Retail News

Supervalu

Last Thursday, Supervalu announced results for its second quarter ended September 9, 2017. Overall sales were up 36% based on 58% growth in the Wholesale division, which was mostly attributable to incremental revenue from the acquired Unified business as well as from new customers such as The Fresh Market. EBITDA was up 11% for the quarter as Retail held things in check with -3.5% comps and a 44% decline in EBITDA. The Company also announced an agreement to acquire Associated Grocers – Florida for $180.0 million in a deal expected to close by the end of the year. It was suggested on the conference call that AG’s EBITDA was slightly over $20.0 million for the most recent fiscal year, representing an EBITDA multiple of nearly 9x on the deal; similar to the 9.5x multiple paid on the Unified deal. The Company expects $7.0 million in transaction costs, $15.0 million in transition and integration costs and to achieve $16.0 million in run rate synergies by the end of the third year. Supervalu may be entitled to a $7.0 million termination fee and AG a $9.0 million reverse termination fee should Supervalu not gain antitrust approval before June 14, 2018. The deal will be funded with excess cash and borrowings under the ABL. At quarter end the Company had zero borrowings, $51.0 million in letters of credit and $790.0 million available under its $1.00 billion ABL revolver expiring February 3, 2021.

On October 20, S&P revised its outlook on Supervalu to “negative” from “stable” and affirmed its B+ corporate credit rating. It also affirmed its BB- issue-level and 2 recovery ratings (70% – 90%) on the Company's term loan facility; and affirmed its B- issue-level and 6 recovery ratings (0% – 10%) on its senior unsecured notes. The outlook revision reflects S&P’s view that “Supervalu's credit metrics will weaken through fiscal 2018 as the Company adds incremental debt to partially fund the purchase of Associated Grocers of Florida.”

In other news, Supervalu’s Cub Foods chain is in the midst of a massive makeover, driven by its aging stores and new competition. Remodeled stores go by the name Cub, no longer Cub Foods, and offer a broader assortment of goods, more prepared foods, an expanded produce section, and drive-up pharmacy. New stores have opened in Blaine and Oakdale, while 16 Twin Cities locations have been remodeled. Remodels have begun in Maple Grove, Minnetonka, New Brighton and at an existing store in Blaine. Nearly all of Cub’s remodels are in areas where Hy-Vee opened stores nearby.

Meanwhile, a newly remodeled 88,500 square-foot Cub store that opened in Stillwater last week has been chosen as its flagship location.

Buehler's Supermarkets

E&H Family Group, parent company of Buehler’s Supermarkets, is selling all 13 of its locations to employees in an employee stock ownership program (ESOP). The 2,100 employees will be retained during the transition, an d eligible employees will become owners. The ESOP will be operated by the newly formed Buehler’s Fresh Foods, President and COO Dan Shanahan will be president and CEO of the new Company; VP of human resources Rick Lowe will be EVP/CAO; and VP of store operations Mike Davidson will be EVP of store operations. The Company’s stores are located throughout Ohio. According to Nielsen, as of July 2017, Buehler had a presence in three metro areas including Cleveland with three stores and a 1.75% market share; Canton with two stores and a 4.65% market share; and Akron with one store and a 0.5% market share. E&H Family Group also operates 22 hardware stores in the state under the E&H Ace Hardware name. The sale has no impact on the E&H Hardware Group, which will continue to operate under Buehler family ownership.

Macy's

Macy’s inked a deal to sell the top half of its flagship location in Chicago (State Street) to Toronto, CA-based Brookfield Asset Management. The deal, which has not been finalized, includes floors eight through 14, which encompasses 700,000 square feet. The sale price was not disclosed. Should the deal go through, Macy’s will continue to own and operate retail space on the lower half of the building. It should be noted that Macy’s formed a partnership with Brookfield back in November 2016 to redevelop as many as 50 Macy’s properties; this deal is believed to be separate from that agreement.

Publix

Publix recently opened three pharmacies as part of the first step in a three-pronged partnership with Baycare Health Systems. Each of the pharmacies are located inside a BayCare hospital. Publix pharmacies are also planned to open in two more hospitals. As part of the second part, by 2018, Publix locations throughout Florida’s Pinellas, Pasco, Hillsborough and Polk counties will have BayCare HealthHub kiosks. In the next two years, as part of the third part, Publix locations in the four counties will offer about 25 walk-in telehealth clinics for non-urgent medical care through a private room with teleconferencing and medical diagnostic equipment.

Maurice Sporting Goods/Big Rock Sports

On October 17, the planned acquisition of Maurice Sporting Goods by the parent of Big Rock Sports was called off. This follows Maurice’s October 9 announcement that Peak Global Holdings, LLC, the parent of Big Rock as well as Head Quarters Taxidermy Supply and Bluefield Brands, signed a letter of intent to acquire the Company. Big Rock previously acquired Canadian sporting goods distributor Redl Sports Distributors, Ltd. from Maurice Sporting Goods on August 29, 2017.

