October 31, 2018
Sears Holding Corporation
On October 26, the Court in the Sears Holdings, DIP case issued an interim order authorizing the Debtors to: (i) commence closing sales at 142 stores; and (ii) engage Abacus Advisors Group L.L.C. to conduct the GOB sales. A hearing on final approval is scheduled for November 15, 2018. The 142 closing stores are in addition to the previously announced group of 46 unprofitable units which are expected to close by November 2018.
Meanwhile, on October 25, Sears Holdings, DIP filed a notice of adjournment for a hearing to consider approval of a $300.0 million Junior DIP Facility. The hearing was previously scheduled for November 1, 2018, and the notification stated that the deadline to respond or object to the motion was adjourned to a date to be announced. As we previously reported, ESL Investment, Inc. has indicated an interest in providing a substantial portion of the funding. The Debtors previously stated that “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.” The Creditors’ Committee selected Akin Gump Strauss Hauer & Feld LLP as its counsel and FTI Consulting as its financial advisors.
For a complete list of Sears locations,click here.
Hibbett Sports
On Monday, Hibbett Sports announced that it has signed a definitive agreement to acquire City Gear, a privately held retailer of premium athletic, footwear, apparel, and accessories with 135 stores in 15 states. Hibbett will pay $88.0 million in cash at the closing of the transaction, with the potential for an additional $25.0 million, subject to performance targets. City Gear will operate as a subsidiary of Hibbett and will continue to be based at its corporate headquarters in Memphis, TN. The Company does not anticipate any changes to senior management and expects the deal to close in December.
During fiscal 2017, City Gear generated $190.0 million in revenue and has witnessed average comparable store sales in the mid-single-digit range for the past three years. Hibbett stated that the transaction is expected to be accretive to its bottom line for fiscal 2020. Although Hibbett expects to finance a portion of this transaction with borrowings on its credit facility, it currently holds no bank debt and generated $80.0 million in TTM EBITDA as of the end of the second quarter.
For a complete list of Hibbett Sports locations, click here.
For a complete list of City Gear locations, click here.
Brookstone Holdings Corp.
In the Brookstone Holdings Corp., DIP Chapter 11 case, Bluestar Alliance LLC announced the closing of its going concern acquisition of the Brookstone 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 on all 103 of the Company’s retail stores concluded on September 30.
For a complete list of Brookstone locations, click here.
Wakefern Food Corp.
Wakefern Food Corp. reported record retail sales of $16.50 billion for the 52-week fiscal year ended September 29, 2018, a 1.6% increase from the prior year. Wakefern opened four new ShopRite stores and two Price Rite Marketplace stores during the year.
For a complete list of ShopRite locations, click here.
iFresh, Inc.
On Monday, iFresh, Inc. announced a new strategic plan, outlined by Mr. Long Deng, Chairman and CEO. The plan includes closing or selling underperforming stores, and remodeling and updating all other iFresh stores. Additionally, Rainbow Tang, a New York based food management company, has signed a sublease agreement with iFresh Glen Cove. Rainbow Tang will be responsible for making and selling ready-to-eat food in the iFresh Glen Cove Inc. supermarket that iFresh plans to open in 4Q18.
CVS Health Corporation
On October 26, CVS Health Corporation entered into a 364-Day Bridge Term Loan Agreement providing for total commitments of $4.00 billion, effective on that date. The Bridge Term Loan Agreement was entered into in connection with the pending merger with Aetna Inc. The bridge facility is unsecured and does not amortize. Any borrowings will mature and be payable in 364 days from the date of the agreement.
In other news, CVS Health recently opened 15 of its Hispanic-focused stores, called Pharmacy y más, in Texas, including three in the Houston area, four in Dallas and one each in Austin, Channelview, Harlingen, Irving, Odessa, Plainview, San Antonio and Seguin. The stores offer bilingual signage and staff as well as more than 1,500 products from Hispanic brands. CVS first introduced the concept in 2015 in Miami. Since then, the Company has expanded CVS Pharmacy y más to 130 locations in 67 cities across California, Florida, Nevada, Texas and Puerto Rico.
For a complete list of CVS locations,click here.
