April 19, 2023
On Monday, David’s Bridal LLC, DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of New Jersey. The proceedings have been designated as case number 23-13131. The Company expects to file a "recognition proceeding" in Canada, which will recognize or otherwise give effect to the Chapter 11 Case in furtherance of the restructuring. Additionally, a subsidiary of David's Bridal expects to commence an administration proceeding for its business in the United Kingdom. David's Bridal stores remain open, and the Company said it “intends to continue operating in the ordinary course, including by fulfilling all customer orders without disruption or delay.” The Company emerged from its last bankruptcy on January 18, 2019.
Documents filed in the case state that “if the Debtors are unable to implement a going-concern transaction, the Debtors will turn to an orderly liquidation of their remaining assets, including the sale of distinct assets separate from the Debtors’ operations. The Debtors and Gordon Brothers Retail Partners, LLC have proposed procedures related to a potential wind-down of the Debtors’ business operations and liquidation of inventory in all retail stores.”
Although Amazon paused further Fresh store openings a month ago, in the Company’s annual shareholder letter, CEO Andy Jassey said Amazon remains committed to its grocery business, noting that while Whole Foods is on “an encouraging path,” the Amazon Fresh banner is a work in progress as the Company aims to “identify and build the right mass grocery format for Amazon scale.” At the same time, Amazon is also focused on building its healthcare offerings since it acquired primary care provider One Medical in July 2022. Lastly, Jassey, elaborated on recent efforts to improve profitability which have included closing brick-and-mortar locations, including bookstores and the 4 Star format, and structurally realigning the U.S. fulfillment network into eight regions while redesigning “scores of processes and mechanisms” in the fulfillment center and transportation network to improve cost efficiency.
In other news, the Company has started charging customers a $1 fee if they return items to a UPS store when they live near a free option, namely Whole Foods, Amazon Fresh grocery stores and Kohl’s department stores. Amazon said that it estimates only a very small number of customers may incur the charge. According to data from the National Retail Federation, overall, customers sent back around 17% of the total merchandise they purchased online in 2022, totaling $816 billion.
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This month, Nordstrom announced plans to open nine Nordstrom Rack locations (see chart below). These new stores will join the previously announced openings in Natomas, CA (26,000 sq. ft.) and San Antonio, TX (35,000 sq. ft.), both slated for Fall 2023. In FY22, Nordstrom opened three stores (one ASOS and two Nordstrom Racks) and closed one Nordstrom Rack store. The retailer announced plans to open or relocate 20 stores through Spring 2024. In other news, the Company announced the appointment of Jason Morris as chief technology and information officer, effective May 1. Morris joins Nordstrom from Walmart, where he most recently led global enterprise technology as SVP of enterprise business services.
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Walmart is closing four of its eight stores in Chicago, after earlier this year closing a store in Washington D.C. near the White House, two in downtown Portland, OR, and one in downtown Atlanta, GA that experienced a fire. The pullback in urban stores is significant because Walmart tried for years to find a profitable way to do business in those markets, seeing them as an opportunity to grow beyond the suburbs and rural areas.
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Walgreens Boots Alliance (WBA) expanded its VillageMD services to Colorado, opening three new primary care practices, two in Fort Collins and another in Longmont. WBA first invested in VillageMD in 2020 and has since doubled its ownership stake with an additional investment of $5.2 billion, increasing its stake from 30% to 63%. In January 2023, VillageMD closed on its near $9 billion acquisition of Summit Health-CityMD (Walgreens directly invested $3.50 billion), making it a major player in primary care.
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Coborn's has agreed to acquire Sullivan's Foods, whose operations include 11 grocery stores, a convenience store/fuel center, three ACE hardware stores, a central office, and a warehouse all in Northern and Central Illinois. The grocery stores will continue to operate under the Sullivan's banner. Details were not disclosed, but the transaction is expected to close in May 2023. This acquisition marks Coborn's first stores in Illinois, and following its completion, the Company will operate 77 total grocery stores in Minnesota, Wisconsin, Michigan, North and South Dakota, as well as Illinois. In total, with liquor stores, fuel centers, pharmacies, and other retail concepts, Coborn's will operate 130 locations. Both Coborn’s and Sullivan’s currently use Associated Wholesale Grocers as their lead wholesaler, and that relationship will continue following the completion of the sale.
Sportsman’s Warehouse sales decreased 8.9% due to lower sales demand stemming from consumer inflationary pressures and recession concerns, partially offset by the opening of nine new stores over the last year. Compared to 4Q19, net sales increased 46.9%. Gross margin decreased 40 bps from lower overall product margins due to promotional activity, partially offset by lower overalltransportation and freight costs. Company-reported EBITDA fell 25% to $28.9 million.
