October 23, 2018
Sears Holding Corporation
The Court scheduled a hearing for November 1 to consider approval of the Sears Holdings, DIP motion for a $300.0 million Junior DIP Facility. As we previously reported, ESL Investment has indicated interest in providing a substantial portion of the funding. The Debtors previously stated, “The Junior DIP Facility will allow the operation of a larger number of stores, while attempting to secure a buyer for a substantial part of the business as a going concern. It would also provide additional time to evaluate about 250 ‘bubble’ stores, which may be valuable to ongoing operations or sale prospects. Without the Junior DIP Facility, the opportunity to effect a going concern exit will be seriously jeopardized.”
AggData's historical locational data was recently used by CNBC and The Wall Street Journal to map Sears' store activity leading up to their bankruptcy filing. If you're interested in receiving this data, click here.
United Natural Foods (UNFI) and Supervalu
Yesterday, United Natural Foods (UNFI) completed the previously announced acquisition of Supervalu for $32.50 per share in cash, or approximately $2.90 billion, including the assumption of outstanding debt and liabilities. Supervalu’s common stock ceased trading prior to the market opening on October 22 and has been delisted from the New York Stock Exchange.
Along with the closing of the transaction, Supervalu has repaid in full its term loan, which consisted of $698.0 million outstanding, and asset-based lending (ABL) agreement. The Company still has $180.0 million of 6.75% 2021 Senior Notes and $350.0 million of 7.75% 2022 Senior Notes outstanding that is expected to be redeemed in November, following a required 30-day call notice period.
In other Supervalu news, on November 19 the Company will close the 16 remaining Shop ‘n Save stores and one fuel center it has not sold off. The stores include 10 in Missouri and six in Illinois located in the St. Louis and Springfield, IL, markets. In mid-September, Supervalu announced a deal to sell 19 Shop ‘n Save supermarkets and one standalone pharmacy to Schnuck Markets. Schnucks has also agreed to assume the multi-employer pension obligations related to the acquired stores, the fair value of which is estimated to be $24.0 million. At the time, Supervalu noted that it would close the rest of the Shop ‘n Saves if no buyers were found. Supervalu also said that later this year it plans to close a distribution center in St. Louis that mainly serves Shop ‘n Save locations. Meanwhile, Schnucks finished the conversion of the acquired Shop ‘n Saves to its banner this past weekend, click here to request the list of locations.
Save-A-Lot is reportedly investing $100.0 million to cut prices on hundreds of items across its entire store network, as part of its new brand transformation that is expected to be completed in 2019. The Company is calling the initiative a “permanent reset” of its prices. The Company was acquired by Onex Corp from Supervalu back in December 2016. We estimate the Company has closed nearly 100 stores since the acquisition.
Starbucks announced plans to fully license its operations in France, Belgium, the Netherlands and Luxembourg to its long-time Latin American business partner, Alsea. Under the deal, Starbucks is selling 83 Company-owned stores in those countries to Alsea. Alsea will also provide services to 177 other Starbucks locations, which are owned by franchisees. The changes come as Starbucks CEO Kevin Johnson has been restructuring the Company’s domestic operations and looking to improve lagging sales in the U.S. and China, which the chain has targeted for aggressive expansion. Starbucks initially joined forces with Alsea in 2002, and it operates more than 900 Starbucks stores in Argentina, Chile, Colombia, Mexico and Uruguay.
Starbucks also intends to restructure its back-office support functions in the region, with plans to close a support center in Amsterdam, and lay off nearly all of its 190 workers. It is also planning an organizational shake-up at its head office in London.
On October 22, National Stores, DIP provided notification of the closing of the going concern sale of 85 of the Company’s 269 existing stores to Pegasus Trucking, LLC. We previously reported that Michael Fallas, an owner of the Debtors, also has an ownership interest in Pegasus. Additionally, store closing sales have started at the Company’s other 184 stores, after the Court approved the liquidation of those units.
Last week, Target announced plans to roll out a new toy experience in stores and online in time for the holiday season and ahead of the first Christmas since Toys “R” Us liquidated its business. The Company plans to devote more aisles to selling toys and hosting play days in stores. It plans to add a quarter-million square feet of space dedicated to toys across more than 500 stores by November 2 (about 500 square feet per store). The extra space will be permanent, lasting beyond the holiday season. Target will give a fuller remodel to 100 stores, which will allow those locations to showcase larger items. Target said it plans to make searching for toys online easier for customers. The Company will release 22 million gifting catalogs in homes and stores, featuring 15% more toy pages compared to last year. In other news, Target opened its first store in Vermont, expanding its presence to all 50 states. The 60,000 square-foot Burlington store is one of the more than 130 small-format units that Target plans to open by the end of 2019. The Company’s traditional stores average 130,000 square feet. Target’s Shipt subsidiary is also making its Vermont debut today with the launch of same-day delivery. About 60,000 households in the greater Burlington area now have access to the service.
