Retail News

Charming Charlie

Yesterday, Charming Charlie LLC filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court in the District of Delaware (click here to request a copy of the full petition). The proceedings have been assigned case number 17-12909. Subject to Court approval, the Company, which currently has 375 stores, intends to move forward with previously announced plans to close underperforming locations and simplify business operations. As seen in the map below, the Company's stores are concentrated in Texas, California, Florida and Illinois. Charming Charlie also announced it has entered into a Restructuring Support Agreement (RSA) with a majority of its Term Loan Lenders and Equity Sponsors, which will significantly reduce the Company's funded debt amounts and cash debt service and establish a sustainable capital structure. The Company has secured commitments for $20.0 million in new-money debtor-in-possession (DIP) financing from a majority of its existing Term Loan Lenders and has entered into a $35.0 million DIP Asset Backed Loan (ABL) with its current lenders.

Lidl

Lidl has stalled plans on several proposed new stores, including sites in Mantua Township, NJ; Staunton, VA; East Lampeter Township, PA; and Austintown Township, OH. According to published reports, customer traffic at some of its new locations has slowed following its initial success. The Company appointed a new executive in Germany to oversee its operations in the U.S. in September, suggesting that results had not been meeting initial expectations. Lidl is rethinking its real estate strategy as it is now looking for leased sites that are smaller (15,000 to 21,000 square feet) versus the owned sites of 35,000 square feet. With 47 stores open so far, the Company remains on track to meet its goal to open 100 stores by the end of summer next year.

Camping World

One of the first Gander Outdoors stores to be opened by Camping World will be the Lakeville, MN location, which will open tomorrow. Other stores in Duluth, Forest Lake, Baxter, and Bemidji, MN will also reopen, and management at Camping World also plans to build a store in Woodbury, MN. Camping World had previously planned to open between 15 and 20 stores by the end of November, but the plans were delayed. The current plan is to open 15 to 20 Gander Outdoors units by the end of the first quarter of 2018 and an additional 40 to 45 stores during the 2018 second and third quarters.

Ingles Market

Ingles reported fourth quarter sales rose 13.2% to $1.09 billion (4Q17 had one extra week compared to 4Q16). Comps increased 3.6%, adjusted for the extra week, and benefited from hurricane activity. Net income increased 36.6% to $19.4 million. For fiscal 2017, sales rose 5.5%, comps increased 1.5% and net income was down slightly to $53.9 million.

During fiscal 2017, capital expenditures were down 7.2% to $127.7 million. The Company opened two new stores and closed four, one of which is being rebuilt and will reopen later this month. Ingles has a line of credit facility totaling $175.0 million with $165.5 million available (after deducting letters of credit) at September 30, 2017.

Casey's General Stores

Casey's General Stores reported second quarter sales growth of 12.2% to $2.15 billion. Comps increased 2.5% for Grocery and Other Merchandise, and rose 2.1% for Prepared Food and Fountain. Same-store fuel gallons sold were up 1.9%. However, operating expenses increased 9.4%, to $322.9 million, due to increases in employee-related costs from operating more stores and implementing growth programs. In addition, credit card fees and fuel expenses combined were up $4.1 million, primarily due to higher fuel prices. After higher interest expense, net income fell 14.4%, to $48.9 million.

In the first half of fiscal 2018, the Company built and opened 12 new stores, acquired 14, completed 14 replacements, and remodeled 28 stores. In addition, there were 66 new stores, 18 replacement stores, and 14 major remodels under construction. During the second quarter, the Company opened its 2,000th store, including its first in the state of Michigan. Casey’s also has 134 sites under agreement for new store construction.

Based on softer than expected traffic in 2Q, the Company lowered its Prepared Food and Fountain comp guidance to 2% – 4%, down from 4% – 6%.

Conn's

Conn’s third quarter sales decreased 1% to $373.2 million, reflecting a 7% decrease in comparable store sales, which came on top of a 10.1% decrease in the same period last year and was partially offset by the opening of three new stores since last year. Comps have now been down for eight straight quarters. Comps in markets impacted by Hurricane Harvey were down 1.3%, while comps outside impacted markets were down 9.3%.