Target
Target plans to offer free two-day shipping on online orders this holiday season. The offer will launch on November 1, and run until December 22, and will not require a minimum purchase or membership, a shift from earlier this year when shoppers could receive free shipping only if they spent $35 or used a Target loyalty card. Walmart offers free two-day shipping on orders $35 and up, and Amazon offers the services to customers who pay $119 a year for a Prime membership.
Meanwhile, Target plans to add another small-format store to its Manhattan footprint located near Columbus Circle. The 34,000 square-foot store is expected to open in 2019 and will be Target’s 28th location in New York City. Target opened eight small-format stores nationwide in October and plans to open a total of about 30 this year.
For a complete list of Target locations, click here.
Walmart
In an effort to drive traffic, Walmart is looking to convert space in many of its parking lots to “pseudo town centers” that will feature a variety of retail tenants such as restaurants, day care establishments, health clinics, bowling alleys, food trucks, bike rental stations, driving ranges, fuel stations, among others. Parking systems will also be overhauled to better facilitate the store's grab-and-go services. According to published reports, such projects are underway at select Walmart stores in Arkansas, California, Colorado, Iowa, Missouri, Oregon, Texas, and Washington. The test parking lots are said to resemble open-air malls more than standalone big-box stores.
In other news, Walmart is launching a faster check out option that allows customers to bypass long lines, called Check Out With Me, for the holidays. Starting November 1, associates will be in the busiest parts of the store, including electronics and garden center, and will be able to check out customers with the swipe of a card. The Walmart app now also has store maps that are specific to each location and will help shoppers find items easily.
Walmart has agreed to pay $160.0 million to settle a long-running shareholder class-action suit related to the U.S. government’s continuing investigation of the retailer for alleged bribery. The settlement with the City of Pontiac General Employees Retirement System adds to the hundreds of millions of dollars the retailer has spent over six years related to the investigation. Walmart did not admit fault, as part of the settlement. In late 2011, Walmart said in a financial filing it was investigating possible bribery within the Company, without giving specifics. In 2012, it was alleged that Walmart paid bribes in Mexico to win government zoning changes and permits to open more stores. Since 2012, Walmart has spent $892.0 million on an internal investigation of the allegations and related compliance improvements.
For a complete list of Walmart locations, click here.
Store Activity
BJ's Wholesale Club
On October 27, BJ's Wholesale Club opened a new store in Roanoke, VA. The opening brings the Company’s store count to 216 in 16 states. In Virginia there are nine BJ’s warehouse clubs located within five miles of 7 Costco’s and 5 Sam’s Clubs, see below for Store Overlap Map.
For a complete list of BJ's Wholesale Club locations, click here.
Grocery Outlet
Grocery Outlet recently submitted plans to open a 20,000 square-foot store in Dayton, NV; earlier this year it also submitted plans for a store in Fernley. The openings would increase the number of major grocery retailers in Lyon County by 50%. The county currently has Smith’s in Dayton, Raley’s in Yerington and Fernley, and a Walmart Supercenter in Fernley.
On November 15, Grocery Outlet will open an 18,000 square-foot store in Palmer Township, PA, its third location in Lehigh Valley. Grocery Outlet operates about 317 stores in six states, 22 of which are in Pennsylvania.
For a complete list of Grocery Outlet locations, click here.
Sprouts Farmers Market
Sprouts Farmers Market expects to open seven new stores in the first quarter of 2019. The stores are in Carlsbad and Fontana, CA; Clearwater and Naples, FL; Sugar Land, TX; Las Vegas, NV; and Lynnwood, WA. The Lynnwood store will be its second in Washington after initially entering the market in August. Sprouts has said it plans to open 30 stores next year. It currently operates more than 300 stores in 19 states (Store Concentration Map below), with plans to expand to new markets next year. For a complete list of Sprouts Farmers Market locations, click here.
Publix
Publix plans to build a concept store in Indialantic, FL, which is about half-way between Daytona Beach and Jupiter. Publix is not commenting on specifics but reports indicate the store will be neither a traditional Publix store, nor one of its Greenwise formats. It is expected to be opened by the end of 2019 or in early 2020.
For a complete list of Publix locations, click here.
