April 17, 2018
Aldi
Aldi has chosen the city of Buckeye for its first store in Arizona, set to open in 2019. Aldi has reportedly been scoping out Arizona for new stores, and in January sources indicated that the Company was looking at up to 40 stores around greater Phoenix. Aldi is also working on a regional distribution center in neighboring Goodyear. Kroger’s Fry’s Food & Drug Stores, Albertsons, Bashas’, Sprouts Farmers Market, Trader Joe’s, Smart & Final, Winco Foods and Whole Foods, along with Walmart and Target, all have stores in the crowded Arizona market. The below map displays store concentration for Aldi.
Sears Holdings
Real estate services firm Cushman & Wakefield is partnering with Real Insight Marketplace to sell 16 profitable Sears Holdings locations online. Bids are due by May 1. The stores are all under the Sears banner and are mostly attached to malls and located in suburban markets. Five are in Texas, four in Missouri, three in Indiana, three in Ohio and one in Michigan. Click here to request full list. They are being marketed as sale and leaseback deals; some have agreements that could result in the properties being turned into self-storage, hotel or residential space.
Sears has been unwinding its assets in hopes of raising liquidity and cutting its losses. It ended the year with just 307 owned properties and in early 2018 announced plans to close more than 100 stores by April. Most recently, the Company said it raised enough money to pay $407.0 million toward its pension plan in order to unlock and allow for the sale of 140 other properties.
Meanwhile, in mid-July Sears will close its last store in Chicago, IL, the city where it opened its first store 93 years ago. A liquidation sale at the Six Corners store is set to begin April 27. The adjacent Sears Auto Center will close in mid-May. The planned closure comes after the Company shut nearly a fifth of its U.S. department stores in 2017. The Six Corners property was one of 265 sold to Seritage Growth Properties REIT when it was spun off from Sears in 2015. An investment firm owned by Eddie Lampert, Sears Holdings’ CEO, has a significant ownership stake in Seritage. Sears continues to operate many of those stores, but Seritage has begun redeveloping others. Seritage’s website lists the Six Corners property, including the 127,110-square-foot main building and the 56,180 square-foot auto center, available for lease. Sears reportedly will continue to operate stores in the suburbs.
Meijer
Meijer will open its 10th store in Wisconsin on May 17 in Grand Chute. The 195,000 square-foot supercenter will also have a separate gas station/convenience store. It is one of six new stores Meijer will open this year, in Wisconsin, Illinois, Indiana and Michigan. The below map highlights recent Meijer openings and closings.
Rite Aid
According to published reports, some Rite Aid shareholders plan to oppose the $24.00 billion merger with Albertsons, which they believe undervalues the Company. These investors are saying they are not getting a big enough share of the Company that would be formed by the merger and that Rite Aid would be better off overhauling its pharmacies on its own. Critics of the deal also say executives at the two companies are too close, noting that Albertsons CEO Bob Miller previously served on Rite Aid’s board. The reports indicate that one of Rite Aid’s 10 biggest shareholders (unnamed) said it planned to vote against the deal because it doesn’t give shareholders a fair premium. Under the deal, Rite Aid investors may exchange 10 of their shares for a share in the combined company plus $1.83 in cash, or alternatively 10 shares for 1.079 new shares. Rite Aid CEO John Standley says that the deal “makes sense for us strategically and financially. The merger will transform Rite Aid.” Albertsons’ largest investor, Cerberus Capital Management LP helped broker the deal.
Rite Aid reported fourth quarter fiscal 2018 results last week that included a 1.7% decline in comps. For fiscal 2019, the Company expects total sales of $21.70 billion – $22.10 billion and adjusted EBITDA of $615.0 million – $675.0 million, compared to $21.53 billion and $588.7 million, respectively, in fiscal 2018. Top-line growth will be driven by the PBM segment, as retail comps are expected to be flat to up 1%, with improvement in the back half as the Company cycles its exclusion from certain networks in fiscal 2018.
