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April 22, 2020


L Brand's deal to sell 55% of its Victoria's Secret banner to Sycamore Partners could fall through, as the private equity firm is seeking to cancel its $525.0 million purchase after claiming L Brands breached covenants in the transaction agreement. While the Victoria's Secret brand has been faltering for some time, the recent coronavirus-led lock-downs and significant pull-back in consumer discretionary spending likely prompted Sycamore's decision, as it will be increasingly difficult to turnaround the mall-based retailer. This would disrupt L Brands' plans to increase management focus on its better-performing Bath & Body Works banner and eliminates a significant source of cash.

COVID Impact Report 


Best Buy announced that it retained about 70% of its March sales compared to the prior year, which management attributed to its curbside service model and its e-commerce site. This occurred despite having its 1,231 stores closed since March 21. Domestic online sales jumped 250%, of which half came from customers selecting curbside pickup. The Company saw increased demand in March from people buying freezers, computer monitors, and other items to use for staying at home during the pandemic. While Best Buy paid workers for the first four weeks of closures, the Company furloughed about 51,000 domestic hourly employees beginning April 19. These employees retain health benefits at no cost for at least three months. Meanwhile, Best Buy is retaining 82% of its full-time employees, including most of its In-Home Advisors and Geek Squad Agents, even though these services have been suspended for the time being. The Company’s CEO took a salary reduction of 50%, and executives will take a 20% cut through at least September 1. The board has agreed to take a 50% retainer fee reduction. The Company is also lowering inventory receipts, requesting extended payment terms with key vendors, reducing marketing and promotional spend, lowering capex, and suspending its 401K match.

Hot Market Report - Boston, MA Metro Area

The Greater Boston Area, which consists of five counties in Massachusetts and two in New Hampshire, is home to more than 4.8 million residents as of 2018, making it the 10th largest U.S. metropolitan area. Our Hot Market Report takes a closer look at Boston's real estate landscape, and provides visual competitive analyses as well as key real estate metrics such as future openings, store count, market share, and demographics.

COVID Impact Report 


Yesterday, Gamestop provided an update to its global operations:

  • As of April 21, approximately one-third of U.S. stores remain closed, with two-thirds of U.S. stores closed to customers but available for curbside pick-up.
  • The Company has begun the process of re-opening certain stores in Italy, Germany, Austria and the states of South Carolina and Georgia and continue to monitor its ability to re-open stores in other operating countries and states in the coming weeks.
  • All stores in Australia have remained open with strong results, reflecting an increase of approximately 24% in comparable store sales for the nine weeks ended April 4, 2020, the final day of the fiscal March period.
  • The Company’s comparable store sales for the nine weeks ended April 4, 2020, declined approximately 23%, which is more or less in-line with performance before COVID-19 and includes the impact of the majority of stores having closed in most operating countries throughout the fiscal month of March.
  • For the three-week period ended March 21, 2020, the date the Company closed U.S stores to the public, comparable U.S. store sales grew approximately 3% as it experienced a surge in demand. For the five-week fiscal March period, the Company’s Australian stores posted comparable store sales increase of approximately 64%.

Click here to request more information.

Covid Impact Report  style="color:red"


On Monday, Kirkland’s extended the closure of its 405 stores, which have been shuttered since March 19. The Company will offer curbside pickup at over 300 units, and its e-commerce site remains operational. All part-time store employees were furloughed, and full-time managers and key employees have had their salaries temporarily reduced. The Company permanently reduced 33% of distribution center indirect labor and furloughed 30% of direct labor. It also permanently reduced its corporate headcount by 18%, in addition to the 14% cut taken in January. Kirkland’s has cancelled orders and delayed merchandise receipts, extended payment terms with lenders, reduced transportation expenses, and negotiated with landlords to defer or waive rent. As of April 17, the Company had $34.0 million of cash on hand. Click here for more information.

COVID Impact Report 


Beginning May 4, Starbucks said it will reopen as many stores as possible, with modified operations and safety measures. Similar to its experience in China, where more than 95% of its stores have now reopened, Starbucks plans to gradually expand and shift its in-store customer experiences. Some locations will continue as drive-thru only, while others may feature mobile ordering for contactless pickup and delivery. Still others may reopen for “to-go” ordering. (More than 60% of Starbucks’ U.S. stores include a drive-thru, and about 80% of all customer orders were placed “on-the-go” prior to COVID-19.)

