December 18, 2019
Topgolf is on track to expand into dozens of locations in both Central Europe and Asia, and it announced plans to expand into smaller U.S. markets. CEO Dolf Berle said that Topgolf currently has “tremendous white space” in each of its business lines, including its domestic venues. He noted that Topgolf has built less than half of the real estate locations that are available for its domestic venues, and there are still several years of significant growth ahead in that area. One of the ways the Company is evolving its venue growth is by building a prototype for its smaller markets. The Company plans to build out those prototypes in 2020 in Chattanooga, TN; Waco, TX; and Augusta, GA. Mr. Berle commented, “Our belief is that the smaller venues with a smaller number of bays and a smaller footprint will be very viable in cities with populations under 500,000.” Topgolf sees the potential to add 100 venues in smaller cities. The Company is also set to launch Lounge by Topgolf in 2020, a new line of business that will have a collection of swing suites, providing an all-indoor virtual gaming experience with a restaurant and bar. The first lounge is set to open in January outside of Seattle. The lounges will offer not only a number of famous virtual golf courses from around the world but also other virtual games, such as zombie dodgeball and games related to hockey, basketball, and other sports. Published reports indicate the Company is in talks with investment banks for hiring underwriters for an IPO.
In other news, Topgolf opened a 65,000 square-foot store in Cleveland, OH on December 13. Click here to request a list of future openings.
Camping World plans to shutter its Muncy Township, PA Gander Outdoors location by year’s end. The 56,000 square-foot location was opened in January 2018 in a former Gander Mountain store. Camping World had acquired the lease rights to the Gander brand in 2017 with plans to open 74 stores under the Gander Outdoors banner. However, facing strong RV industry headwinds that caused declining unit sales and forced promotional pricing, Camping World has had to shift to a lower gear. The Company’s store count will drop back to about 180 sites after divesting or converting the remaining 34 non-RV sites. Click here to request a list of future closings.
On December 12, Hibbett Sports announced that its Evansville, OH store will close due to lack of traffic and underperforming sales. The store, which opened in 2005, does not have an official closing date, but going-out-of business sales have commenced. Hibbett is in the process of closing about 95 stores during the fiscal year ending February 2020, of which 83 were closed during the first three quarters.
In other news, Hibbett named Michael E. Longo as president and CEO. Mr. Longo succeeds Jeff Rosenthal, who announced his planned retirement in March. In addition, Mr. Longo will replace Mr. Rosenthal on the board. Mr. Longo served as CEO of City Gear, which Hibbett acquired in 2018.
Wegmans Food Markets will build a new full-service, regional distribution center in Ashland, VA. According to the Company, the $175.0 million project will expand the Wegmans’ East Coast distribution network to help fuel its growing retail base, which is now more than 100 stores. The 1.1 million square-foot facility is reportedly slated to begin operations in 2022 and become fully operational by the end of that year. Upcoming new stores from Wegmans will expand its Mid-Atlantic trade area farther south and grow its presence in metro New York. The Company said it is planning another five stores for the Raleigh-Durham, NC area, including a location in West Cary slated to open next year. Other North Carolina locations that have been announced include Wake Forest, Cary, Chapel Hill and Holly Springs. Click here to request a list of future openings.
2019 Holiday Preview Report
AggData has released the 2019 Holiday Preview to its Premium Subscribers. This detailed report outlines:
- Expectations for the holiday shopping season based on changes in consumer preferences
- Black Friday Weekend
- Holiday trends to watch
- Updated retail strategies
On December 12, Publix opened two GreenWise Market stores in Florida, in Boca Raton and Lakeland. GreenWise Market is a specialty, natural and organic store with a large selection of prepared foods. The first new-concept GreenWise Market opened in Tallahassee in October 2018 with three more locations debuting in 2019, and a total of 12 announced. The Company continues to look for additional GreenWise Market locations in its operating area. Click here to request a list of future openings.
Albertsons Companies and Takeoff Technologies have formed a strategic partnership with dedicated teams to collaborate on the evolution of grocery micro-fulfillment centers (MFC). Albertsons has also agreed to purchase additional MFCs from Takeoff and is evaluating market expansion opportunities. Albertsons and Takeoff worked closely together on the successful implementation of the Company’s first MFC in South San Francisco in October. The two companies began their partnership in 2018, with the announcement of two pilot micro-fulfillment centers that would be constructed in existing grocery stores. Albertsons began operating its first pilot unit on October 23 at a Safeway in South San Francisco, CA. Another pilot unit is scheduled to begin operations at a Safeway in San Jose, CA by the end of 2019.
