August 4, 2021
Wegmans will open its second store in New York City and its first in Manhattan in the second half of 2023. The store will be located in the East Village at the site of a recently shuttered Kmart. Wegmans has reportedly taken out a 30-year lease on the 82,000 square-foot location. Wegmans opened its first NYC location in the Brooklyn Navy Yard in October 2019. It also has nine stores operating to the west in New Jersey, and one to the north in Westchester County. Click here to request a list of future store openings.
Amazon’s 2Q21 net sales increased 27% to $113 billion, with third-party sellers (up 38%) and AWS (up 37%) doing the best. However, all segments advanced, as online sales gained 16%, and physical store sales advanced 11%. Operating income jumped 32% to $7.70 billion (6.8% margin) despite costs of sales and fulfillment costs increasing a steep 91% and 36%, respectively. The Company also noted that more than 250 million items were purchased during Prime Day (June 21-22) in 20 countries with the Fire TV Stick being the most popular item purchased. Looking forward, net sales are expected to advance 10% - 16% in 3Q, while operating income is expected to retreat as the Company laps an incredibly strong sales and efficiency period in the prior year. Amazon’s balance sheet remains pristine, with cash and securities of $90 billion.
Meanwhile, a new report indicates Amazon needs to invest billions of dollars to expand its warehouse and delivery system to keep up with consumer demand. Amazon is reportedly running out of space and available labor. The Company has almost doubled its network of warehouses in an 18-month period, although more investments are being planned. Amazon plans to add 517 facilities to its global distribution infrastructure in the coming years, which is 176 million square feet on top of the 402 million it already has.
A U.S. labor board official has recommended a rerun of a landmark Amazon union election in Alabama where employees had voted overwhelmingly against making their warehouse the Company’s first to organize in the U.S. The Retail, Wholesale and Department Store Union (RWDSU) had said Amazon illegally threatened staff with reduced benefits and compromised the election’s integrity via a ballot collection box it secured outside the warehouse. Amazon plans to appeal. Click here to request a list of future store openings.
Sally Beauty’s consolidated 3Q21 sales and comps both accelerated 45% from last year, driven by store re-openings without capacity restrictions. Despite more than 100 net store closures since the end of 3Q19, 3Q21 sales were up 5% versus two years ago. Higher sales and gross margin improvement enabled quarterly EBITDA to more than double to $157 million, with a margin of 15%. During the quarter, the Company repaid more than $200 million in total debt, including $197 million of its 5.5% Senior Unsecured Notes due 2025 and another $8 million of its Floating Rate Term Loan.
GNC had been struggling for years with a bloated store base, increasing competition, especially from online channels, a heavy debt load (which ultimately could not be refinanced under the duress of COVID-19 last year), and widespread temporary store closures that dented cash flow. As a result, the Company filed for bankruptcy in June 2020. During 2018 and 2019, GNC closed more than 600 stores; we estimate over 1,300 more were shuttered during early 2020 and through the bankruptcy process, shrinking its domestic store count by nearly half over the last five years. The Company was bought out of bankruptcy by Harbin Pharmaceutical Group, a Chinese joint venture partner that had previously acquired 38% of the Company’s equity. With a leaner store base and a healthier balance sheet with no pending maturities, the Company is looking to take advantage of the COVID-fueled trend toward health and wellness. However, the Company’s internal projections only anticipate a FY21 EBITDA margin of 7.2%, meaningfully shy of the 9.1% - 9.2% in 2018 and 2019, and well below the high-teens of six and seven years ago. Also, at initial debt levels, interest coverage only projects at about 1.9x with debt/EBITDA of about 7.6x, very weak leverage ratios, suggesting operating improvements will be needed over the coming years. Click here to request a list of future store openings and closing.
Starbucks reported 78% sales growth to $7.5 billion in 3Q21, as global comps rose 73%. U.S. comps increased 84%, or 10% on a two-year basis. The Company opened 352 net new stores during the quarter, representing 3% unit growth. Starbucks generated net income of $1.15 billion, compared to a net loss of $678.4 million in the prior-year period. Management narrowed its FY21 guidance to 20% - 21% global comp growth (compared to 18% - 23% previously) and 21% - 22% U.S. comp growth (17% - 22% previously). At the same time, management increased its full-year operating margin guidance to 17%, up from 15% - 16%.