Stater Bros.

Tomorrow, Stater Bros. will open a new, 44,000 square-foot store in Tustin, CA, its 30^th store in Orange County and second in Tustin. Expanding offerings include a café and seating area, more organic production, a sushi bar, and full-service meat and deli departments. The Company recently opened new stores in in Menifee and Rancho Cucamonga, CA and currently operates 171 stores.

Key Food

On October 13, Key Food Stores Co-Operative opened its first Halsey Traders Market location in the Bedford-Stuyvesant section of Brooklyn, NY. The 5,000-square-foot store offers a produce department that includes organic and locally grown items, prepared foods and catering services, specialty and gourmet items, and craft beers. Key Food Stores consists of more than 240 primarily member-owned and corporate grocery stores operating under the Food Universe, The Food Emporium, SuperFresh, and Food Dynasty banners. The stores are located in the five boroughs of NYC, Long Island, upstate New York, New Jersey, Connecticut and Pennsylvania.

Earth Fare

Earth Fare, a specialty organic and natural foods grocery store, opened a new store in Oldsmar, FL. It is the Company’s seventh in Florida and second in the Tampa Bay area. Earth fare operates 43 locations across nine states in the Southeast, mid-Atlantic and Midwest, with additional plans for expansion.

Amazon/Kohl's

All bids were due last Thursday for Amazon’s second headquarters dubbed “Amazon HQ2”. Amazon announced that it has received 238 proposals and is being offered as much as $7.00 billion in potential credits against state and city taxes, with the biggest breaks apparently being offered by New Jersey if Amazon chooses Newark. The new headquarters will have the potential to bring 50,000 new jobs and a $5.00 billion investment. As previously reported, Moody's has ranked Austin, TX as the most likely to win the bid based on its labor pool, costs of doing business and quality of life, among other criteria. Austin is also the headquarters of Whole Foods Market, which Amazon recently acquired. Amazon has said it will announce a decision for its second campus next year.

As of last Wednesday, 10 Kohl’s stores in the Los Angeles, CA, and Chicago, IL, markets began selling Amazon’s smart home products and accepting Amazon’s returns. The kiosks selling Amazon products are run entirely by Amazon, while returns are handled by Kohl’s employees. Through the partnership, Kohl’s is hoping to draw more shoppers to its stores, while Amazon is trying to make it easier for customers to return items. The partnership will be expanded to more than 70 additional Kohl’s stores, although no timeline has been provided.

Published reports indicated that Amazon has signed deals with some of the nation’s largest apartment building owners and managers to take over the running of their package rooms. This allows Amazon direct access to more than 850,000 apartment units across the country. Amazon has begun installing locker systems in thousands of apartment buildings, and hopes to have them available by the beginning of the holiday shopping season. In many cases, Amazon is said to be undercutting other companies offering similar services by offering its lockers for half the price; the Amazon lockers will accept all deliveries, not just those from Amazon.

Amazon announced it will shut down its Amazon Wine business on December 31. Amazon Wine, which launched in 2012, offers wineries and other wine brands opportunities to sell to customers through Amazon.com. While the company is prevented from selling wine itself due to current alcohol industry regulations, wine suppliers can make their products available and sell to Amazon customers. “Wine will continue to be offered through Amazon Fresh, Prime Now and Whole Foods Markets,” Amazon wrote in a note to wine sellers.

Academy Sports + Outdoors

Over the weekend, Academy Sports + Outdoors opened a 62,000 square-foot store in St. Peters, MO, its third store in the greater St. Louis market. The St. Peters store joins nearby Academy locations in Manchester and O’Fallon. There are seven competing retailers operating a total of 12 stores within a 20-mile radius, including four Dick’s Sporting Goods, three Hibbett Sports, and one store each of Bass Pro Shops, Cabela’s, Camping World, REI, and West Marine.

Meijer

Meijer received approval for a new store in Avon, OH, expected to open in May 2019. Originally approved in 2015, the modified site plan was reduced in size by about 35,000 square feet to a 157,000 square feet store, in addition to a 3,376 square-foot convenience store and gas station. The store will feature Starbucks and Huntington Bank, with the potential to add more vendors. Meijer currently has 240 retail locations across six states, including 40 stores in Ohio.