The cost of an MFC is estimated to be less than $5.0 million; they typically range from 10,000 – 20,000 square feet and can fill about 4,000 orders a week. Bigger facilities, like the Ocado facilities employed by Kroger, can be larger than 300,000 square feet and fulfill about 65,000 orders a week with the cost for such facilities up to $50.0 million. These centralized centers can be built in two to three years and are anticipated to reach profitability in three to four years.
Metro is selling its stake in MissFresh, a ready-to-cook meal delivery subscription service based in Montreal, to ready-to-cook meal company Cook It. Financial terms of the deal were not disclosed. MissFresh was started in 2015; Metro purchased a majority interest in August 2017, with the co-founders retaining a 30% stake.
It is estimated that Save Mart’s top line decreased marginally to around $4.00 billion in 2018 due to slightly negative comps; however, we expect a small rebound in 2019 due to a new store and some share gains. Additionally, Save Mart appears to have initiated a much-needed strategic transformation including a handful of store remodels, a new flagship store in its hometown of Modesto, and a new digital strategy.
Kroger and Walgreens Boots Alliance announced on December 11 that they have formed a new group purchasing organization (GPO) aimed at delivering purchasing efficiencies, lowering costs and combining resources to help drive further innovation. The new joint venture will be known as Retail Procurement Alliance. In December 2018, Kroger and Walgreens launched a Kroger Express concept where Kroger private-label items were added to 13 Walgreens stores in Northern Kentucky. In addition, the concept allows customers to order Kroger grocery items and pick up orders at Walgreens stores. In August 2019, Walgreens and Kroger announced an expansion of the pilot at 35 Walgreens locations in Knoxville, TN and introduced a curated assortment of Walgreens’ health and beauty products at 17 Kroger stores in the same area.
Sheetz will open a store in Columbus, Oh in the spring of 2021. The Company’s stores closest to Columbus are in Zanesville and Cambridge.
Dine Brand Global’s IHOP Restaurants plans to launch Flip’d by IHOP, a new fast-casual concept in the U.S. The new brand aims to fill a gap in the restaurant space by focusing on freshly made breakfast foods and beverages with speed and convenience in mind, directly addressing a growing consumer demand in densely populated city centers. Upon entering Flip’d, visitors can order from a digital kiosk or directly at the counter. Orders can also be placed online and picked up at a designated area or be delivered. The first Flip’d is expected to open in Atlanta next April with additional sites in New York City, Washington D.C., Denver, and San Francisco currently under exploration for 2020. Flip’d by IHOP will be a standalone brand within the IHOP portfolio.
In other news, the Company announced the first IHOP restaurant opening in Lima, Peru through an agreement with Percapitals S.A.C., which calls for 25 IHOP restaurant openings in Peru through 2028.
Captain D’s signed two new franchise development agreements that will expand its presence in Southern Florida and Southeast Georgia. Through these agreements, the Company plans to open three new restaurants each in Florida and Georgia. Click here to request a list of future openings.
Based on the success that Saladworks has seen with the first two ShopRite locations, it is opening a new location within a Philadelphia-area Fresh Grocer. The Company also has locations under development in Delaware, Maryland, and New York. Current locations in the greater Philadelphia area include Island Avenue ShopRite, Parkside Town Center, and Wyncotte Fresh Grocer along with the Cheltenham location that opens in January 2020. Two new locations are opening in ShopRite stores in Roxborough and Fox Street. Some of the new ShopRite Saladworks units will be found in Brown’s Super Stores, a NJ-based company that has ShopRite and Fresh Grocer locations in the Delaware Valley area. Saladworks is currently in partnership with a number of other ShopRites and other major East Coast grocery chains.
Del Taco Restaurants announced the re-franchising of all 10 Company-owned restaurants in the San Diego, CA market to franchisee group SoCal Food Group. SoCal has also committed to develop up to 21 additional Del Taco restaurants over the next seven years, primarily in the San Diego market. The Company also completed the re-franchising of its Reno, NV market during its fourth quarter, which followed the re-franchising of 13 restaurants in the Los Angeles, CA market during its first quarter. Click here to request a list of future openings.