Whole Foods

According to an analysis by the research firm Gordon Haskett, “Whole Foods' prices are creeping back up after highly-publicized cuts following its acquisition by Amazon.” The firm checked prices on 110 items at a Whole Foods store in Princeton, NJ, and found that the cost of the total basket of items increased 1% since the end of September. Most of the latest price increases affected dry, packaged goods, according to the price study. At the same time, there were some price cuts in produce and dairy. Produce prices fell 4.9%, while snack foods rose 5.2%, dry grocery rose 2.5%, beverages and bakery each rose 1.3%, and frozen goods rose 1.3%.

Meanwhile, a judge has issued a preliminary injunction saying Whole Foods must open its closed 365 store in Bellevue, WA, which was shut in October due to poor performance. Whole Foods had signed a 10-year lease agreement with the mall where it was located. The judge claims Whole Foods violated its lease agreement and ordered the retailer to open the store in 14 days. Whole Foods’ lease included an operating covenant requiring the retailer to operate the store seven days a week for the first 10 years of the 20-year lease. The 365 store’s sales did not meet Whole Foods’ projections resulting in the closure.

AggData's Future Store Closing Database Currently Contains 100+ Locations Scheduled To Close In 1Q 2018.

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7-Eleven

The $3.30 billion sale of 1,100 Sunoco convenience stores to 7-Eleven is expected to be completed in January 2018. The companies released a joint statement saying they believe the transaction is in the later stages of the regulatory approval process with the FTC. The transaction also includes the associated trademarks and intellectual property of Sunoco's Laredo Taco Co. and Stripes brands. Sunoco is also entering into a 15-year fuel supply agreement with a 7-Eleven subsidiary, under which Sunoco will supply approximately 2.2 billion gallons of fuel annually.

Destination Maternity

Destination Maternity reported fiscal 2017 third quarter net sales declined 6.1% to $96.4 million, driven by 25 net store closures, and the exit of the Kohl’s business, slightly offset by comparable sales increasing 1.1% (following a 5.2% decline last year). The Company also noted that ecommerce sales grew 54% compared to the prior year; we estimate ecommerce now represents 17% of all sales.

Meijer

In 2017 Meijer has been aggressively remodeling stores in key Midwestern markets such as Cincinnati, Louisville, Indianapolis, and suburban Chicago. Remodels include updates to the pharmacy area, expanded grocery and health and beauty sections, and an updated apparel department, among other things. The Company recently completed its 22nd Supercenter remodel of the year in Rockford, MI. A total of six Meijer Supercenters in Michigan were updated, including Mt. Pleasant, Grand Rapids and the Detroit area. A quarter of its 235 stores have been remodeled over the past two years.

Aldi

Aldi received approval to open a 17,880 square-foot store in Boynton, FL. It will have to compete with a nearby Walmart, Publix and BJs Wholesale Club. The location is also about five miles from another Aldi store under construction. Aldi already has several Palm Beach County locations including Royal Palm Beach, Palm Springs, Lake Park, West Palm Beach, Delray Beach and Boca Raton. The Company also has a distribution center and regional headquarters in Royal Palm Beach.

Tailored Brands

Tailored Brands’ net sales decreased 4.3% to $810.8 million, driven by 230 net store closures and flat comparable store sales. Comps by retail segment decreased 1% at Men’s Wearhouse, increased 4.9% at Jos. A. Bank (following a 9.8% decline last year), declined 3.5% at K&G, and declined 2.2% at Moores.

Wawa

Wawa will open its first store in Washington D.C. on Thursday. It will be the Company’s largest location at 9,200 square feet (stores average 4,225 square feet) and will boast an “upscale, urban feel.” It will also offer an outdoor patio and will be open 24 hours. According to president Chris Gheysens, the location “has all of the important demographics for us: population growth, millennials and lots of foot traffic.” Mr. Gheysens said Wawa could have as many as 10 D.C. stores by 2020, including a Georgetown store in the works for next year, and another location under contract in Chinatown. The Company already has a large presence in surrounding states including 83 stores in Virginia, 49 in Maryland, and 43 in Delaware.