COVID Impact Report 


According to published reports, Petco only paid 25% of April rent, without the preapproval of its landlords. While stores remain open, the Company faces higher logistics and labor costs to keep employees safe, and sales of non-food pet supplies have dropped off significantly. Store traffic is off more than 50% including the impact of scaled back in-store services (like vet care). Other services, such as grooming, have been temporarily closed for being regarded as non-essential business. Click here for more information.


On April 16, it was reported that Neiman Marcus Group skipped a $5.6 million bond interest payment due April 15. The Company has a 30-day grace period to make the payment. The Company was considering bankruptcy to ease its debt load but was reportedly continuing to negotiate with its debtholders in an effort to restructure the $4.30 billion in debt. On April 19, reports state that the Company is preparing to seek bankruptcy protection as soon as this week, although the timing could slip. The reports also stated that, “… once it files for bankruptcy, Neiman Marcus could attract interest from potential suitors seeking to pick up the Company or some of its assets on the cheap.” Neiman’s 43 U.S. stores have been closed since March 17.

COVID Impact Report 


For the second quarter ended April 12, Jack in the Box’s system-wide comps are expected to decline 4.2%, as a 5.2% increase over the first seven weeks of the quarter until March 8 was more than offset by a 17% drop in the last five weeks. Restaurant closures have prompted the Company to fully draw availability under its credit facility and management expects to report over $165.0 million in cash at the end of the second quarter. The Company has taken several steps to support its franchisees, including reducing April marketing fees from 5% to 4% and postponing 40% of April rent payments until July.

Separately, Jack in the Box announced the appointment of Darin Harris as CEO, effective no later than June 15. The board has also elected independent lead director David Goebel to serve as non-executive chairman. Mr. Harris and Mr. Goebel will replace current Chairman and CEO Leonard Comma, who previously announced plans to retire in December 2019 and has served in his current roles since 2014. Mr. Harris has been serving as CEO of North America for IWG PLC, a provider of offices and workspaces, since April 2018, and previously served as CEO of CiCi’s Pizza from 2013 to 2018.


Yesterday, Grocery Outlet provided insight to 1Q20 results for the period ended March 28. Net sales were $760.3 million, up 25.4% from prior year driven by comp growth of 17.4% and 32 net new stores open. Net income will be in the range of $8.8 million – $9.9 million, up more than 100% from prior year.

The Company also noted that Hellman & Friedman LLC (H&F) has commenced an underwritten public offering of 10.0 million shares of Grocery Outlet’s common stock. As of March 20, H&F owned approximately 30% of the outstanding common stock; based on approximately 89.9 million shares outstanding, this sale will bring H&F ownership below 20%. Click here to request a list of future openings.

COVID Impact Report 


Conn’s continues to operate nearly all 137 of its stores, with reduced in-store hours. It also implemented underwriting changes beginning in March to control delinquencies and charge-offs. Non-essential capital expenditures have been delayed or eliminated, including the reduction of a number of planned store openings in fiscal 2021, from 16 – 18 to six to eight. The Company also delayed store openings associated with the future Florida distribution center. Hourly wages have been temporarily increased by $2.00 per hour to support front-line employees, while executives have reduced their salaries by 20% and the CEO by 25%.

As of April 14, the Company had “over $270.0 million of cash” and $120.0 million available under its revolver, bringing total liquidity to “approximately $400.0 million.” Management also stated, “It is important to note that our stores remain profitable even with significantly lower revenue as a result of the variable cost structure of our retail stores and high retail gross margins. On average, our stores break even with a reduction in retail revenue of nearly 60% from fiscal 2020 levels.” Click here to request a list of future openings.

COVID Impact Report 


Chuy’s Holdings announced preliminary comparable restaurant sales for 1Q20 are expected to decrease 9.7%. These results includecomparable restaurant sales growth of 3.1% for the first 10 weeks of the quarter, prior to the impact of COVID-19. During the last two weeks of the first quarter, as required by federal and local officials, Chuy’s transitioned to an enhanced off-premise operating model at 92 of its locations. Since that transition, the Company’s combined takeout and delivery sales have more than tripled from its pre-COVID-19 off-premise sales, including an alcohol mix of approximately 6%.