Schnuck Markets
Schnuck Markets will open a 37,000 square-foot store in Warrenton, MO, on November 7. The location, which will place heavy emphasis on fresh departments, is not part of the Company's acquisition of 19 Shop 'n Save stores. Schnuck operates 118 stores in Missouri, Illinois, Indiana, Wisconsin and Iowa.
For a complete list of Schnuck Markets locations, click here.
99 Ranch Market
Asian supermarket chain 99 Ranch Market launched a new format called Cravings by 99 Ranch Market in Chino, CA. The 56,000 square-foot location is larger than 99 Ranch Market’s traditional stores, which average 30,000 – 40,000 square feet. The Cravings format combines a warehouse-style grocery store with a dining hall that includes nine vendors offering Asian, Mexican, Southern California and American food.
For a complete list of 99 Ranch Market locations, click here.
Rouses Markets
Rouses Markets opened a new store in Moss Bluff, LA, on October 24. It is the Company’s second store in Calcasieu Parish, after entering the market on September 12 with a location in Sulphur. Rouses’ 60th store will open November 8 in Baton Rouge.
For a complete list of Rouses Markets locations, click here.
Wegmans
Wegmans has announced plans to build a 100,000 square-foot store in Wake County, NC. Although an opening date has not been set, the store will be the fourth Wegmans in the Triangle. The first broke ground last year and is expected to open in Raleigh in 2019. Two others will be located in Cary and another will be in Chapel Hill.
For a complete list of Wegmans locations, click here.
Natural Grocers by Vitamin Cottage
Natural Grocers by Vitamin Cottage plans to open a 13,000 square-foot store in Woodland Park, CO. The Company operates 149 stores in 19 states, 37 of the stores are in Colorado. For a complete list of Natural Grocers by Vitamin Cottage locations, click here.
Sam's Club
Walmart’s Sam’s Club is opening a new, 32,000 square-foot store in Dallas, TX called Sam’s Club Now that is designed to be a testing ground for new technologies. The location, which is a quarter the size of an average Sam’s Club, will feature electronic shelf labels and enable shoppers to use a new app called "Sam's Club Now" to help navigate the store and bypass the traditional checkout process.
For a complete list of Sam's Club locations, click here.
ABC Supply
Last week, ABC Supply opened a new branch in Alpharetta, GA, its 15th location in the state. The Company also opened its 40th branch in Texas, in Waxahachie on October 23. The opening follows the Company’s closure of two deals this month; it has acquired the assets of CSC Home & Hardware and DRI Supply.
For a complete list of ABC Supply locations, click here.
Indigo Books & Music
Indigo Books & Music has opened its first U.S. location at The Mall at Short Hills in New Jersey. The 30,000 square-foot store offers books, magazines, cards, stationery, electronics, home décor, jewelry, kitchen accessories, handbags and a range of other lifestyle products. The store also has a café, which is still under construction. Indigo’s stores, including the New Jersey location, are organized around several shops-within-a-shop, including Books, IndigoKids, IndigoBaby, Wellness, Home, Joy of the Table, A Room of Her Own, and IndigoPaper. During a recent investor call, Indigo CEO Heather Reisman hinted at more U.S. openings — approximately three to five over the next two years. In Canada, Indigo operates about 85 superstores under the Indigo and Chapters banners as well as 120 smaller-format stores under the Coles, Indigospirit, SmithBooks and the Book Company banners. The Company has been in the process of renovating 16 of its larger-format stores into cultural department stores.
For a complete list of Indigo Books & Music locations, click here.
Earning Releases
Amazon
Amazon.com announced results for its third quarter ended September 30, 2018. Sales increased 29.3% to $56.58 billion, which included $4.25 billion from the acquisition of Whole Foods Market. We estimate that Whole Foods comps grew in the low single-digits compared to last year. The growth of the Company’s high margin segments offset higher shipping costs and leveraged SG&A costs, resulting in EBITDA more than doubling to $8.85 billion; EBITDA margin expanded 570 basis points for the quarter.