Walmart’s Flipkart has backed Indian startup Shadowfax in a new $60.0 million financing round. Shadowfax operates an unusually built business-to-business logistics network in more than 300 cities in India. The startup works with neighborhood stores to use their real estate to store inventory, and a large network of freelancers for the delivery. Flipkart, which is one of Shadowfax’s clients, said it will explore ways to strategically work more closely with the startup going forward. Flipkart CEO Kalyan Krishnamurthy said Shadowfax will help the Company “significantly reduce delivery time and provide superior customer experiences across product categories.”
In a further sign that Walmart is rethinking its digital portfolio, Bonobos founder Andy Dunn announced he is leaving the Company. While the split appears amicable, it could be a precursor to the sale of Bonobos as Walmart evaluates the shopping spree it went on a few years ago to acquire digital expertise. Click here to request a list of future openings.
Amazon’s purchase of a stake in online food delivery group Deliveroo has been put in doubt by Britain’s competition regulator, which said the deal raised “serious competition concerns” for consumers and may require an in-depth investigation. Amazon led a $575.0 million fundraising in Deliveroo in May. The deal would allow Amazon to participate in the management of Deliveroo, which has grown rapidly since being founded in 2013. It now has global sales of close to £500.0 million ($642.0 million) and operates in over 100 towns and cities across Britain. After completing a “Phase 1” probe, the Competition and Markets Authority (CMA) said last Wednesday it would proceed to an in-depth investigation if Amazon and Deliveroo failed to offer legally binding proposals that addressed its concerns. The CMA’s initial probe found that the investment, in its current form, could harm competition in two ways. First, the regulator is concerned it could damage competition in online restaurant food delivery by discouraging Amazon from reentering a market it exited last year. Second, the CMA is concerned the deal could damage competition in the emerging market for online convenience grocery delivery, where Amazon and Deliveroo have already established market-leading positions. Responding to the CMA, Deliveroo and Amazon both defended the deal.
In other news, Amazon is retraining a third of its U.S. workforce, spending $700.0 million over roughly six years to help everyone from fulfillment-center workers to software engineers prepare for new types of work.
Amazon plans to open an 111,720 square-foot facility in Jacksonville, FL. The building will be reconfigured into an e-commerce distribution, fulfillment and delivery center.
Amazon Web Services is reportedly scouting several sites in Central Ohio and elsewhere for two new data farms, representing a total investment of $1.60 billion. The two sites would have up to four $200.0 million, 200,000-square-foot centers (per site). Construction would not start until 2025 and would be completed by the end of 2030, according to an application filed with the city of Hilliard.
Amazon has blocked third-party sellers from using FedEx's ground services into the final days of the holiday season. Amazon said third-party sellers, which make up around half of the goods sold on its website, must use the Amazon Prime delivery services or pay for FedEx's more expensive Express service. There are reports that Amazon is unhappy with FedEx's delivery performance; however, the relationship between the two sides has frayed. Earlier this year, Amazon and FedEx ended two major shipping contracts, as Amazon is building up its own delivery network, and FedEx is shifting its focus to competing retailers, including Walmart and Target.
Conn’s has submitted permitting requests to remodel a former Sears space at the Mall of Abilene in Abilene, TX into a Conn’s HomePlus. The $750,000 project involves about 50,000 square feet of space on the first floor of the former Sears location. Conn’s operates 137 locations in 14 states. Earlier this year, it opened a store in a former Sears location at the Sunset Mall in San Angelo, TX.
On December 16, 84 Lumber announced it closed its Baldwinsville, NY location, which was about 13 miles outside of Syracuse and served the Central New York region. The Company maintains a store in East Syracuse, just five miles outside of the city. 84 Lumber operates about 250 locations in 30 states.
On Black Friday, Neiman Marcus opened selling studios inside four of its stores that allow customers to resell items in exchange for store credit, in a move to attract younger and/or less affluent shoppers. The Company had purchased a minority stake in Fashionphile, an e-commerce retailer that sells pre-owned designer handbags and other similar products, in April 2019, with plans to open in-store locations. Three of the selling studios are located in California (Newport Beach, San Francisco and Beverly Hills) and the fourth is in Dallas, TX.
RH announced that Chairman and CEO Gary Friedman sold an aggregate of 500,000 shares of RH common stock from December 9 through December 11, consisting of an option to purchase 100,000 shares, and 400,000 shares of common stock that Mr. Friedman owned outright. The sale was made in order to fund (i) a final payment obligation due under a marital dissolution agreement; (ii) the acquisition and improvement of real estate for a personal residence; and (iii) the repayment of outstanding balances under personal line of credit borrowings. The sale represented approximately 6.9% of Mr. Friedman’s ownership. Following the sale, Mr. Friedman retains ownership of 6.7 million shares, representing 28.1% of RH’s common stock.
