August 21, 2019
On August 13, it was reported that management at Avenue Stores told its employees that it plans to close all of its stores in the coming weeks, although no public announcement was made at the time. On August 14, the Company confirmed its decision to close all 222 stores in 33 states (click here to request the list). Management said that store sales are being conducted by a joint venture consisting of Gordon Brothers and Hilco Merchant Resources.
Late Friday, Avenue Stores filed for Chapter 11, citing high lease costs and an extremely competitive retail environment. The plus-sized apparel retailer also hired investment bankers at Configure Partners to sell it ecommerce business, which consist of Avenue.com and Loralette.com. Its primary lender, PNC Bank, provided a $12.0 million DIP Facility to fund the Company during the proceedings. Versa Capital acquired United Retail Group, the operator of Avenue Stores, in a bankruptcy-led auction in April 2012.
According to published reports, Costco plans to open 21 – 22 new stores each year going forward, with 75% to be located in the U.S. and 25% located outside the country. The Company currently has plans to open a total of 13 new stores during fiscal 2019 - click here to request a list of future openings.
On August 5, 2019, Pier 1 announced it had received notice from the NYSE that it is no longer in compliance with NYSE continued listing standards requiring its average global market capitalization over a consecutive 30 trading-day period to be at least $50.0 million and, at the same time, its shareholders’ equity to be at least $50.0 million. As of August 2, 2019, the 30 trading-day average global market capitalization of the Company was approximately $25.0 million and the Company’s last reported shareholders’’ equity as of June 1, 2019 was $9.2 million. Pier 1 intends to respond to the NYSE with a plan of action within 45 days of receiving the Notice. Click here to request a list of Pier 1 Future Closings.
Kroger and Walgreens announced they are expanding their partnership into a new test area following an exploratory pilot launched in Northern Kentucky in October 2018. Starting this fall, 35 Walgreens stores in the Knoxville, TN area will feature a curated selection of Kroger's Our Brands products like Simple Truth, America's largest natural and organic brand, and national brand products. The assortment will vary by store and could include fresh meat, produce and dairy, frozen foods, shelf-stable products and Home Chef meal solutions to provide customers with a fill-in grocery shopping experience. Most locations will feature a full Kroger Express assortment, with up to 2,700 products, and other stores will offer, on average, 2,300 products. Most of the Walgreens pilot stores will also provide customers with Kroger Pickup, enabling shoppers to place an order on kroger.com or through the Kroger app for curbside pickup. If the companies decide to continue to grow their partnership, it could allow Kroger to expand its digital footprint in markets where it has no brick and mortar stores, such as in Florida where Kroger is currently building one of its Ocada fulfillment centers. The partnership could also benefit Walgreens’ front-end traffic. The Knoxville expansion will also pilot a curated selection of Walgreens' owned-brand health and beauty products in 17 Kroger stores, also debuting in the fall. The destination will feature several categories, including beauty, personal care, over-the-counter medications and wellness. This move shows their determination to drive traffic to their stores. Walgreens recently announced its intention to close 200 of its U.S. locations.
600+ retailers have filed for bankruptcy year to date, including several major national chains. To request the full list of bankruptcies or to sign up for our daily listing of Chapter 11 filings (all industries), click here.
Ahold Delhaize’s Giant Food Stores is opening a two-level, 65,000 square-foot urban flagship store in downtown Philadelphia scheduled to open by fall of 2020. The news comes on the heels of the Company’s launch of its new format, Giant Heirloom Market, in Philadelphia. The new location is in addition to a $70.0 million investment Giant announced last year to grow its portfolio across Philadelphia by constructing six new stores, remodeling two locations, and opening four new fuel stations through the end of 2019. Giant will soon open a store in East Stroudsburg and plans to open two more Heirloom Markets in the Philadelphia neighborhoods of Northern Liberties and Queen’s Village. Giant operates a total of 181 locations, including 158 stores in Pennsylvania.
King Kullen closed an underperforming grocery store in Mount Sinai, NY on June 20. It plans to shutter two more stores; its 33,000 square-foot Lake Ronkonkoma location on August 22 and its 39,000 square-foot Babylon store on September 26, while it continues the process of finalizing its pending acquisition by Ahold Delhaize’s Stop & Shop. Employees are being reassigned to other stores and no layoffs are planned. In January, Stop & Shop said it would buy King Kullen Grocery’s 37 stores (32 King Kullen supermarkets and five Wild by Nature natural food stores) all on Long Island.