In other news, last week the Company opened its sixth Amazon Go store, marking its first location in California. The 2,300 square-foot San Francisco store was the second Amazon Go store to open this month, after a 1,200 square-foot store debuted in Chicago. In Chicago, Amazon plans to open a 2,000 square-foot store at the Illinois Center in 2019 and a 1,700 square-foot location in the Ogilvie Transportation Center. It also plans to open a second 1,750 square-foot San Francisco store this winter. In total, Amazon currently has 603 physical stores (492 Whole Foods – 472 US, 6 Amazon Go, 18 Bookstores, one Amazon 4-Star outlet and 86 Pop-Ups in Kohl’s).
Chipotle
Chipotle reported third quarter sales growth of 8.6% to $1.23 billion, driven by new openings and comp growth of 4.4%. Comps improved primarily as a result of an increase in average check, including a 3.8% menu price increase, partially offset by 1.1% fewer comp restaurant transactions. Digital sales increased 48.3% and accounted for 11.2% of sales. Net income was $38.2 million, including the impact of $22.4 million in expenses related to restaurant asset impairment, corporate restructuring, and certain other costs, a 94.8% increase from $19.6 million last year. During the first half of the year, the Company opened 97 new restaurants and closed or relocated 42.
Looking ahead at fiscal 2018, comps are expected to increase in the low to mid-single digits. New restaurant openings will be at the lower end of the previously announced range of 130 – 150. For fiscal 2019, management anticipates opening 140 – 155 new restaurants.
For a complete list of Chipotle locations, click here.
Noodles & Company
Noodles & Company announced results for the third quarter ended October 2, 2018. Revenue increased 2.2% to $116.7 million, as system-wide comps rose 5.5% (Company-owned restaurant comps grew 5.2% and franchise restaurant comps grew 7.6%). During the third quarter, the Company did not open any restaurants and closed three Company-owned locations, following the expiration of their leases.
For a complete list of Noodles & Company locations, click here.
Bloomin' Brands
Bloomin’ Brands reported third quarter sales growth of 1% to $965.0 million, driven by restaurant openings, and higher U.S. comp growth, partially offset by currency exchange. Combined U.S. comps increased 2.9%, with comp growth of 4.6% at Outback Steakhouse, 1.8% at Bonefish Grill, 0.5% at Fleming’s Prime Steakhouse & Wine Bar and a decline of 0.6% at Carrabba’s Italian Grill. Comps were down 3.3% in Brazil. Operating income was $12.53 million, compared to $5.2 million last year, primarily due to lower impairment and restaurant closing expenses, productivity initiatives, and increases in average check. This increase was partially offset by commodity inflation, labor inflation, higher incentive compensation expense, and lower comps in Brazil. The impairment and restaurant closing expenses are excluded from the adjusted operating income margin.
During the quarter the Company opened five new restaurants, including four in international markets.
The Company raised its fiscal 2018 adjusted EPS guidance to $1.41 – $1.47, from previous guidance of $1.38 – $1.45. It now expects combined U.S. comp growth of 2% – 2.5%, compared to $1.5% – 2.5% previously.
Watsco
Watsco reported third quarter sales increased 5.4% to $1.30 billion, and operating income rose 6.8% to $122.3 million. By product line, sales of HVAC equipment (68% of total sales) grew 7%, other HVAC products (28% of sales) increased 4%, and commercial refrigeration products (4% of sales) were flat. Results also reflect realization of price increases and a richer mix of high-efficiency systems, as well as a $3.0 million operating profit decline in Florida-based locations on flat sales, and a $2.0 million operating profit decline in Mexico on lower sales. During the quarter, the Company completed the acquisition of Alert Labs Inc., a technology company based in Kitchener, Ontario, Canada. Watsco’s network consists of 568 locations in 37 U.S. states, Canada, Mexico and Puerto Rico.
Looking ahead, the Company estimates 2018 annual EPS of $6.40 - $6.50 compared to adjusted EPS of $5.54 in 2017 (2017 GAAP EPS was $5.81 and includes a $0.27 one-time tax benefit related to the change in U.S. tax law).
Watsco also announced that its board approved a 10% increase in its annual dividend to $6.40 per share on each outstanding share of its common stock and Class B common stock to be reflected in its next regular quarterly dividend payment beginning in January 2019.
For a complete list of Watsco locations, click here.
Carter's Inc.