In other news, RH opened its newest location in Columbus, OH, a 60,000 square-foot store that includes a glass-enclosed rooftop restaurant and a wine and barista bar opening onto a landscaped park. The Company’s last new unit was a 60,000 square-foot store in Edina, MN that opened in October. Next year, RH expects to open five new galleries and one new guesthouse, and in fiscal 2021 it plans to open at least seven new galleries. RH currently operates 86 locations.
According to published reports, a C$1.90 billion (US$1.40 billion) bid by Hudson’s Bay Chairman Richard Baker and controlling shareholders to take the Company private has fallen short in securing enough shareholder support. The deadline to secure the majority of minority shareholders (Baker’s consortium controls 57%) was December 13. However, shareholders can change their minds before the special meeting, which was scheduled for yesterday (December 17) but subsequently postponed. A new date for the meeting is to be determined. Activist investor The Catalyst Capital Group (which had offered C$11 per share to buy the Company and was rejected despite it being higher than the C$10.30 bid from the controlling shareholders) petitioned the Ontario Securities Commission for a cease trade order related to the proposed take-private deal, but the Commission ruled that the vote should proceed as scheduled. The OSC also ordered Hudson’s Bay to revise the disclosures it made to its shareholders on how the deal was put together. It is unclear at this point what the Company’s next steps will be if shareholders vote as expected and reject the deal.
Yesterday, Regis Corporation announced it took another step toward selling/converting Company-owned salons to franchisees. Regis sold 133 Company-owned salons in Pennsylvania to franchisee Alline Salon Group fka Super C Group. The 133 salons operate under several banners, including Holiday Hair, Famous Hair, Best Cuts, CityLooks, Style America, and BoRics Hair Care. As part of the deal, 105 salons will remain under the Holiday Hair banner, while the balance will be converted to the Cost Cutters brand. The transition and conversion began earlier this month and will continue into early 2020. As background, last year Alline Salon Group purchased and converted 66 stores in Michigan to the Supercuts banner, and earlier this year purchased and converted 190 salons in Ohio to Cost Cutters and Supercuts, making Alline the largest Supercuts and Cost Cutters franchisee for Regis. With the latest sale, Alline will now be the Company’s largest franchisee and the sole franchisee of Holiday Hair. Management at Regis indicated that the Company has a pipeline of 970 salons that are in various stages of negotiation to be transitioned to franchisees, or about 50% of its remaining Company-owned salons when taking into account the expected closures of about 380 underperforming locations.
With the closure of its acquisition by Franchise Group, Inc., Vitamin Shoppe is officially off of the public markets. This will allow the Company to evolve its products and customer experience without the pressure of public market investors, with the aid of a larger, better-funded parent. The Franchise Group already owns other retailers, including Buddy's Home Furnishings, so may be able to apply those learnings, including supply chain, logistics, operations and marketing, among others, to this concept. There could also be cost savings on the back-end if the two retailers are able to share systems and technology.
On December 16, U.K.-based movie theater operator Cineworld Group, plc signed a definitive agreement to acquire Cineplex. The transaction is valued at approximately C$2.80 billion, and Cineworld will acquire all of the issued and outstanding shares of Cineplex for C$34 per share in cash, representing a 39% premium over the 30-day average share price. The deal is subject to shareholder approval, and is expected to close during the first half of 2020. The Company’s stock opened approximately 41.5% above the last closing price on the news. Cineworld will be funding the acquisition through committed debt facilities, including a US$1.90 billion Senior Secured Term Loan facility and a US$0.30 billion Senior Unsecured Term Loan facility. Bank of America, HSBC Bank plc and Goldman Sachs Bank USA have committed to make the debt facilities available on or around completion of the deal.
Costco reported first quarter sales growth of 5.6% to $37.04 billion. Comps, excluding gas and foreign exchange, rose 5%, consisting of growth of 5% in the U.S., 5.1% in Canada, and 4.5% in other international. E-commerce sales increased 5.7%. Total and comp sales were negatively impacted by 0.5% due to Thanksgiving occurring a week later this year. E-commerce sales were negatively impacted by an estimated 12%. Net income was up 10% to $844.0 million, including a $77.0 million tax benefit related to stock-based compensation.