In other news, Starbucks has agreed to sell its 50% ownership share of Starbucks Coffee Korea Co., Ltd. Joint venture partner E-Mart Inc. (Shinsegae Group) will acquire an additional 17.5% interest in Starbucks Coffee Korea Co., Ltd., giving it 67.5% ownership of Starbucks’ operations in South Korea. Additionally, Starbucks Coffee Company has agreed to sell its remaining ownership share of Starbucks Coffee Korea Co., Ltd. to an affiliate of GIC Private Limited, Singapore’s sovereign wealth fund, giving GIC a 32.5% ownership stake in Starbucks Coffee Korea Co., Ltd. Starbucks has more than 1,500 stores across 78 cities in South Korea. Financial details were not disclosed. Click here to request a sample list of future store openings.
Dollar General opened its first two stores that combine the offerings of a DG Market and pOpshelf, in the Nashville, TN area. In May 2021, the retailer indicated plans to develop approximately 25 Dollar General and pOpshelf combination stores. Dollar General first revealed the pOpshelf concept, which offers the vast majority of its items at $5 or less and aims to make the shopping experience “fun” and “affordable,” in October 2020. Since then, the Company has opened 16 pOpshelf stores in three states. Stores are currently under construction in Mobile and Foley, AL; and Aiken and Columbia, SC. Dollar General is planning up to an additional 50 pOpshelf units in various markets by the end of FY21. Click here to request a sample list of future store openings and closings.
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Last week, Alimentation Couche-Tard agreed to acquire Cape D’Or Holdings Limited, Barrington Terminals Limited, and other related holding entities, which operate an independent convenience stores and fuel network in Atlantic Canada under the Esso, Wilsons Gas Stops, and Go! Store brands (Wilsons). The Wilsons network includes 79 corporate-owned convenience retail and fuel locations, 147 dealer locations (of which two are corporately owned), and a marine fuel terminal in Halifax, Nova Scotia. The deal, terms of which were not released, is expected to close in the first half of calendar 2022 and will be financed with available cash and/or existing credit facilities. The Company expects a portion of the Wilsons assets to be purchased by a third-party acquisition partner to be determined following a review of the proposed transaction by the Canadian Competition Bureau.
As expected, Albertsons posted lower 1Q21 sales and EBITDA, down 6.5% and 22.6%, respectively. However, on a two-year stacked basis, operating trends remained positive, with comps up 16.5% and Company-reported EBITDA growing at a 22.1% CAGR. Digital sales were flat in 1Q21 and up a solid 276% on a two-year stacked basis. Short-term trends are expected to remain negative but ahead of pre-pandemic levels. Management revised its FY21 guidance upward, with comps to fall 5% – 6% (two-year stacked growth of 11% – 12%), and EBITDA to decline from $4.3 billion in FY20 to $3.7 billion – $3.8 billion, or a margin in the mid 5% range compared to 4.4% for FY19. Some of the improved guidance is related to the COVID vaccine performance; to date, Albertsons has administered six million doses, but this revenue source has begun to taper off. Management noted it continues to see favorable sales trends in 2Q21, including consumers upgrading to more quality products, and elevated sales in “meat, produce and high-end wines, providing evidence that some important food and beverage categories remain shifted to food at home.” Management also indicated it saw modest cost inflation of 1.5% to 1.7% in 1Q21, which it successfully passed through, although the trend is increasing slightly. Albertsons opened five new stores and completed 33 upgrade and remodel projects during 1Q21. Click here to request a list of future store openings.
BBQ Holdings Inc., parent to Famous Dave’s and Granite City Food & Brewery, announced it has completed the acquisition of Village Inn and Bakers Square. Established in 1958, Village Inn is a family restaurant concept with 21 Company-owned restaurants and 114 franchised restaurants in 18 states.
WOWorks, the parent company of Saladworks, Frutta Bowls, Garbanzo Mediterranean Fresh, and The Simple Greek, issued a business update on July 28 in which the Company noted its brands are on track to open more than 70 new restaurants before the end of the year. In the past three months, the brands have signed 13 new franchise agreements and opened 18 new locations, including debuts in Utah, California, Texas, Massachusetts, and Tennessee. The Company is projecting 61 new openings before the end of the year and is pursuing more grocery opportunities in Ohio, New Jersey, and Pennsylvania.