Big Y Foods

Big Y Foods will open a 60,000 square-foot World Class Market in Derby, CT, in 2019. World Class Markets feature prepared meals, a broad selection of specialty and local foods, an extensive produce department, and a full-service pharmacy. It will be the Company’s 71^st store and its eighth World Class Market in southern Connecticut.

Claire's Stores

Claire’s Stores reported third quarter sales increased 0.8% to $314.6 million. Sales would have decreased 1.1% excluding the favorable impact from foreign currency exchange rate changes and attributable to the effect of store closures, partially offset by an increase in comparable store sales and an increase in new concession and Company-operated store sales. Consolidated comps increased 1.1%, with North America comps up 2.4% and Europe comps up 1%. Operating income was $29.4 million, compared to a loss of $120.4 million in the prior-year period. As of October 28, Claire's Stores operated 2,638 stores in 17 countries throughout North America and Europe.

Starbucks

Starbucks opened a Starbucks Reserve Roastery in Shanghai, China on December 6. The Shanghai location will be only the second Starbucks Reserve Roastery location, with one currently in Seattle, WA. Others are planned for Chicago, IL; New York, NY; Tokyo, Japan and Milan, Italy. Starbucks said China is the Company's fastest growing market with more than 3,000 stores across 136 cities.

Francesca's

Francesca’s third quarter sales decreased 11.4% to $105.8 million, and comparable store sales dropped 18%, impacted by “a decline in boutique traffic and conversion rates as the back-to-school assortment did not resonate with guests.” Additionally, Hurricanes Harvey and Irma negatively impacted comps by about 425 basis points, mostly as a result of the supply chain disruption the Company experienced at its corporate offices in Houston, TX. These decreases were partially offset by the addition of 45 net new boutiques since the end of the third quarter last year and $1.5 million of additional gift card breakage income. Income from operations dropped to $455,000 from $15.8 million in the prior-year period. The Company opened 23 new boutiques and closed one boutique during the quarter, bringing the total count to 714 at quarter end.

Looking ahead, Francesca’s expects fourth quarter sales of $145.0 million – $150.0 million, a 9% – 12% decrease in comps, and plans to open nine new boutiques. For the fiscal year ending February 3, the Company expects net sales of $478.0 million – $483.0 million, a 9% – 10% comp decline; it plans to open 60 boutiques and close eight boutiques.

99 Cents Only

99 Cents Only announced its third quarter results last Thursday which included comps of 11.3% and an $11.6 million increase in EBITDA bringing EBITDA margin to 2.1% for the quarter and 1.8% on a TTM basis. The leveraging effect from higher sales helped boost margins along with lower workers’ comp claims, lower shrink and scrap and improved inventory management, resulting in 85% product sell-through resulting in lower clearance initiatives. In the follow up earnings call, the Company indicated that its 48 Texas stores experienced 13.4% comp-store sales despite the interruption from Hurricane Harvey and very close to the 15.5% recorded through the first half. Three of 27 Houston area stores had sustained damage due to the Hurricane with only one yet to re-open; “closed stores and overall damages were immaterial after taking into account insurance coverage.” Management stated that the Texas stores have shifted to a profit from a loss last year which it stated would be a “strong foundation to future expansion in Texas.” Texas was cited as a great place for expansion due to rapid growth and being more business friendly than California; the Katy distribution center also has capacity to serve another 150-200 stores with minimal further investment.

Walmart

Walmart is changing its legal, corporate name from “Wal-Mart Stores” To “Walmart” (without the dash). CEO Doug McMillon said in a statement, “While our legal name is used in a limited number of places, we felt it was best to have a name that was consistent with the idea that you can shop us however you like as a customer.” The name change comes as Walmart has been investing in its digital initiatives such as Jet.com, along with online brands such as Modcloth and Bonobos. Most of its capital investment these days has centered on technology including its online platform and logistics while store growth has significantly stalled with just 249 – 279 new stores/clubs planned for this year.