Albertsons
Albertsons managed to realize a 0.6% increase in fourth quarter comps, aided by increased investments in promotions and pricing. Gross margin declined 30 basis points (excluding fuel) due to the aforementioned investments as well as higher shrink related to system conversion disruptions as the Company continues to transition stores and distribution centers to the Safeway platform. The stronger sales and improved SG&A margin helped push EBITDA up approximately 2% to $714.1 million, with EBITDA margin flat at 5.1%. For fiscal 2018, the Company expects to maintain positive comps, with growth forecast between 1.5% and 2%, including stronger gains in the back half, as inflation is expected to pick up. The Company expects adjusted EBITDA of approximately $2.70 billion, compared to $2.44 billion in fiscal 2017. The Company has been investing in its omnichannel offerings, including its Drive Up and Go (click-and-collect) service and its alliance with Instacart, which were available in 102 and 1,300 stores, respectively, at the end of fiscal 2017, and are expected to be available in more than 500 and 2,000 stores, respectively, in fiscal 2018. At year-end 2017, grocery delivery was available in 34 markets, including eight of the top ten metropolitan statistical areas (MSAs).
Jetro Holdings LLC
Restaurant Depot, a division of Jetro Holdings LLC, will reportedly begin construction of its Harrison Township, OH location this month. The Company is said to be investing $7.0 million on the 55,000 square-foot store. No opening date has been set. Restaurant Depot currently operates 128 cash and carry locations across 33 states.
Save-A-Lot
Save-A-Lot, which is owned by an affiliate of Onex Corporation, will begin construction on a new corporate headquarters in St. Ann, MO, just outside of St. Louis. Save-A-Lot is reportedly investing $20.0 million in the 165,000 square-foot facility, which will replace a shuttered shopping mall. It is about 15 minutes from the Company’s current headquarters.
Retail REIT Roundup
See How REITs Performed In The 2017 Fourth Quarter
Includes a comparison of key metrics (Occupancy Rates, Tenant Sales Per Square Foot, Net Operating Income, Funds From Operations and more)
Southeastern Grocers
Southeastern Grocers LLC, DIP (SEG) filed a prepackaged Chapter 11 bankruptcy on March 27 and plans to complete the process within 90 days. A hearing to consider confirmation of the Plan, which includes the elimination of more than $500.0 million of debt and the sale or closure of approximately 120 stores, is currently scheduled for May 14. Meanwhile, management appears eager to start implementing improvements at its remaining base of about 580 stores. At a recent reopening of a renovated store in St. Johns County, FL, CEO Anthony Hucker indicated the Company plans to start accelerating store upgrades. The renovated store focuses on fresh, including 1,400 new natural and organic items. It is interesting to note the same store received a $5.5 million remodel in 2011, suggesting its prior remodeling efforts failed to generate the desired effect. Will management get it right this time? Mr. Hucker would not say which other stores are slated for renovations, but that the Company will make those decisions based on customer feedback.
Meanwhile, last Wednesday SEG opened two new Fresco y Más stores in West Florida, growing the banner to 24 locations and expanding it beyond South Florida for the first time. The two stores are located in Tampa; a Winn-Dixie is expected to be re-bannered to Fresco y Más in Orlando later this month. The format has received intriguing initial reviews, although it’s questionable how relevant the format may be outside of its current South Florida market area.
SEG will introduce a new loyalty program this summer called SE Grocers rewards, which will allow customers to redeem points on groceries and fuel at participating Shell or other select fuel stations.
Coborn's
Coborn’s will reopen a store in Delano, MN on April 26, after a remodeling project that transformed it into the Company’s fifth “next-generation” grocery store. Through this remodel, Coborn’s has added more fresh products, introduced new services, and brought a “unique modern look” to the interior of the store. The store now offers expanded prepared foods through “The Kitchen,” its Chop Shoppe for cutting fruits and vegetables, click and collect online shopping, and Caribou Coffee, among other things. Coborn’s operates 53 grocery stores across Minnesota, North Dakota, South Dakota, Illinois and Wisconsin. It also owns CobornsDelivers, an online grocery ordering and home delivery service, and standalone convenience, liquor and pharmacy locations.