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Foot Locker entered into a definitive agreement to acquire Eurostar, Inc. (WSS), an athletic-focused footwear and apparel retailer that operates primarily in the West Coast. The purchase price of $750 million will be funded with cash on hand (the Company had almost $2 billion in cash as of May 2021). WSS operates 93 off-mall stores, primarily in California, Texas, Arizona, and Nevada. WSS reported a three-year sales CAGR of 15%, culminating in FY20 sales of about $425 million. The transaction is expected to close in 3Q21. The Company also announced that it has entered into an agreement to acquire Text Trading Company, K.K. (atmos), an online-focused premium sneakers and apparel retailer based in Japan. The purchase price is $360 million, and will also be funded with cash on hand. Atmos operates 49 stores globally, including 39 in Japan. The stores consist of both the namesake “atmos” banner and the women’s focused “atmos pink” banner. Atmos reported FY20 revenues of approximately $175 million, with more than 60% online penetration. The transaction is expected to close in 3Q21.
O’Reilly Automotive’s 2Q21 sales increased 12% to $3.47 billion from $3.09 billion a year ago. Comparable store sales were up 9.9% during the quarter, on top of a 16.2% rise a year ago. Operating income advanced 8% to $796 million (23% of sales), from $736 million (23.8% of sales) a year earlier. Management noted that its results thus far in FY21 are the product of strong execution of market strategy, combined with a beneficial industry backdrop, favorable weather trends, and the significant positive impact from the last round of government stimulus starting at the end of 1Q. As of June 30, the Company operated 5,710 stores in 47 U.S. states and 22 stores in Mexico. Click here to request a sample list of future store openings and closings.
BJ’s Restaurants’ 2Q21 revenues more than doubled to $290.3 million, as its locations benefitted from the lifting of most dine-in restrictions, especially in California in mid-June. 2Q comps rose 121.9%, but on a two-year basis were down 6%.
The comp trend has been improving over the course of FY21, as BJ’s went from a two-year 7.6% decline in April and May to a 3.8% decline in June before flipping to positive 1.6% growth in July. Net income was $6.4 million versus a $29 million net loss in the prior-year period. The Company opened two new restaurants in Merrillville, IN and Lansing, MI in the quarter, and plans to reopen its Richmond, VA location this month. No other openings are currently in store for FY21, but management indicated that plans to open eight to 10 new restaurants in FY22. Click here to request a list of future store openings.
Our Hot Market Report takes a closer look at the Washington D.C. real estate landscape, and provides visual competitive analyses as well as key real estate metrics such as future openings, store count, market share, digital insights, and demographics. Click here to request a copy of the full report.
SpartanNash opened a 55,000 square-foot micro-fulfillment center in Caledonia Township, MI. The new $5 million facility offers 16,000 products and fulfills pick-and-pack Fast Lane orders for D&W Fresh Market, Family Fare, Forest Hills Foods, and Ada Fresh Market stores in the Grand Rapids, MI metro area. The micro-fulfillment center will support more than 1,000 Fast Lane orders daily once fully operational, which more than doubles its current Fast Lane order capabilities.
On August 18, Schnuck Markets will open a “Schnucks Fresh” store in Jasper, IN. The 18,000 square-foot new format store will include a heavy focus on fresh departments, such as produce, meat, seafood, deli and bakery. The Jasper location will mark Schnucks’ seventh Indiana store, joining six others in the Evansville area. Click here to request a list of future store openings.
Bloomin’ Brands released results for its 2Q21 ended June 27. Revenue jumped 86.2% to $1.08 billion, as the Company cycled extended periods of indoor dining closures in the prior-year period due to the pandemic. Combined U.S. comparable restaurant sales were up 84.6%, and on a two-year basis were still up 12.1% compared to 2Q19 sales, reflecting continued strength in its off-premise business (28% of total sales in 2Q), even as customers return for dine-in service. The Company also adjusted its full-year guidance for capital expenditures to $140 million - $150 million, compared to $170 million - $185 million previously. The decrease is due to raw materials constraints that are now expected to delay certain relocations and remodels into FY22. Bloomin’ still expects to open 20 to 25 new restaurants in FY21.
H&M Hennes & Mauritz’s (H&M) recovery gained steam in 2Q21, as stores reopened and restrictions eased. Revenue rose 62.3% to SEK 46.51 billion (US$5.42 billion), excluding VAT 75% in local currency but still down about 4% compared to 2Q19, primarily reflecting the impact of the pandemic and store closures. Around 1,300 stores were temporarily closed at the start of the quarter and about 140 remained closed at the end of the period. The Company continued to implement cost-mitigation measures, which when coupled with the gross margin improvement, resulted in EBITDA of SEK 9.46 billion for the quarter, compared to EBITDA of SEK 179 million during 2Q20.