Foot Locker has opened a new 9,000 square-foot unit under its “power store” format in Manhattan’s Washington Heights neighborhood. The customer-centric store offers interactive experiences and is the first Foot Locker to showcase Nike’s proprietary digital technology, specifically its “Nike App at Retail.” This marks the first time Nike has used the technology outside of its own stores. The Nike app allows Foot Locker shoppers who are members of Nike’s loyalty club (Nike Plus) to experiences, content and services. The store also features Nike’s first ever “ShoeCase,” a machine that provide members with the chance to gain early access to popular sneaker releases. Foot Locker has opened power stores in Detroit, Philadelphia, London, Liverpool and Hong Kong. The Company plans to open more than a dozen new power locations across its brands in 2019, with upcoming stores planned for Los Angeles and Vancouver.
On August 21,Stater Bros. Markets will reopen three stores following significant remodels that included interior upgrades and expanded offerings. The stores are located in Lake Forest, Lancaster and Palmdale, CA.
Last week Stater unveiled new logo at a store in Tustin, CA featuring a modern font that is replacing a 1970s-era look. Stater Bros. has been quietly giving its stores a hipper look in recent years to meet customer demands.
Dunkin Brands’ Baskin Robbins signed a multi-unit agreement to develop 10 new locations across Upstate New York with Bapa Chambers Rd Ice Cream, LLC. The first store opened in mid-July and two more are expected to open at the end of the summer. Click here to request a complimentary sample list of Dunkin' Future Openings.
Albertsons’ Acme Markets banner will reportedly close four underperforming stores in New York and New Jersey this fall. The store in Eastchester, NY is slated to close November 4, and stores in Elmwood Park, Woodcliff Lake, and Weehawken, NJ are set to close October 2. According to a Company representative, Acme is looking into future store sites, but at the present time has no plans to open more locations in either New York or New Jersey.
Demoulas Super Markets plans to open a 70,000 square-foot Market Basket in the new Maynard Crossing development located in Maynard, MA. The store is expected to open during the first quarter of 2020. Other stores currently in the development pipeline include a 69,000 square-foot store in Plymouth, NH, and a 72,500 square-foot store in Pawtucketville, MA, both slated to open during the fourth quarter of 2019.
Rouses Markets’ revenues grew an estimated 7% in 2018, on top of more than 20% growth the prior year, reflecting store acquisitions and expansion. Rouses Enterprise has been adding five to ten new stores a year, mostly by acquiring competitor boxes in existing and adjacent markets. The Company is also in the process of opening new headquarters and a distribution center in Shriever, LA.
Steve Madden announced the acquisition of BB Dakota, a California-based women’s apparel business, whose portfolio includes owned brands BB Dakota and Jack by BB Dakota, as well as licensed brand Cupcakes and Cashmere. Terms of the deal were not disclosed. BB Dakota, whose products are sold by department stores, e-commerce retailers, and specialty shops, had $43.0 million in sales for the 12 months ended June 30. The Company also acquired online sneaker upstart Greats last week (which also has a flagship location in New York City). Terms of that deal were also not disclosed. Greats had sales of $13.0 million in the 12 months ended June 30. Steve Madden operates 224 stores and sells products in department stores, specialty stores, luxury retailers, national chains and mass merchants.
On Monday, Tailored Brands announced that it has closed on the sale of its corporate apparel business to a group led by the existing corporate apparel U.K. executive team for $62.0 million, subject to certain working capital adjustments. Of the total, approximately $56.0 million was received upon closing and $6.0 million is deferred to 1Q20. The Company will use the proceeds to reinvest in its business in accordance with the provisions of its term loan. This will free up funds previously slated for capital expenditures for debt reduction. The transaction represents a multiple of 4.3x fiscal 2018 adjusted EBITDA for the corporate apparel business, which had net sales of $235.4 million in fiscal 2018.
Hot Market Report - Atlanta, GA
The Atlanta Metro Area consists of 29 counties, which are individually governed by boards of commissioners, city councils, and mayors. It is the ninth largest metropolitan area in the U.S. and had the lowest relative cost of doing business among the nation’s ten largest metro areas according to KPMG in 2017. The market is home to 5.9 million residents (2018), more than 150,000 business establishments, and its population has grown over 12% since 2010. Metro Atlanta is considered a top business city and a primary transportation hub of the southeastern U.S. and is home to 26 of the country’s largest Fortune 1000 corporations. The region ranked tenth in total GDP for fiscal 2016 (the most recent year available) at $276.00 billion. In addition, the metro area’s median household income is higher than the national average ($65,381 in Atlanta compared to $57,652 in the U.S. overall, in 2017). Our report takes a closer look at the Atlanta 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.