EVINE Live

According to published reports, EVINE Live’s former executive team, including Jim Morrison and Marvin Segel (son of QVC’s founder), are planning to launch a proxy fight to take the Company private after their turnaround proposal was rejected by management. EVINE said the Company is not up for sale. According to the reports, the former executives are eager to take advantage of the Company’s current vulnerable operating and financial position, looking to own a shopping channel for, what Mr. Segel said is, “relatively not a lot of money.” Mr. Segel further commented that EVINE’s content is “boring, old and stale and it doesn’t work on mobile,” which is critical in today’s environment. Mr. Segel’s and Mr. Morrison’s reported turnaround plan includes utilizing their StarShop’s platform to penetrate “social media influencers who have millions of followers on YouTube” and other social sites, as well as offering a Spanish TV shopping channel and online platform coupled with enhanced mobile commerce capabilities. Mr. Morrison and Mr. Segel reportedly hoped to collaborate with management to implement their proposal “in exchange for a seat on the Company’s board and an executive position.” They reportedly plan on “buying the operating assets of Evine for a 30% to 40% premium of its total enterprise value of approximately $140.0 to $175.0 million, while leaving the Company intact as a corporation so shareholders can reap the tax benefits of more than $100.0 million in net operating losses.” Current shareholders are said to be offered an option to “take up to a quarter stake in their new private company.” The Company did not comment on Mr. Morrison and Mr. Segel’s reported proposal, however management did indicate that EVINE’s “experienced board” would “deal with any legitimate offer in a professional manner” if presented to them.

Aldi

Aldi will open a new store in Monrovia, CA on December 7. It also announced to open its first store in the Austin, TX, market on November 2, in the town of Pflugerville. It will be Aldi’s first Central Texas store.

According to a new Kantar Worldpanel survey, Aldi and Lidl continue to grow their market share in the U.K. The survey reveals that Aldi’s market share increased from 6.2% to 6.8% in the most recent quarter, while Lidl’s went from 4.6% to 5.2%. The market share figures for the UK’s “big four” grocers, however, went in the other direction: Tesco’s went from 28.2% to 27.9%, Sainsbury’s went from 16% to 15.8%, Walmart’s Asda’s went from 15.6% to 15.4%, and William Morrison’s market share went from 10.4% to 10.3%.

Best Buy

Best Buy opened a new, 500,000 square-foot distribution center in Compton, CA to meet the Company’s growing demand for large products such as big-screen TVs and major appliances in the Southern California area. This is the Company’s first new facility opening in 12 years; it will join an existing facility in Chino, CA to serve customers in the area. Looking ahead to 2018, the facility will also serve as one of the Company’s first e-commerce centers, fulfilling online orders.

Mac Acquisition LLC, DIP

On October 18, Mac Acquisition LLC, DIP (dba Romano's Macaroni Grill) filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court in the District of Delaware. The Honorable Mary F. Walrath has been assigned to the case, which has been designated as case number 17-12224. Below is the filtered Store Concentration Map, which shows the locations of the Company’s stores.

Shopko

Just last week, Spirit Realty’s stock was down about 5% to $8.08 from last Monday’s open of $8.56, a decline that was attributed to a published report claiming Shopko has been put up for sale by Sun Capital. The article noted that a sale of Shopko could be done outright or in a Chapter 11 proceeding. In Spirit Realty's last quarterly report it stated, "Shopko operates in the general merchandise industry and is the Company's largest tenant as a percentage of rental revenue. Total rental revenues from properties leased to Shopko for the three months ended June 30, 2017 and 2016, contributed 7.6% and 9.5% of the rental revenue."

Arby's

Arby's Restaurant signed development agreements to build 25 new restaurants in the Chicago metro area over the next five years. Arby’s currently has 64 restaurants in Chicago and has said that it is a priority growth market. Development agreements were signed with Pete Lyders-Petersen to open an initial 20 restaurants in the North and Northwest Chicago suburbs as well as Faisal Merchant to open an initial five restaurants in downtown Chicago and the Southwest Chicago suburbs.

The Tile Shop

On October 20, The Tile Shop opened a new, 10,970 square-foot store in Houston, TX (The Woodlands), marking its third store in the metro area. The other two stores in Houston were opened during the third quarter, in Webster and Sugarland. The Company operates 134 stores nationwide, including 14 in Texas. This year the Company expects to open 15 stores, of which 12 have opened so far.

Target

Last week, Target opened 12 new stores across the country including 11 small-format stores located in New York, Chicago, Los Angeles, Philadelphia and Minneapolis, bringing Target's total of small-format stores to 55. The retailer is also opening a traditional store in Honolulu. In total, it plans to open 32 new stores in 2017, and 35 new stores in 2018. Target is accelerating the pace of opening new small format stores in dense urban and suburban areas and on college campuses. By the end of 2019, Target plans to operate more than 130 small-format locations nationwide.