Weis’ 2Q21 sales fell 4.7% to $1.05 billion. Comps fell 5.8% but increased 18.3% on a two-year stacked basis. Operating income was $45.6 million, down from $56.0 million last year. As part of its $135 million capex program announced in April, the Company opened replacement stores in three Pennsylvania locations during 2Q. Click here to request a list of future store openings.
Like virtually all other grocery chains, Demoulas Super Markets benefited from the pandemic-related boost. Sales rose for the sixth straight year, reaching $5.8 billion in 2020, more than an 8% increase over 2019, primarily driven by the aforementioned pandemic windfall, as well as one new store in operation. The Company currently operates 85 locations located in Massachusetts (51), New Hampshire (31), Maine (2), and Rhode Island (1). The new 89,000 square-foot store in Johnston, RI is its first in the state. The Company currently has four new locations in development, including sites in Hanover and Shrewsbury, MA; Johnston, RI; and Concord, NH; opening dates have not been announced. We expect the Company’s strong reputation as a price leader, combined with a fiercely loyal customer base, will provide a fair amount of protection from growing competition, primarily from Walmart and Aldi. Click here to request a list of future store openings.
The original Stew Leonard’s in Norwalk, CT is proposing a major $15 million renovation project. The two-story expansion would eliminate the outdoor tent and seasonal sales area. A new farmers market and garden center measuring 10,500 square feet is part of the proposal.
Piercing Pagoda, a division of Signet Jewelers, is changing its name to Banter by Piercing Pagoda. Currently, about one-fifth of the chain’s existing locations are testing the new name, and the Company plans to gradually roll it out to its more than 500 U.S. locations as well as online. Banter by Piercing Pagoda will also open up to 100 locations this year. While Piercing Pagoda locations are typically in kiosks (in mall hallways), Banter will operate a store layout that will include a lounge area for a more private piercing experience and smart mirrors to virtually try on products, in select locations. It also plans to expand its newest service, facial and nose piercings, to more locations. The brand revamp is part of Signet’s “Path to Brilliance” growth and transformation strategy.
Yum! Brands’ 2Q21 revenue increased 34% to $1.6 billion. Worldwide same-store sales rose 23%, and Yum’s comps grew 4% on a two-year basis, even as 1% of its restaurants remained closed due to the pandemic as of the end of the quarter. KFC’s comps increased 30%, led by growth in the U.S. (up 2% on a two-year basis). KFC’s international comps fell 1% over the two-year period, as 2% of KFC stores remain temporarily closed. U.S. same-store sales jumped 19% on a two-year basis, as pandemic restrictions eased and diners returned.
Pizza Hut’s comps rose 10% (1% on a two-year basis). U.S. same-store sales jumped 9% on a two-year basis, while international same-store sales shrunk 6%. Taco Bell’s same-store sales grew 21% in the quarter (12% on a two-year basis).
The Company reported $5 billion in digital sales, a 35% increase over the prior year. Taco Bell U.S. launched a rewards program last year that contributed to the growth of the brand’s digital sales. Earlier this year, the Company launched an app and website for KFC, replacing its third-party website, which has increased its digital sales as well.
Yum! opened 603 net new locations during the quarter and plans to pick up its expansion pace by reinstating its long-term growth targets. The Company said it plans to grow the number of restaurants it operates by between 4% – 5% over the long term, up from its previous guidance of 4% growth.
Texas Roadhouse reported 89% sales growth to $898.8 million in 2Q21, reflecting comps of 80.2% and contributions from ten net new restaurants opened over the past year (eight Company-owned, two franchised); two-year comps were up 21.3%. To-go orders represented 16.9% of total sales, though that percentage fell to 14.2% last month and will likely fall further as more customers return to pre-pandemic dining habits. Restaurant operating margin rose from 2.5% to 17.7% year-over-year. During 2Q, the Company refinanced its credit facility, replacing its previous $200 million facility (including an $82.5 million incremental facility added in May 2020) with a new $300 million revolver that matures in May 2026. As of quarter-end, the Company had $190 million in outstanding debt against $483.4 million in cash on hand, or a net cash position of $293.4 million. Click here to request a list of future store openings.