Carrefour had planned to open an automated store in Brussels, Belgium, but technical and logistical issues made the Company put those plans on hold. The format, which was announced last December, was supposed to be a cross-over of a large vending machine and a pick-up point for groceries ordered online. It was to be open 24/7. Carrefour has not disclosed if it will pursue this store concept at another location, and the future plans for the location are also unknown.
About a year after Farm Fresh was sold piecemeal by Supervalu, one of the few independently owned stores to keep the name closed last week in Virginia Beach following its lease expiration. The same owner continues to operate two other Farm Fresh stores located in Portsmouth and Newport News.
On August 15, Dollaramaclosed on its previously announced acquisition of a 50.1% interest in Latin American value retailer Dollarcity. The estimated purchase price is in the range of $85.0 million – $95.0 million, including an upfront payment of $40.0 million at closing. The transaction is expected to be immediately accretive to Dollarama's earnings in the amount of C$0.02 – C$0.03 per share for the remainder of fiscal 2020 and C$0.05 – C$0.07 per share in fiscal 2021. As of March 31, 2019, Dollarcity operated a total of 180 stores, with 44 in El Salvador, 54 in Guatemala and 82 in Colombia. Dollarcity's growth plan through 2029 is to reach a target of up to 600 stores within its three existing countries of operation, with the majority of store growth to be focused in Colombia.
Last Thursday, Amazon opened a 4-star store in Seattle, WA’s South Lake Union neighborhood. The concept behind Amazon's 4-star stores is to sell items that have a rating of four stars or more on Amazon.com - "top sellers" and "new and trending items." The Company has three existing 4-star stores located in New York City's SoHo neighborhood, Berkley, CA and Lone Tree, CO.
Amazon defeated an appeal by the U.S. Internal Revenue Service in a $1.50 billion dispute over its tax treatment of transactions with a Luxembourg subsidiary. A 2017 ruling by the U.S. Tax Court was upheld related to intangible assets that Amazon transferred in 2005 and 2006 to the unit, Amazon Europe Holding Technologies SCS. Amazon had warned it might face “significant” new tax liabilities if the Tax Court ruling was reversed, or the IRS approach was applied to other tax years.
Rent-A-Center completed its previously announced acquisition of substantially all of the assets of C/C Financial Corp (dba Merchants Preferred), a virtual rent-to-own services. With the completion of the deal, Joe Corona, president and CEO of Merchants Preferred, joins Rent-A-Center under the Acceptance Now segment, leading its virtual strategy. Meanwhile, Rent-A-Center updated its annual guidance, now expecting sales of $725.0 million – $745.0 million, up from $700.0 million – $715.0 million. Due to the funding of the acquisition, the Company expects net debt to be $195.0 million – $225.0 million, up from $165.0 million – $195.0 million. Additionally, net debt to adjusted EBITDA is expected to be 0.7x – 1x, up from 0.6x – 0.9x.
On August 15, two units of Camping World Holdings were sold to privately held outdoor specialty retailer Gearhead Outfitters, Inc. Terms of the transaction were not disclosed. The units are Rock Creek Outfitters, which operates seven retail units in Tennessee, and Uncle Dan’s, Ltd., which has five stores in the Chicago, IL area and one in Wisconsin (Uncle Dan’s absorbed Erehwon Mountain Outfitter in 2018). The transaction also includes the e-commerce presence of both companies. Based in Bentonville, AR, Gearhead Outfitters operates 10 brick-and-mortar retail locations across the mid-south.
Camping World acquired the two units less than two years ago as part of its diversification from sales of RVs into retail, which also included the acquisition of about 60 stores from Gander Mountain (subsequently renamed Gander Outdoors). Camping World has been experiencing operational problems following the acquisitions, and the relatively quick disposal of these two units following the closure of some of the Gander stores may be a further acknowledgement that its foray into retail may have been too aggressive.
The Special Committee of the board of Hudson’s Bay Company commented on the amended unsolicited offer made on August 7 to shareholders by the Catalyst Capital Group to acquire up to 19.8 million shares (10.7% of total shares) for $10.11 per share in cash. The initial offer on July 22 was for 14.8 million shares at the same price. The expiration date was August 16, ahead of the expected September completion of the formal valuation of HBC’s common shares being prepared by the Special Committee. Therefore, the committee requested an extension, but Catalyst declined. Meanwhile, the committee continues to believe the $9.45 offer from a group of shareholders to take the Company private is inadequate. It has asked the group whether it intends to make a revised proposal once the committee completes its formal valuation of the Company’s shares.