As of April 17, Chuy’s estimates a cash burn rate of $500,000 per week. To preserve financial flexibility and liquidity, the Company has temporarily suspended the payment of rent on operating leases and is currently negotiating rent concessions, abatements and deferrals with landlords. As of the end of the first quarter, the Company furloughed 80% of hourly employees and 40% of store management personnel, while enacting temporary salary reductions for remaining managers. It has also furloughed 40% of its corporate and administrative staff, has temporarily reduced the pay of all necessary corporate and administrative staff by 25% – 50%, temporarily reduced senior management salaries by 50% – 75%, and has temporarily suspended all board fees. The Company expects $3.0 million in tax refunds due to the CARES Act. It is currently in favorable negotiations with its lender to extend its revolving credit facility through the end of 2021 and temporarily ease covenant requirements.

COVID Impact Report 


Lumber Liquidators reported that 1Q20 comp sales through the week ended March 21 (quarter ended March 31) increased 4%, but as COVID-19 restrictions began to impact consumers, orders declined significantly. As a result, 1Q20 comps eroded 1% by the end of the quarter. Despite softening sales in late March, gross margin increased due to margin optimization and supply chain efficiency efforts. Meanwhile, web traffic has increased “meaningfully” in recent weeks. The Company indicated that it is currently offering free online flooring samples, and extended hours for voice and click-to-chat customer support. The Company intends to use the SEC’s extended filing deadline for its 1Q report and Form 10-Q, and anticipates filing the week of May 25.

All but 20 of its 420 stores are operating under reduced hours and are closed on Sunday. Many are operating as warehouses only, offering curbside pickup and home or jobsite delivery options. However, as a result of reduced demand, the Company temporarily furloughed about 300 store associates and reduced operating hours at its distribution centers. Impacted employees are receiving two weeks of pay and have the opportunity to use up to 80 hours of paid time off; Lumber Liquidators will pay the employee portion of benefit premiums through the end of May. The Company is reducing capital spending, managing inventory flow, deferring payments, and delaying the planned opening of certain new stores. It also reduced salaried employee compensation, including a 25% reduction in the base pay of the interim president, CFO, and other C-level executives, and a corresponding 30% reduction in the cash compensation of the board.

On April 17, the Company amended its Senior Secured Credit Facilities maturing March 2024 to increase the senior asset-based revolver from $175.0 million to $212.5 million (bringing total availability from $200.0 million to $237.5 million). Lumber Liquidators borrowed $37.0 million under the ABL facility, and as of April 17 had liquidity of $120.0 million, including $41.0 million in cash and cash equivalents.

COVID Impact Report 


Shake Shack provided preliminary results for its 1Q ended March 25. Total revenues advanced 8% to $143.2 million, largely due to relatively normal results in January and February before the COVID-19 situation had a significant impact. A sharp 28.5% drop in comps in the month of March pushed full-quarter comps down 12.8%.

As of yesterday, 17 Company-operated restaurants and 63 licensed restaurants, mainly in U.S. airports and international markets, have temporarily closed. To preserve liquidity, management has furloughed or laid off more than 1,000 corporate employees and reduced the pay of executives and other employees indefinitely, with the exception of general managers. Capital expenditures have been halted, but management expects to pay $12.0 million for construction work that has already been completed.

In other news, Shake Shack has filed a prospectus supplement with the SEC under which it may offer and sell shares of its stock for up to $75.0 million through an “at-the-market” (ATM) equity-offering program. Proceeds are expected to be used to strengthen its balance sheet, which would include general corporate purposes, and to further enhance the Company’s ability to resume execution of its long-term strategic growth plan. Shake Shack said it is returning a $10.0 million loan it received from the U.S. government under an emergency program that was implemented to help small businesses pay workers and keep their operations running during the COVID-19 crisis. The $349.00 billion stimulus package ran out of funding last week. Over the last few days, there has been growing backlash over the distribution of the funds. Shake Shack CEO Randy Garutti and Chairman Danny Meyer said that the NYSE-listed Company no longer needs the money because they are “fortunate to now have access to capital that others do not.” This is referring to the $75.0 million it expects to raise from investors, mentioned above. 


On April 16, Stein Mart and Kingswood Capital Management mutually agreed to terminate their merger deal, previously announced on January 31. Under the going-private transaction, an affiliate of Kingswood was to acquire all of the outstanding common stock of Stein Mart not already beneficially owned by affiliates of Jay Stein, Stein Mart’s former CEO and current chairman, and related investors. The termination was approved by Stein Mart’s board (other than Mr. Stein) acting on the recommendation of the Special Committee of independent directors that oversaw negotiation of the merger agreement. Neither party will be required to pay a termination fee as a result of the mutual decision to terminate the agreement. Stein Mart’s 283 stores have been closed since March 18.