Carter’s, Inc. reported third quarter net sales decreased 2.5% to $923.9 million, primarily driven by a sales decline in the Company’s U.S. Wholesale segment, reflecting the loss of sales to Toys “R” Us and Bon-Ton, partially offset by growth in the U.S. Retail and International segments. U.S. Retail segment sales increased 1.2% to $459.1 million, U.S. Wholesale segment net sales decreased 8.3% to $339.0 million, and International segment net sales increased 1% to $125.8 million. Changes in foreign currency exchange rates compared to the prior-year period adversely affected current-quarter consolidated net sales by $4.1 million, or 0.4%. On a constant currency basis (a non-GAAP measure), consolidated net sales decreased 2.1%. Operating income decreased 20.6% to $103.6 million. 2018 results include $3.5 million in charges related to changes in the Company’s business model in China. Chairman and CEO Michael D. Casey commented, “We did not achieve our growth objectives in the third quarter. We saw less robust demand than expected for our fall transitional product offerings, especially during the Labor Day holiday shopping period. In the latter part of September, as cooler weather arrived in more parts of the United States, sales trends improved meaningfully and were more in line with our expectations. Given the improved trend in sales, together with the strength of our fall and holiday product offerings, we are expecting good growth in sales and earnings in the fourth quarter.” In the third quarter, the Company opened 18 stores and closed nine stores in the U.S. As of the end of the third quarter, the Company operated 835 retail stores in the U.S., 184 retail stores in Canada and 42 retail stores in Mexico.
Looking ahead, Carter’s projects fourth quarter net sales to increase approximately 5% and adjusted diluted EPS to increase approximately 10%. For fiscal 2018, the Company expects net sales to increase approximately 1.5%, and adjusted diluted EPS to increase approximately 5%.
For a complete list of Carter's locations, click here.
Boot Barn Holdings
Boot Barn Holdings’ second quarter sales increased 17.5% to $168.1 million, driven by an 11.3% increase in same store sales, the sales contribution from the stores acquired from Wood’s Boots, Lone Star and Drysdales, and sales from new stores added over the past 12 months. Income from operations was $8.7 million, or 5.2% of net sales, compared to $5.6 million, or 3.9% of net sales, in the prior-year period. During the quarter, the Company added a net three stores through new openings and acquisitions, bringing the total count at quarter-end to 232 stores in 31 states. CEO Jim Conroy commented, “Same store sales increased double digits, both in our retail stores and online, which combined with merchandise margin expansion from increased full-price selling and exclusive brand penetration, drove 130 basis points of operating margin improvement over last year. During the quarter, we made significant progress across each of our four strategic growth initiatives. Most notably, in mid-September we successfully launched our new exclusive brand, Idyllwind, Fueled by Miranda Lambert. We are well positioned to continue driving improved results during our upcoming holiday quarter and over the long term.”
Looking ahead, the Company expects third quarter comp growth of 5% to 7%. For fiscal 2019, Boot Barn anticipates comp growth of 6.5% to 8%, income from operations of $57.5 million to $60.5 million, and plans to add 23 new stores, including the 9 stores opened and acquired during the first six months of fiscal 2019.
For a complete list of Boot Barn locations, click here.
O'Reilly Automotive
O’Reilly Automotive’s third quarter sales rose 6.1% to $2.48 billion, comps were up 3.9%, and operating income increased 5% to $485.1 million. CEO and Co-President Greg Johnson commented, “During the third quarter, we opened 43 net, new stores, which brings our year-to-date store openings to 171 net, new stores across 33 states, and we are well positioned to achieve our target of 200 net, new stores for 2018. We continue to be pleased with the performance of our new stores and remain very confident in our opportunities to profitably grow in both existing and new market areas. Based on solid industry demand drivers and our confidence in the ability of our store Teams to continue to take market share, we are establishing a target range of 200 to 210 net, new store openings for 2019, supported by our industry-leading distribution network and best-in-class parts availability.”
Looking ahead, the Company expects fourth quarter comps of 2% to 4% and fiscal year revenue of $9.40 billion to $9.60 billion with comps of 3% to 4%.
For a complete list of O'Reilly Automotive locations, click here.