Last week, Walmart said that soaring online purchases have caused delays in its distribution network, reflecting the challenge retailers and delivery services face in handling strong peak-season e-Commerce demand. A Company representative stated, "The week of Thanksgiving is an incredibly busy time for all of retail. With massive volume going through our system, there were some orders that took extra time, much like other major e-commerce sites. A vast majority of orders are shipping on time now." One senior FedEx employee said Walmart's national distribution network had fallen behind in processing some four million customer orders, though he declined to elaborate on how this impacted FedEx deliveries. Walmart offers free two-day shipping on millions of items when the order size is over $35. The Company said online sales surged 50% in the last quarter. Adobe Analytics forecasts a record $107.40 billion holiday season for online orders, the first ever to cross the $100.00 billion mark, it said on Wednesday. FedEx said it expected to deliver 380-400 million packages globally during the peak shipping season.

J.Crew

J. Crew is shutting down its 21-year-old flagship store in Manhattan’s Soho neighborhood due to “unsustainable rent costs,” according to a person familiar with the matter. The Company plans to continue operating its 13 other stores in New York City, including six full-line stores in Manhattan and a men’s shop in Soho. J. Crew previously announced plans to shut down as many as 50 stores based on declining sales and traffic.

PriceSmart

PriceSmart's November sales increased 6.4% to $261.5 million and comps rose 2.7%. For the quarter ended November 30, sales increased 4.1% to $745.4 million and comps increased 2.2%. The Company opened one new warehouse club over the past year bringing its store count to 40.

Restoration Hardware

RH’s (fka Restoration Hardware) third quarter revenue increased 7.9% to $592.5 million, as a result of three net new stores and comparable store sales growth of 6%. Gross margin improved 390 basis points due to a favorable product mix, which was somewhat offset by SG&A margin increasing 70 basis points. Ultimately, EBITDA improved 56.6% to $62.1 million from $39.6 million, and EBITDA margin expanded 330 basis points to 10.5%. For fiscal 2017, management expects to generate $2.43 billion – $2.45 billion in sales and achieve free cash flow of $420.0 million – $440.0 million. For fiscal 2018, management expects revenue of $2.58 billion – $2.62 billion, adjusted operating margin of 9% – 10% and free cash flow of at least $240.0 million.

Dollar General

Dollar General’s third quarter sales increased 11% to $5.90 billion. Comps rose 4.3%, attributed to increases in average transaction size and customer traffic, including an estimated 30 to 35 basis point benefit from hurricane-related sales. Comps were driven by positive results in the consumables, seasonal and apparel categories, partially offset by negative results in the home products category. Net income was up 7.3% to $252.5 million, including a $13.0 million negative impact from hurricane related expenses.

During the YTD period, the Company opened 1,044 new stores and remodeled or relocated 719. The new store growth includes rebannering 263 former Dollar Express locations acquired in 2Q17.

Looking ahead at fiscal 2017, Dollar General expects sales growth of 7%, comp growth of 2.5% and capex between $700.0 million – $750.0 million. It plans to open a total of 1.285 stores and remodel or relocate 760. For fiscal 2018, it expects to open 900 new stores, remodel 1,000 and relocate 100 stores.

On the news, the Company’s stock hit a 52-week high of $96.60 (almost an all-time high), retreating slightly to close the day up 2.8% to $93.37.

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Dollarama

Dollarama reported third quarter sales growth of 9.7%, to $810.6 million, driven by comp growth of 4.6%, and the addition of 66 new stores over the past year. The Company operated 1,135 stores as of October 29. Comp growth consisted of a 4.5% increase in the average transaction size and a 0.1% increase in the number of transactions. Net earnings rose 18.2% to $130.1 million, the result of a 9.7% increase in sales, a stronger gross margin, and lower SG&A as a percentage of sales.

In other news, Dollarama intends to purchase shares for cancellation under its 5.68 million share repurchase program. Dollarama will repurchase common shares through daily purchases that will take place between December 11, 2017 and January 25, 2018, subject to a maximum of 437,000 shares.