In recent filings in preparation of a shareholder vote on a proposed reverse stock split, set for May 9, Bed, Bath & Beyond has made several disclosures:
• As of April 10, 2023, the Company has sold approximately 100.1 million shares for approximately $48.5 million of net proceeds under the ($300 million) ATM Agreement. Funds raised satisfied the minimum required equity proceeds (from the ATM and Purchase Agreements) for the testing period ended April 11, which required cumulative minimum equity proceeds of $40 million (as detailed in our March 30 alert).
• The Company was required to apply all net cash proceeds from the equity offerings to repay outstanding revolving loans under the ABL Facility or to cash collateralize any outstanding letters of credit.
• As of April 10, 2023, there were only about 111.7 million shares eligible to be offered by BRPC II for resale pursuant to the Purchase Agreement. At current prices of about $.30 per share, this would result in proceeds of only about $33 million, well short of the “up to $1 billion” offering.
• The Company closed 179 Bed Bath & Beyond stores in the U.S., 5 buybuy BABY stores in the U.S. and 45 Harmon Stores from February 26, 2023 through April 8, 2023.
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Express and global brand management firm, WHP Global announced a definitive agreement to acquire menswear brand Bonobos from Walmart for a combined $75 million. Walmart had acquired Bonobos in June 2017 for $310 million. This is the first acquisition to be made jointly by WHP Global and Express since finalizing their strategic partnership earlier this year. WHP Global will acquire the Bonobos brand for $50 million and Express will acquire the operating assets and assume the related liabilities of the Bonobos business for $25 million. The transaction is expected to close during 2Q23, subject to customary closing conditions.
Omega Sports announced that it will close its remaining stores and e-commerce operation after 45 years of business. Management cited “challenges presented by the COVID-19 pandemic, such as supply chain shortages, economic uncertainties, and wage and cost inflation.” Omega Sports said it intends an “orderly wind-down” of operations until early summer. The Company emerged from a previous bankruptcy in July 2021. The privately held specialty sporting goods retailer has six stores in North Carolina
Meijer is continuing its Midwest expansion with plans to open two new 159,000 square-foot supercenters in Warren and Wooster, OH on May 16, increasing the retailer's store count to 52 in the state. The stores will feature traditional grocery departments as well as floral, pharmacy, pets, electronics, toys, sports, and apparel. In addition, the locations will also include a garden center and adjacent gas stations, which will open later this week. The Company operates 501 supercenters, Meijer Grocery, neighborhood markets and Express locations throughout Michigan, Ohio, Indiana, Illinois, Kentucky, and Wisconsin.
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Rite Aid opened a Rite Aid Pharmacy in Scottsville, VA, its third store in rural Virginia that is part of a pilot program to improve access for pharmacy services in “pharmacy deserts” and underserved communities. Locations in Craigsville and Greenville, VA opened late last year and one more location in Grottoes is expected to open later this month. The smaller format store, approximately 2,500 square feet, features a full-service pharmacy and a retail assortment of health and wellness products.
Whole Foods Market is introducing frictionless shopping technology from its parent company Amazon to locations in the Denver, CO area. Customers at 11 Whole Foods stores will be able to use the Amazon One palm-based payment system that allows them to use their palm to pay for purchases, and one of the stores will also offer the Dash Cart smart shopping cart device, which enables products to be scanned in real time and then shoppers can walk through a dedicated Amazon Dash Cart checkout lane to have their purchase charged to a credit card associated with their Amazon account. In total, Amazon has rolled out the palm payment technology to more than 100 Whole Foods stores in California, Texas, Washington State, and New York, as well as select Amazon stores. Dash Cart first launched in 2020, and the debut in the Denver location will mark the fourth store that offers the service.
Since the start of April, Camping World has announced three new acquisitions, Breeden RV Center in Van Buren, AR; Travel Land RV Center in Houghton Lake, MI; and All Seasons RV in Bend, OR. All three transactions are expected to close in 2Q23. The Company currently operates RV sales and service locations in 42 states.
Lawyers representing Kroger asked a U.S. judge in a California federal court to dismiss a consumer antitrust lawsuit alleging the Company's proposed acquisition of Albertsons would decrease grocer competition and raise prices. The lawsuit, which is allowed under U.S. antitrust law, was brought by 25 consumers from states including California, Texas, and Florida. Kroger’s attorneys argued that the plaintiffs’ complaint failed to define the relevant market necessary to evaluate grocery store competition and to identify how the acquisition would hurt consumers. A hearing on the matter is scheduled for May 18.
Reports indicate Best Buy is laying off potentially hundreds of employees in an effort to cut costs and shift its business towards e-commerce. According to the reports, this past week several employees who specialize in selling computers and smartphones were told their positions would be eliminated. As of January 2023, Best Buy employed more than 90,000 workers in the U.S. and Canada, including about 58% full-time, 32% part-time, and 10% seasonal staff.
The below retailers recently released their earnings reports.
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