Key Food Stores Cooperative
On April 14, Key Food Stores Cooperative opened a new store in Brooklyn, NY in Dobbs Ferry. The 18,000 square-foot store has expanded organic, specialty and prepared food sections. Key Food Stores Cooperative includes more than 260 primarily member-owned and corporate grocery stores in New York, New Jersey, Connecticut and Pennsylvania.
Target & Shipt
Target and Shipt announced they will begin offering same-day delivery later this month in the Tuscon, AZ; Albuquerque, NM; Las Vegas and Reno, NV metro areas. About half of Target’s stores are expected to offer Shipt’s same-day delivery through the early part of 2018, with most stores offering the service by the 2018 holiday season. Target said Shipt’s service will be in nearly 180 markets by the end of the year, and same-day delivery will be available for all major product categories at Target by the close of 2019.
Elsewhere, Rouses Market and Target stores in Louisiana and Mississippi will launch same-day delivery through Shipt. Rouses operates 55 stores in three states: 47 in Louisiana, three on the Mississippi Gulf Coast and five in lower Alabama.
In Utah, Shipt will begin delivering from Target and a number of stores owned by Associated Food Stores beginning May 1.
Sears Hometown and Outlet Stores
Sears Hometown and Outlet Stores opened its newest Texas Sears Hometown store on April 5 in Wichita Falls. This is the 13th opening of a Sears Hometown store this year. As of April 29, Sears Hometown and Outlet operated 1,012 stores across all 50 states as well as in Puerto Rico and Bermuda.
Walmart
As part of Walmart’s $11.00 billion capital expenditures budget for fiscal 2019, it plans to remodel 500 stores and open 20 new stores across more than two-dozen states. Walmart is bringing online grocery pickup to 1,000 additional stores this year, adding pickup towers for online orders to another 500 stores, and expanding Mobile Express Scan & Go, which allows shoppers to scan and pay for items with their smartphones.
A number of specific market investments were announced last week. Walmart expects to spend about $200.0 million over the next year in Florida through opening and remodeling 43 stores. It will open new stores in Central Florida, Jacksonville and Miami-Fort Lauderdale, and a new distribution center in the city of Cocoa. Remodels will take place in Central Florida, the Panhandle, Tampa Bay, West Palm Beach, and other parts of the state.
In Alabama, it plans to invest $17.0 million to remodel four Birmingham area stores and one in Orange Beach. It will also expand its online grocery pickup service to 30 new locations there, bringing the offering to a total of about 70. It plans to add its Mobile Express Scan & Go service, which is currently available at all Sam’s Club locations in Alabama. Four Alabama locations are currently equipped with pickup towers that allow customers to order items online and pick up in store.
In Georgia, it will invest $38.0 million to remodel 11 stores, add more than 40 new online grocery order pickup locations to its current 43, and expand its Mobile Express Scan & Go. Currently there is a single Walmart Pickup Tower located in Marietta and it plans to open additional towers in the coming year.
Walmart plans to spend about $56.0 million over the next year on high-tech upgrades in Washington. It will renovate 16 stores throughout the state. Walmart currently has 15 online grocery pickup facilities in Washington and plans to double that number in the coming year. It will also launch Pickup Towers there this summer.
In Arizona it will spend $52.0 million to remodel 15 stores, including 10 in metro Phoenix. It currently offers online grocery pickup at 23 locations and plans to add the service to at least 20 more of its stores in the state. It will also add pickup up towers and vending machines to at least 16 more Arizona stores next year from its current four.