Target is also increasing its investment to reimagine more than 1,000 stores by the end of 2020. It plans to remodel a total of 110 stores in 2017, and fully renovate more than 325 in 2018, 350 in 2019 and 325 in 2020. The remodels will be customized based on customer feedback and will all include modern design elements. Additionally, Target is investing in differentiating its shopping experience by increasing staffing and training. At the opening of its Herald Square location in New York City last week, Target CEO Brian Cornell told reporters that "reimagining" Target stores will be a major component of its $7.00 billion investment plan, first announced in February. The remodeling has resulted in a 2% to 4% lift in sales.

Additionally, Target will expand its same-day delivery service in New York City to three additional locations. In 2018, Target will offer guests additional digital fulfillment options by expanding Target Restock nationwide.

Meanwhile, Target plans to open its first store in Vermont in October 2018. The 60,000-square-foot will be located in South Burlington. Once the store opens, Target will have stores in all 50 states.

In other news, Target has announced the results of its October 16, 2017 tender offer for up to $2.21 billion of its debt securities. As of the expiration of the offer on October 20, 2017, the Company had accepted $343.6 million in aggregate principal amount of validly tendered notes.

Yesterday, Target announced it would start free shipping beginning in November and that most of its gift assortment had been priced at under $15, as it gets ready to take on Amazon and Walmart during the start of the holiday season. Target plans to offer promotional deals during weekends for the last two months of the year. It is also rolling out a service that allows online customers to send friends and family electronic gift boxes that let them make changes to items or select entirely different gifts before they ship.

Fashion to Figure

Published reports indicate Fashion to Figure, a 27-store primarily mall-based chain with locations along the East Coast, plans to shutter up to 10 locations following the upcoming holiday shopping season. The fast-fashion retail chain previously received an $18.2 million investment in February 2013 from Perella Weinberg Partners to fund its expansion plans, which allowed it to more than double its store base from the dozen stores it operated at the time. However, the recent reports say the Company is pulling back on its aggressive growth plans due to declining mall traffic. The Company operates stores in Maryland (8), New York (6), New Jersey (4), Massachusetts (3), Georgia (3), Connecticut (2), and Delaware (1).

Walmart

Walmart announced the Early Participation results of its October 6, 2017 tender offer for up to $8.50 billion of its certain outstanding debt securities. As of the October 20, 2017 Early Participation date, $5.50 billion in securities were tendered, all of which are expected to be accepted. The tender offer runs through November 3, 2017.

In other news, Walmart is reportedly close to finalizing a deal that would add department store chain Lord & Taylor (owned by Hudson’s Bay Co.) to its website. The deal would be a first step in creating an “online mall” at Walmart.com, which would include its other brands such as Bonobos and Jet.com. The move is also part of an effort to bring more upscale customers to Walmart’s website.

Yesterday, Walmart’s Jet.com officially launched its first private label line under the Uniquely J line. The brand includes more than 50 SKUs in the coffee, cleaning, laundry, pantry goods and food storage categories. According to the Company, Uniquely J aims to appeal to millennials by offering lower prices without sacrificing quality. The Company said it expects to add more products to the line in the coming months.

Wal-Mart de Mexico

Wal-Mart de Mexico (Walmex) reported third quarter revenue rose 7.8% to 136.80 billion pesos (US$7.50 billion), benefiting from earthquakes in Mexico last month that prompted shopping sprees for donations of supplies to displaced people. Mexico’s sales climbed 8.9% and Central America sales rose 10.2%. Walmex's net profit fell 13.7% to 8.70 billion pesos, attributed to the sale of clothing chain Suburbia to El Puerto de Liverpool. Walmex said online sales grew at a lower rate than expected due to call center disruptions and a decrease in orders in the earthquakes’ aftermath.

During the quarter, the Company opened 33 new locations, bringing its total store count to 3,076 sites in six countries.

The Company said that its Sam's Club locations had the highest growth in same-store sales compared with the Walmart, Bodega and Superama formats.

Stitch Fix

According to a filing with the SEC, San Francisco, CA-based e-commerce clothing subscription company Stitch Fix filed for an IPO, listing $100.0 million as its initial offering amount. The Company plans to list its stock on the Nasdaq under the ticker symbol “SFIX.” Goldman Sachs and J.P. Morgan are lead underwriters on the deal. The Company was founded in 2011 and has 2.2 million active customers. According to its IPO filing, Stitch Fix generated sales of $977.0 million during fiscal 2017, and a net loss of just under $1.0 million. Fiscal 2017 sales were up 33.8% from 2016 sales of $730.0 million, and the Company recorded a profit of $33.0 million in 2016. Stitch Fix plans to use the proceeds from the IPO to increase its capitalization and financial flexibility, for general corporate purposes and potentially for acquisitions. The Company’s largest investors include Steve Anderson’s Baseline Ventures (28% stake), Benchmark Capital (25.6% stake) and founder and CEO Katrina Lake (16.6% stake).