Raley’s opened a new store on April 15 in Land Park, CA. While the 55,000 square-foot store provides a more modern shopping experience centered around health and wellness, many self-serve offerings are currently closed. Through Raley’s online ordering platform, eCart, the store can process up to 250 orders for pickup or delivery per day. The Company’s former Land Park store will remain open until all of its inventory is sold, providing the community with temporary access to two stores during the pandemic.

COVID Impact Report 


According to published reports, Amazon is preparing to launch an ultra-fast grocery delivery service in the U.K. The service, Ultra Fast Fresh, involves retrofitting nine existing depots within the country to handle fresh produce and fulfill grocery orders within hours. The project could involve making Amazon Fresh, Amazon’s grocery delivery service, a free benefit for Prime members in the U.K., instead of the monthly add-on fee or per-order charge it currently levies.

Last week, the U.K. Competition and Markets Authority granted preliminary approval to Amazon’s $575.0 million investment in Deliveroo, with a final decision coming in June. While Amazon announced the deal nearly a year ago, it had been held up by the U.K. antitrust regulator due to concerns over the impact on competition in restaurant and food delivery.

On April 17, Amazon was forced to close all six of its distribution centers in France, after a court in that country hit the Company with fines of $1.1 million a day until it produced a plan to provide better COVID-19 protections for employees. The closures have been extended from April 20 to tomorrow (April 22).

Last Friday, the Court of Federal Claims issued a sealed ruling allowing the Department of Defense to remand portions of the $10.00 billion Joint Enterprise Defense Initiative (JEDI) cloud contract. The move allows the DOD to “reconsider the aspects of the procurement challenged in this protest action” over the next 120 days, or until August 17. The ruling follows a long legal battle after the contract was awarded to Microsoft over Amazon Web Services due to an evaluation flaw that may have favored Microsoft.

Amazon recently opened a new 855,000 square-foot fulfillment center in Bessemer, AL.

The Company is also expanding in Maryland with a one million square-foot warehouse in Baltimore County. It already operates an 855,000 square-foot fulfillment center in the state in Sparrows Point, which opened in 2017.


The Court approved asset sale transactions between Fairway Group Holdings Corp., DIP and Village Supermarket, Inc., Seven Seas Georgetowne, LLC, and Amazon Retail LLC for proceeds totaling $82.5 million. The proceeds are much less than the $227.0 million of secured debt, which increases the likelihood of the Company being administratively insolvent. Click here for more information.

Hy-Vee has partnered with footwear and accessories company Designer Brands Inc., parent company of DSW, to offer footwear to shoppers. Given the current pandemic, the partnership will launch with a DSW “digital experience” through Hy-Vee’s website. DSW and Hy-Vee are also working on buy online, pickup in-store (BOPIS) capabilities, but no date has been announced for that rollout. In the future, the companies plan to open DSW shops inside Hy-Vee locations but will begin by testing pallet sales of top-selling family footwear at more than 120 Hy-Vee stores.


Dollar General opened its first store in Washington State, in Cathlamet, in line with its plans to expand in the Northwest. Six additional locations are already under construction in the state, as part of its aggressive store expansion plans for 2020 that include 1,000 new stores. Dollar General has not issued an update on whether COVID-19 will impact its store opening and remodel plans. 

COVID Impact Report 


BJ’s Restaurants announced that it temporarily closed four restaurants, effective April 17. The Company will also furlough about 200 restaurant managers and 40 support center employees, though they will retain benefits through June 30. BJ’s previously hoped to keep all of its 209 restaurants open through the COVID-19 situation but had warned that it would close stores if their off-premise sales were not adequate. To preserve liquidity, the Company is reducing pay for support center employees making over $100,000 by 10% to 20%, and reducing executive pay and board member fees by 20%. 

A judge in the Chapter 11 bankruptcy case of Lucky’s Market Parent Company, LLC, DIP signed orders approving the sale of numerous Lucky’s Market store locations, including seven stores and a distribution center, for a total of $6.7 million. The additional sale of 16 stores is still awaiting approval from the judge. If and when they are approved, the Debtor will receive another $22.0 million.