In Texas, Walmart plans to invest $277.0 million for four new stores and 45 remodels, including 12 in the Houston area. The Company, which currently offers curbside grocery pickup at 180 Texas locations, will introduce 125 new pickup locations across the state. It is also looking to expand its Mobile Express Scan & Go service, currently offered at 85 Texas Sam’s Clubs and 20 area Walmart stores, and pickup towers, currently available at 17 Texas stores, to additional locations.
Bi-Mart
Bi-Mart will open a new store in Port Orchard, WA in mid-June, after being delayed from a fall 2017 opening. Bi-Mart’s remodel of a former Kmart will create a 30,000 square-foot sales floor and 2,300 square-foot mezzanine, along with a warehouse and office spaces, according to plans filed with the city. Bi-Mart has 76 stores in Oregon, Washington and Idaho. Aberdeen is the only other location in Western Washington.
Toys "R" Us
According to published reports, since putting 147 of its approximate 700 stores up on the market for auction last week, Toys “R” Us, DIP received just 50 winning bids. Should this trend continue as additional auctions commence, a substantial portion of the Company’s stores may remain empty or dark. The auction generated proceeds of $37.0 million. Of the successful bidders, notable winners include Raymour & Flanigan, Big Lots, PGA Tour Superstore and Burlington Coat Factory. Additionally, Toys “R” Us received several bids in excess of $1.00 billion for a majority stake in its Asian business. The offers are for the 85% stake in the Asian business that is owned by the Company and includes intellectual property. Among the bidders, Fung Group (which owns a 15% stake) is in talks to acquire the remaining 85% share.
Nordstrom
Nordstrom opened its newest store in New York City, a 47,000 square-foot three-level men’s store on 57th Street and Broadway, on April 12. This is the first full-price department store Nordstrom has opened in New York City, and the Company’s only standalone men’s store. Nordstrom’s 367,000 square-foot flagship New York City store has been in the works since 2012 and is slated to open in fall 2019. Men’s apparel accounts for 16% of Nordstrom’s sales. This is also the first store to offer 24-hour pickup on in-store merchandise.
Camping World
Camping World inked a deal to acquire Cullum & Maxey Camping Center, an RV dealership in Nashville, TN. Terms of the deal were not disclosed. The acquisition is part of the Company’s future growth plans, which include expanding into several additional markets this year. Camping World operates three Tennessee locations in Chattanooga, Knoxville, and Nashville, and the acquisition expands its presence in the state with another four RV SuperCenters.
Meanwhile, Camping World filed a development application to build an 80,000 square-foot store in Fort Pierce, FL. More than 48,000 square feet would be for outdoor equipment, another 17,000 square feet for camping gear and 15,000 square feet for RV repair and a service center. Camping World has 85 stores nationwide, including 16 in Florida.
Brookstone
Brookstone is launching a new platform called Brookstone Makers Showcase in Garden City, NY. The 4,000 square-foot pilot location, a converted Brookstone store, will spotlight products from online collaborative invention platform Quirky and crowdfunding website Indiegogo, as well as new tech brands from around the world. It will also feature a selection of the best-selling products at Brookstone. The format is designed to give customers a hands-on experience with new products, and features a dedicated product demonstration stage. The Company plans to open at least 10 such stores this year, all of which will be remodels of existing Brookstone locations. Since 2014, Brookstone has been owned by Chinese conglomerate Sanpower Group Company, whose primary businesses are in technology and modern service industries.
Fastenal Company
Fastenal Company’s first quarter sales increased 13.2% to $1.19 billion. The Company indicated that its March 31 acquisition of Manufacturers Supply Company contributed 1.3% of sales growth, while the remaining increase was primarily driven by higher unit sales from continued strength in demand from growth drivers including industrial vending and Onsite locations. Operating income grew 10.4% to $234.5 million. The Company signed 5,679 industrial vending devices during the quarter, an increase of 4.5% from the prior year, ending with 73,561 devices installed. Sales through vending devices continued to grow at a strong double-digit pace. Fastenal also signed 100 new Onsite locations (defined as dedicated sales and service provided from within, or in close proximity to, the customer’s facility), on top of 64 signed in the first quarter of 2017, an increase of 56.3%. The Company had 678 active Onsite locations at the end of the quarter. Meanwhile, Fastenal signed 36 new national account contracts; revenues attributable to national account customers represented 50.3% of total revenues. During the first quarter, the Company shuttered 49 branches and five branches were converted from a public branch to a non-public location.
