite Aid announced results for its second quarter and six months ended September 1. Revenues from continuing operations for the quarter were $5.42 billion, an increase of $76.4 million or 1.4%. Same-store sales from Retail Pharmacy continuing operations for the quarter increased 1% from the prior year, consisting of a 1.6% increase in pharmacy sales and a 0.1% decrease in front-end sales.
The Company also announced the separation of the chairman and CEO positions. Bruce G. Bodaken will hold the position of chairman, effective at the 2018 annual meeting. John T. Standley remains CEO. Rite Aid also nominated three new independent directors to the board.
Bed Bath & Beyond
Bed Bath & Beyond reported flat second quarter sales of $2.94 billion. The Company continues to invest in e-commerce and make efforts to improve its in-store experience, but struggles with heavy competition from Amazon and has failed to distinguish itself from competitors like Target and TJX Companies’ HomeGoods. The Company is in the midst of a turnaround and modernization program that includes optimizing the supply chain and revamping stores. Same-store sales decreased for the sixth straight quarter, dropping 0.6%, partially offset by improved digital sales. Gross margin declined due to the Company’s heavy reliance on coupons and other discounts, which drove the 53.3% decline in operating profit to $78.9 million. In its earnings call, management indicated that the boost to its sales from Toys “R” Us’ liquidation was “in line” with its internal expectations and decorative furnishing sales growth was exceeding expectations. Following its earnings release, Bed Bath & Beyond’s stock price plummeted 21% to $14.86 on September 26 compared to the day before; this marks the lowest level since March 2000. CEO Steven Temares indicated that the Company is bringing in two management consulting firms to help it cut costs and improve its merchandise, though he did not name the firms.
Carnival Corporation’s third quarter revenue increased 5.8% to $5.84 billion, fueled primarily by a 4% increase in revenue yield, or revenue per available lower berth day (ALBD, a standard measure of passenger capacity). Net revenue yields increased 2.9% in constant currency, better than June guidance of up 1.5% – 2.5%. Passenger ticket sales rose to $4.35 billion from $4.14 billion last year, and onboard and other revenue increased to $1.32 billion from $1.22 billion. Net income rose 28.4% to $1.71 billion, despite fuel and currency headwinds. During the quarter, the Company authorized the replenishment of its $1.00 billion share repurchase program. Carnival expects fourth-quarter adjusted EPS of $0.65 – $0.69, compared to last year’s EPS of $0.63. Full-year adjusted EPS is expected to be $4.21 – $4.25, up from $4.15 to $4.25 in the prior year. On the news of higher fuel costs, Carnival’s stock dropped about 5% to close at $63.74 on Thursday.
Vail Resorts reported fourth quarter sales increased 1.2% to $211.6 million, with resort revenue up 4.5%. The EBITDA loss widened 17.4% to $59.1 million, primarily due to the mountain segment reporting an EBITDA loss of $64.5 million, partially offset by the lodging segment reporting EBITDA of $6.5 million; however, real estate reported an EBITDA loss of $1.2 million. Season pass sales through September 23 for the upcoming 2018/2019 North American ski season increased 25% in units and 15% in sales dollars. The Company issued its fiscal 2019 guidance range and expects EBITDA to be $718.0 million – $750.0 million. CEO Rob Katz commented, “This year's results highlight the positive impact of our expanding geographic diversification, the stability provided by our growing season pass program and the success of our guest-focused marketing efforts. Our western U.S. destination resorts experienced modest visitation declines compared to the prior year due to the historically poor conditions, particularly for the first half of the season. However, revenue at our western U.S. resorts was in line with prior year performance due to season pass sales and yield growth. Whistler Blackcomb had another record-breaking year, growing from an exceptional fiscal 2017 as the resort benefited from excellent conditions throughout the season, currency favorability that attracted guests from the U.S. and around the world, and the first season of full integration with Vail Resorts. At Perisher, fiscal 2018 results were strong with double-digit revenue and EBITDA growth compared to the prior year, driven by a strong finish to the 2017 Australian ski season and a strong start to the current 2018 Australian ski season, supported by pass sales momentum, which was positively impacted in part by the new pass partnership with Hakuba Valley in Japan.”
On August 15, 2018, the Company closed its acquisition of Stevens Pass for $64.0 million. On September 27, 2018, the Company closed its $74.0 million acquisition of Triple Peaks, the parent of Okemo Mountain Resort in Vermont, Mount Sunapee Resort in New Hampshire, and Crested Butte Mountain Resort in Colorado. As part of the transaction and with funds provided by Vail Resorts, Triple Peaks paid off $155.0 million in leases that all three resorts had with Ski Resort Holdings, LLC, an affiliate of Oz Real Estate. Following the closing of these two acquisitions, Vail Resorts plans to invest $35.0 million over the next two years across the four resorts. In addition, annual ongoing capital expenditures are expected to increase $7.0 million to support the addition of these four resorts.
In other news, Vail Resorts announced that Timothy April, currently VP of information technology and guest experience, was promoted to SVP and CIO, effective October 29. Mr. April will join the Vail Resorts executive committee and oversee facets of technology for the Company. He replaces Robert Urwiler, who is retiring after 12 years with the Company.