Meanwhile, the judge signed his third interim order authorizing debtors to use cash collateral. A final hearing is scheduled for May 11.


On April 13, True Religion Apparel Inc., DIP filed for Chapter 11 bankruptcy protection, citing the indefinite closing of its 100 stores caused by the COVID-19 pandemic, which has “accelerated” its liquidity constraints. In court documents, interim CFO Richard Lynch said the closings eliminated 80% of True Religion’s sales, making bankruptcy “unavoidable.” The Company, which has been struggling for some time amidst changing consumer trends towards athleisure, is seeking new financing and a court order that would allow it to skip rent for 60 days. During fiscal 2019 (ended before the outbreak), True Religion had a net loss of $50.0 million on $259.0 million of revenue. True Religion previously filed for bankruptcy in summer 2017 and exited about four months later under a reorganization plan that reduced the Company’s nearly $500.0 million debt through a debt-for-equity swap. 

Earning Reports


Bed Bath & Beyond’s 4Q19 sales (for the period ended February 29) decreased 6.1% to $3.11 billion, and comps were down 5.6%, driven by insufficient levels of key merchandise and elevated promotional levels. Excluding the benefit of Cyber Monday, 4Q comps fell 11%, with in-store sales sliding 13.6% and digital growth of just 1.1%. Promotions, markdowns, and digital fulfillment weighed on gross margin, down 210 basis points to 32.6%. SG&A margin rose 250 basis points due to consulting expenses to review assets, advertising, and the deleverage of fixed costs on a lower sales base. EBITDA dropped 49.9% to $157.7 million, and EBITDA margin fell 440 basis points to 5.1%. During the quarter, the Company permanently closed 26 stores and opened two units, ending the year with 1,500 stores. The majority of its 1,500 stores are closed through at least May 2, with the exception of about 170 buybuyBaby and Harmon Face Value stores that are considered essential because they sell infant, health, and personal care items.

Preliminary March sales were down 31% across all banners, led by a 41% decrease in in-store sales due to closures. Digital sales were strong, rising 16%, as consumers shifted online; 25% of stores were converted to regional fulfillment centers for online orders. Online sales were even more robust in the first half of April, rising 70% – 90%, with strength in products such as water filtration, bread makers, and general home care.

On April 15, Bed Bath & Beyond said it sold its One Kings Lane division; terms of the deal were not disclosed. The Company had bought the e-commerce home décor retailer in 2016 for a price it described as “non-material.” However, the Company’s plans to sell to, for $252.0 million, failed to close at the end of March due to the ongoing pandemic. CEO Mark Tritton said the Company has taken action to force 1-800-Flowers to close the deal. Click here to request the report.

COVID Impact Report 


Big Lots is trying to remodel its store base to enhance overall performance while the population is on lockdown. At the end of FY19 the Company had converted 29% of the fleet to its Store of the Future concept, leaving about 940 stores still to be converted; only 20 stores are projected to be completed in 2020. Panic buying drove late February and early March traffic increases, but that tailed off at the end of the month. About 30% of revenue is derived from food and consumables. Big Lots has also had to contend with an activist investor that was pushing the Company to monetize its distribution centers (see below). The Company imports about 20% of its goods directly from China, with additional Chinese merchandise coming from other vendors. The new trade agreement should relieve some import pressure.

The shortened holiday season, along with merchandise misses, similar to other discounters and mass merchandisers, contributed to a mediocre 4Q. Sales were up a scant 0.5% as comps fell 90 bps. Margins were mixed, with gross margin falling 180 bps on heavy promotions and price cuts in the 10 days leading up to Christmas while SG&A margin improved 50 bps on continued strong expense management. Overall, EBITDA fell 10.8% and EBITDA margin contracted 130 bps. Management still believes there could be additional pressure on gross margin from continued tariffs. The Company used part of the proceeds from the sale of its California distribution center in the third quarter to pay down revolver debt, leaving it only modestly leveraged, with debt to TTM EBITDA of 0.9x. Big Lots intends to use proceeds from the sale of its distribution centers to pay down remaining revolver debt, once the transaction closes in 2Q. Liquidity is adequate with over $520.0 million in combined cash and revolver availability. In March 2020 Big Lots drew $200.0 million to further shore up liquidity. The Company has not authorized any additional stock repurchases at this time, which should also help maintain liquidity during the pandemic. Click here to request the report.