Qurate Retail Group
Qurate Retail Group announced a series of initiatives involving its HSN and QVC U.S. brands. The two business units will be integrated into one, with the combined unit to be referred to as QXH and operate out of HSN’s St. Petersburg, FL headquarters. As a result, the Company will eliminate approximately 350 positions, primarily at HSN’s St. Petersburg, FL and Long Island, NY locations, and a smaller number at QVC’s West Chester, PA location. Both HSN and QVC’s U.S. fulfillment networks will be integrated to enhance delivery speed and lower costs. The first phase includes opening a new fulfillment center in Bethlehem, PA in 2019, followed by closures of fulfillment centers in Lancaster, PA; Roanoke, VA; and Greenville, TN in 2020. Approximately 1,725 positions will be eliminated at these centers, partially offset by the hiring of 1,200 – 1,500 positions at the Bethlehem facility. Additionally, Qurate will evolve toward a leased versus owned model for many of its fulfillment centers, to increase flexibility and reduce longer-term capital requirements. During 2017, HSN and QVC U.S. generated $8.50 billion in revenue. At its May Investor Day, Qurate outlined $200.0 million – $220.0 million of estimated run-rate operating synergies from the HSNi acquisition. The aforementioned initiatives are expected to deliver an additional $120.0 million – $125.0 million of synergies, bringing total estimated run-rate operating synergies to $320.0 million – $345.0 million by 2022.
Foot Locker’s House of Hoops division partnered with Nike to introduce a mobile pop-up shop called House of Hoops Courtside, which will appear around the country during key basketball moments of the NBA regular season. The first opened in Los Angeles at L.A. Live on October 20 and 22, offering a full line of products from Nike, Jordan and Converse. House of Hoops by Foot Locker has 185 physical retail locations nationwide. Foot Locker also updated its mobile app to integrate augmented reality (AR), which creates a more engaging shopping experience. The Company is using AR to offer scavenger hunts on its mobile app, where consumers who complete the hunts will gain access to limited edition footwear.
On October 22, Bluestar Alliance LLC announced the closing of its going concern acquisition of the Brookstone, DIP brand. Apex Digital Inc. participated in the acquisition and will operate the Brookstone website and 33 airport stores, which were part of the transaction. Bluestar and Apex were the successful bidders at the auction, with a joint bid of $72.7 million. GOB sales at all 103 of the Company’s retail stores concluded on September 30.
The Tile Shop
The Tile Shop’s third quarter sales increased 5.7% to $89.3 million, and comps were up 2.1%. Gross margin increased to 70.6% from 67.1%, primarily due to decreased promotional activity. However, SG&A expenses rose 13.1% to $6.8 million due to costs associated with opening and operating six new stores over the past year as well as investments in store and distribution center compensation. Adjusted EBITDA declined 2.8% to $11.9 million. The Company remodeled three stores during the third quarter. As of September 30, The Tiles Shop operated 140 stores in 31 states and Washington D.C.
Mattress Firm, DIP is now closing 524 of its more than 3,200 U.S. stores, with closures commencing at the beginning of November and ending on February 28, 2019. We previously reported that the Bankruptcy Court approved “hundreds of store closings.” According to our Store Overlap Analysis tool, 933 of the Company’s stores are located within one mile of each other as a result of aggressive acquisition activity. The Company had sought Court approval to reject up to 700 leases.
Amazon is opening its first Amazon Go checkout-free store in San Francisco, CA today. The 2,300 square-foot unit is in the middle of the city’s Financial District. Another Amazon Go is scheduled to open this winter in San Francisco, a 1,750 square-foot store about a half-mile away from the first location.Amazon Go is reportedly planning a store for New York City to open next year across from the World Trade Center. It has confirmed it will open another 2,000 square-foot location in Chicago, which will be its fourth in the city and about a mile from the closest Amazon Go unit there.The Company currently has three Amazon Go stores in operation in Seattle.There has been speculation that the Company could open as many as 3,000 Amazon Go locations by 2021.
In other news, Amazon is set to open a new office in Manchester, England and will hire more than 1,000 new employees to work on research and development in the U.K. The move indicates a significant investment in the North of England.
On October 18, Whole Foods opened a new store in South Capitol Hill, its sixth location in Washington, D.C.
Smart & Final
Last week, Smart & Final opened its 200th Smart & Final Extra! location in Long Beach, CA. The 30,000 square-foot store is larger than the Company’s traditional format, which averages 16,000 square feet, and offers an extra 6,000 club size items. The Company operates 323 stores, about 93.5% of which are in California, with the remainder in Arizona and Nevada.
Publix Super Markets will open a new store in Madison, AL tomorrow, its fourth in the city. In addition to traditional offerings, the 54,900 square-foot unit will have more prepared foods, an expanded organic department and a pharmacy.
Kroger will close an underperforming store in Norfolk, VA in mid-December. The Company also said it does not plan to open a store at the Farm Fresh location it purchased right across the road.
ShopRite, a member of the Wakefern cooperative, opened a new 60,000 square-foot store in Riverhead, NY on Sunday.