Ollie’s reported third quarter sales growth of 15.3% to $327.0 million, driven by strong new store performance from the 42 stores opened in fiscal 2019, including 14 former Toys R Us locations. Comps fell 1.4%, following a 4.6% increase in the same period last year. Operating income increased 22.0% to $35.7 million, and net income rose 8.6% to $27.0 million.
The Company is reaffirmed its full-year guidance of $1.42 billion – $1.43 billion; a comp decrease of 0.5% – 1.5%; operating income of $174.0 million – $178.0 million; adjusted net income of $130.0 million – $133.0 million; and capex of $75.0 million – $80.0 million.
In other news, Ollie’s Bargain Outlet named John Swygert as president, CEO and member of its board. Mr. Swygert has been interim president and CEO since December 2, following the unexpected passing of the Company’s founder, Mark Butler. Mr. Swygert had been EVP and COO since January 2018.
American Eagle Outfitters reported third quarter sales increased 6.2% to $1.07 billion, following an 8% increase last year, and consolidated comps were up 5%. By brand, American Eagle comps increased 2%, following a 5% increase last year, and Aerie comps increased 20%, building on a 32% increase last year and marking the 20th consecutive quarter of double-digit sales growth.
Gross margin declined 160 basis points to 38.2%. SG&A margin improved 50 basis points to 24.3%. Operating income declined 5.1% to $103.1 million, and operating margin was down 110 basis points to 9.7%. During the quarter, the Company opened six American Eagle stores, ending with 945 American Eagle stores, including 170 Aerie side-by-side locations. Additionally, the Company opened 12 Aerie standalone stores and closed one underperforming location, ending with 142 Aerie standalone units. Internationally, the Company operates 241 licensed stores, up from 223 last year. Click here to request a list of future openings.
The Children’s Place reported third quarter sales inched up 0.4% to $524.8 million, and comps were up 0.8%. Gross margin fell 130 basis points to 37.8%, primarily due to increased penetration of its e-commerce business, which operates at a lower gross margin. SG&A margin improved 110 basis points to 22.2% due to reduced expenses associated with the Company’s transformation initiatives and lower incentive compensation. Operating income fell 10.3% to $58.0 million, and operating margin fell 40 basis points to 12.1%. The Company opened six new stores and closed 12 underperforming locations, ending with 955 stores, down 3.2% over the prior year. Since the Company began its store fleet optimization in 2013, it has closed 238 stores.
Tailored Brands reported third quarter sales decreased 3% to $729.5 million, and comps were down 2.2%. Comps fell 2.8% at Men’s Wearhouse (60% of total sales), 1.5% at K&G (10% of total sales), and 5.5% at Moores (7% of total sales), but rose 0.5% at Jos. A. Bank (23% of total sales). Gross margin decreased 380 basis points to 42.2%, primarily due to increased promotional activities, as well as deleveraging of occupancy costs. SG&A margin eroded 40 basis points to 30.5% due to the lower sales. As a result, operating income fell 39.5% to $45.5 million. CEO Dinesh Lathi commented, “Our third quarter performance reflects continued progress in each of our transformational strategies, including improved sales in our polished casual categories, higher online sales driven by enhanced e-commerce experiences and online marketing, and new customer acquisition and increased traffic reflecting more effective marketing campaigns and channel strategies.” The Company ended the quarter with 1,451 stores in operation, down from 1,469 stores last year.
According to reports, Tailored Brands is considering the sale of Joseph Abboud (J.A.). The news comes as the Company has faced ongoing activist pressure from Michael Burry of Scion Asset Management, which upped its share ownership in Tailored Brands to 6.4% as of December 16. Mr. Burry and Scion Asset Management have recommended sale and leaseback transactions to generate cash as a means to repurchase shares and pay down debt.
In other news, the Company named Carrie Ask, currently brand president of Men’s Wearhouse and Moores, to the new role of chief customer officer, with responsibility for Men’s Wearhouse, Jos. A. Bank, and Moores brands. In line with the new position, the Company said it has eliminated the brand president positions for these brands. Mary Beth Blake, brand president of Jos. A. Bank, is resigning.
Coborn’s sales were estimated to have increased in the low single digits in fiscal 2018 to approximately $1.42 billion. During the year, the Company opened three Cash Wise stores and closed a Save-A-Lot and a Coborn’s. The Company also finished the year by acquiring eight Hornbacher’s locations in Fargo, ND from its primary supplier, UNFI, and boosted its share in the market to about 60%.