On Monday, the Catalyst Capital Group Inc., on behalf of investment funds managed by it, announced that it received and accepted 18.5 million shares of Hudson’s Bay Company for $10.11 per share in cash, for an aggregate of approximately $187.0 million. The shares accepted represent 10.05% of total shares outstanding. Catalyst will complete the purchase within three business days.
Grocery Outlet reported second quarter sales growth of 12.2%, to $645.3 million. Comps increased 5.8% and according to the Company, the increase was “broad-based across product categories, regions, and store vintages.” Net loss was $10.6 million, compared to net income of $7.3 million last year mainly due to increased stock based compensation expense related to the IPO. Adjusted EBITDA increased 15% to $45.0 million.
The Company opened eight new stores and closed one, ending the quarter with 330 stores in six states. See below for Future Store Opening Map, click here to request the list.
Looking ahead at fiscal 2019, the Company expects sales of $2.50 billion – $2.53 billion, comp growth of 3% – 4%, adjusted EBITDA of $162.0 million – $165.5 million, and capex of $85.0 million – $90.0 million. It plans to open a net total of 29 new stores.
CEC Entertainment, Inc. announced results for its second quarter and six months ended June 30. Second quarter sales declined 1.0% to $215.2 million, driven by six fewer stores, slightly offset by a 0.5% increase in same venue sales (on top of a 1.0 % growth last year). Comps have now grown for five consecutive quarters. Despite a modest 10 basis point improvement in gross margin from the favorable mix of entertainment offerings, it was majorly offset by lower sales and rising wages, resulting in EBITDA declining 2.5% to $38.4 million; EBITDA margin eroded 20 basis points. On the real estate end, despite operating six fewer locations compared to last year, management noted that it expects to open 12 new international locations for the remainder of the year.
Walmart’s momentum continued into the second quarter with revenue up 1.8% to $130.38 billion. U.S. comps increased 2.8% and 7.3% on a two-year stacked basis, which is the strongest growth in more than 10 years. Segment operating income rose 4%. Walmart U.S. e-commerce sales were up 37%. The Company now offers 1,100 grocery delivery locations and has more than 2,700 pickup locations, surpassing Instacart in the number of online grocery customers. NextDay delivery service from Walmart.com now covers about 75% of the U.S. population. International sales continue to drag on the Company, falling 1.1% to $29.10 billion. Strength in Walmex and China were offset by softness in the U.K. and Canada. Sam’s Club’s sales were up 1.8% to $15.00 billion with comp growth of 1.2%.
Walmart raised its forecast for fiscal 2020 and now estimates that U.S. comp growth will be at the high end of its previously guided range between 2.5% – 3%. Adjusted EPS is now expected to either increase or decrease slightly this year. Walmart was previously anticipating a low single-digit decline.
Addressing tariff concerns during a call with analysts, CFO Brett Biggs stated that the Company is hopeful that an “overarching” long-term agreement can be reached. Mr. Biggs stated, “Over the past several months, the team has been able to thoughtfully manage pricing and margins with both our customers and shareholders in mind. We are currently reviewing the proposed List 4 tariff information that was published by the USTR on Tuesday.” Mr. Briggs added that Walmart’s updated guidance “reflects our current understanding of the timing of tariff implementation on various categories as List 4 affects a larger part of its assortment than the prior tariffs.”
Meanwhile, Walmart announced that Barbara Messing, who joined in August 2018 as SVP and chief marketing officer, is leaving the Company. Ms. Messing will be succeeded by Michael Francis, a marketing consultant working with the Company. Click here to request a list of Walmart Future Openings.