True Value
True Value announced on April 13 that the vote deadline for members to consider an offer to sell 70% of the Company’s equity to ACON Investments was moved to April 19 from April 12. Results of the vote will now be announced at the special meeting of the board on April 20. So far, votes have been largely in favor of the proposal, announced March 15; the Company said 72% of the proxies have been counted, and 85% have voted for the proposal. The Company expects to close the transaction on or around April 20, following the special meeting. The Company’s statement regarding the extension implied it was related to a lawsuit brought by a member who was seeking more information.
Cato Corporation, The Buckle, L Brands and Zumiez
On April 12, Cato Corporation, The Buckle, L Brands and Zumiez reported their March 2018 comparable store sales. Zumiez’ sales have been on a consistent positive trend, L Brands and Cato seem to be in the early stages of recovery, and The Buckle’s performance has been deteriorating. The Buckle’s comps were down 1.1%, and sales dropped 5.2% to $82.3 million. For the nine-week period, comps were down 3%, and sales decreased 2.2% to $146.3 million. The Company operates 456 stores in 43 states, down from 463 stores in the prior year period.
CEO John Cato, stated, “March sales were positively impacted by the shift of Easter from April last year to March this year. Due to this shift, the best way to measure our performance is by combining sales for the two months. We expect April same-store sales to be in the high negative single digits and the combined two months’ same-store sales to be in the low negative single digits.” As of April 7, the Company operated 1,351 stores in 33 states, down by a net 22 stores compared to the prior year.
L Brands’ comps showed a modest 4% improvement in comparable store sales, but Chief Investor Relations Officer Amie Preston stated that the total Company-wide merchandise margin rate was down significantly compared to last year. Additionally, she noted the Company expects that the earlier Easter this year will negatively impact total Company April comps by about two to three points.
Zumiez’s management stated, “During the 5-week period, the men’s category provided our largest comparable sales increase, followed by women and footwear, while accessories was our largest comparable sales decrease, followed by hardgoods.” Additionally, the Company noted that the Easter shift was beneficial to March, and it ended the period with 699 locations.
Bed Bath & Beyond
Bed Bath & Beyond’s fourth quarter sales increased 5.2% to $3.72 billion on strong sales growth from the Company’s customer-facing digital channels. However, comps declined 0.6%, as store sales decreased in the mid-single-digit percentage range. As a result of heavy discounting and promotions, and continued competition, particularly from Amazon and Wayfair, operating income fell 21.6% to $337.1 million. On the news, the price of the Company’s shares plunged 20% on April 12 to $17.21, a 10-year low. As of March 3, the Company operated 1,552 stores, including 1,017 Bed Bath & Beyond stores, 276 World Market stores, 119 buybuy BABY stores, 83 Christmas Tree Shops and 57 Harmon stores. During the quarter, the Company opened one World Market store, one buybuy BABY store, and closed three Bed Bath & Beyond and five World Market stores.
Mattress Firm
During the first quarter of fiscal 2018, ended December 31, 2017, Mattress Firm’s management decided to close 99 stores and open eight. As a result, quarterly sales declined 16% to $850.0 million from $1.02 billion in the prior-year period. For the full year, the Company expects to close a total of 175 stores and open 75 (net 100 closures). The Company, which was acquired by Steinhoff Holdings in 2016, operates 3,400 stores nationwide. Management is looking to optimize its store fleet to “right-size the overall estate and reduce the number of underperforming stores,” according to its most recent quarterly report.