Macy’s second quarter sales decreased 0.5% to $5.55 billion, and comps on an owned basis were up 0.2% (on an owned plus licensed basis, comps rose 0.3%). Comps have now increased for seven consecutive quarters. The comp increase was driven by additional business both in stores and online. Management noted that online sales grew by double digits for the 40th consecutive quarter. However, management commented that rising inventory levels became a challenge based on a combination of factors: a fashion miss in women’s sportswear private brands, slow sell-through of warm weather apparel, and the accelerated decline in international tourism. As a result, the Company took markdowns to clear the excess spring inventory, and gross margin eroded by 160 basis points. The gross margin decline and higher expenses due to strategic initiatives pushed quarterly EBITDA down 35% to $210.0 million. EBITDA margin decreased 200 basis points, but TTM EBITDA margin of 8.8% remains above our department store sector average. Based on the weaker-than-expected quarter, management lowered its fiscal 2019 earnings guidance; the Company expects adjusted EPS of $2.85 – $3.05, down from $3.05 – $3.25 (and $3.56 in fiscal 2018). Total sales are expected to be flat. Comps on an owned plus licensed basis are anticipated to be flat to up 1%. The Company expects to add up to 50 Backstage locations to Macy’s stores in 2019, with 47 locations already opened.
J.C. Penney’s second quarter sales fell 7.4% to $2.62 billion, with comps plunging 9%. Excluding the impact of the Company’s exit from major appliance and in-store furniture categories, comps were down 6%. However, improved inventory management (inventory was down 12.5% year-over-year) and shrink led to a 420 basis point expansion of gross margin. As a result EBITDA increased 39% to $164.0 million. Quarterly EBITDA margin rose 210 basis points, but TTM EBITDA margin of 4.6% remains well below our monitored industry average of 7.1%. Fiscal 2019 comps are expected to be down 7% – 8% (or down 5% – 6% excluding exited categories). Gross margin is expected to increase 150 to 200 basis points, and EBITDA is expected to be $440.0 million – $475.0 million.
In other news, J.C. Penney announced that 30 stores will soon offer a selection of secondhand women’s clothing and handbags from thredUP, an online consignment store featuring like-new styles from leading designers and brands. Each thredUP shop (approximately 500 square feet to 1,000 square feet) at J.C. Penney’s stores will be refreshed weekly to offer continued updated product. Macy’s made a similar announcement last week regarding its own partnership with ThredUp. The Company is piloting sales of used clothing in 40 Macy’s stores nationwide. ThredUp also has a partnership with Stage Stores.
Dillard’s second quarter total net sales decreased 2.8% to $1.46 billion, comps declined 2%, and EBITDA was nearly halved to $37.5 million. Current quarter net loss included a pretax gain of $4.9 million ($3.8 million after tax) primarily related to the sale of a store property. Above-trend performances were noted in juniors’ and children’s apparel, men's apparel and accessories and home and furniture, while the weakest-performing categories were ladies' apparel and ladies’ accessories and lingerie. Sales were strongest in the Eastern region followed by the Western and Central regions, respectively. Year to date, sales decreased 1.2% to $2.96 million, comps were down 1%, and EBITDA fell more than a quarter to $178.9 million.
During the quarter, the Company purchased $48.9 million (approximately 0.8 million shares) of Class A Common Stock under its $500.0 million share repurchase program. Year to date, the Company purchased $66.3 million (approximately 1.1 million shares). As of August 3, authorization of $340.6 million remained under the program. Total shares outstanding (Class A and Class B Common Stock) at August 3, 2019 and August 4, 2018 were 25.3 million and 27.6 million, respectively.
Dillard’s also announced that it will close its stores at Oakwood Mall in Enid, OK and Cary Village in Cary, NC, along with a clearance center at Mall of the Bluffs in Council Bluffs, IA. The Company operates 260 Dillard’s stores and 29 clearance centers across 29 states.
The Home Depot’s second quarter sales increased 1.2% to $30.84 billion, total comparable store sales were up 3%, and U.S. comps rose 3.1%. EBITDA increased 0.5% to $5.39 billion. Current quarter results reflect a shift in the calendar base due to 53 weeks of sales in fiscal 2018. Year to date, sales rose 3.3% to $57.22 billion, and EBITDA increased 2.9% to $9.47 billion. CEO and President Craig Menear commented, “We are encouraged by the momentum we are seeing from our strategic investments and believe that the current health of the U.S. consumer and a stable housing environment continue to support our business. That being said, lumber prices have declined significantly compared to last year, which impacts our sales growth. As a result, today we are updating our sales guidance to account primarily for continued lumber price deflation, as well as potential impacts to the U.S. consumer arising from recently announced tariffs. We are reaffirming our earnings-per-share growth guidance for fiscal 2019.” The Company now expects fiscal 2019 sales to grow by approximately 2.3% and comps to be up about 4%, down from previous guidance of sales increasing 3.3% and comps rising 5%. At the end of the second quarter, the Company operated 2,291 retail stores in all 50 states, D.C, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.