Party City
Earlier today, Party City announced it has entered into an agreement to acquire the MG Novelty Corporation for approximately $5.5 million. The deal includes seven retail stores under the Party Galaxy banner in the Oklahoma City, OK metro area. MG Novelty Corporation reported total annual sales of approximately $9.0 million in 2016. As seen in Party City's store concentration map below, the acquisition provides the Company with the opportunity to enter the new market of Oklahoma City.
Target
Target announced it has agreed to acquire Shipt, Inc., a leading online same-day delivery platform, for $550.0 million. The acquisition will significantly accelerate the Company’s ability to bring same-day delivery service to approximately half of Target stores by early 2018, and all major markets before the 2018 holiday season.
Kroger
To combat the increasingly disruptive threat of e-commerce from Amazon, meal kit operators, and other traditional grocers, Kroger has been ramping up its investments in digital and online growth. The Company recently launched ClickList online ordering and curbside pickup at its 1,000th location, in Milford, OH.
Alimentation Couche-Tard
Alimentation Couche-Tard closed its private offering of US$600.0 million of 2.350% Senior Unsecured Notes due 2019 and US$300.0 million of Floating Rate Senior Unsecured Notes due 2019. Proceeds will be used for repayment of certain amounts outstanding under its senior credit facilities.
In other news, the Company announced yesterday that it has obtained clearance from the FTC to acquire Holiday Stationstores, and certain affiliated companies. Closing is expected to occur on December 22, 2017. Holiday's main assets consist of 522 company-operated and franchised locations in 10 U.S. states, two food commissaries, and a fuel terminal.
The Sports Zone, Inc., DIP
The Sports Zone, Inc., DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of Maryland. The case was assigned to the Honorable Thomas J. Catliota, under case number 17-26758. The petition estimates assets of $500,000 to $1.0 million and liabilities of $1.0 million to $10.0 million. The Company operates 11 retail stores in Washington D.C., and the Maryland and Virginia suburbs, selling footwear, clothing and accessories.
Sports Direct International
Sports Direct International announced that sales for the 26 weeks ended October 29 increased 4.7% to £1.71 billion, EBITDA increased 7.4% to £156.1 million, and free cash flow was up 16.5% to £150.9 million. Net debt increased to £471.7 million, from £182.1 million at the same time last year. Commenting on developments, CEO Mike Ashley said, “Our high-street elevation strategy is currently delivering spectacular trading performance within our flagship stores. We intend to open between 10 and 20 new flagship stores next year. Whilst our reported profit before tax has been impacted by fair value adjustments and transitional factors such as the disposal of assets in FY17, our underlying profit before tax remains healthy. We will continue to invest for the long-term and our net debt has increased in line with management expectations. We continue to anticipate that growth in underlying EBITDA during FY18 will be within our forecast range of 5% to 15%.” The Company also provided results for its U.S. Retail Group, which includes the 21 Bob’s Stores and 27 Eastern Mountain Sports units acquired out of bankruptcy from Eastern Outfitters, DIP. Sales for the period from May 18, the acquisition date, through October 29 were £63.9 million, and EBITDA was negative £5.5 million, for an EBITDA margin of negative 8.6%.
Petsmart
PetSmart opened 28 new stores in the U.S. and Canada during its third quarter ended November 1, 2017. This is in addition to the 35 new stores opened in the first half of the year, bringing the year-to-date total to 63. Store growth has been fairly aggressive over the past few years with 40 new stores opened during fiscal 2015 and 73 in fiscal 2016.
Meijer/Hy-Vee
Meijer has partnered with Wahlburgers to add burger locations to an unspecified number of Meijer stores. Wahlburgers will begin developing new restaurant locations in existing and future Meijer sites. The first Meijer/Wahlburgers sites will roll out in Michigan and Ohio. In addition, Wahlburgers will be bringing their food trucks to select Meijer locations.
The agreement follows Hy-Vee’s partnership with the burger chain to build, own and operate 26 Wahlburgers restaurants. The Company also serves Wahlburgers’ hamburgers at its full-service Market Grille restaurants. Hy-Vee will open its first 5,500 square-foot Wahlburgers restaurant in the Mall of America in Bloomington, MN in summer 2018. Wahlburgers currently operates 17 restaurants in nine states and Canada.
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Charlotte Russe
On Friday, Charlotte Russe announced that it entered into a restructuring support agreement with holders of over 98% of its Term Loan debt, which will reduce Term Loan debt from approximately $214.0 million to $90.0 million. In exchange, the Term Lenders will receive 100% of the equity of Charlotte Russe, subject to dilution from a new proposed management equity incentive plan. Consummation of this transaction remains subject to several conditions, most notably that the Company obtain a threshold amount of annualized operational savings, including rent relief, and the commitment of all holders of the Term Loan debt to participate in the proposed out-of-court restructuring. Charlotte Russe does not anticipate any impact or interruption to the business as a result of this transaction, which it expects to complete in early 2018. The Company’s recent comp performance has been outclassing much of the apparel sector, but its operating performance has been hampered by its heavy debt load. Charlotte Russe currently operates approximately 562 stores but has halted expansion and has been closing underperforming stores.
Smart & Final
A new 32,000-square-foot Smart & Final Extra! opened last week in Torrance, CA in a former Ralphs supermarket. Management trimmed new store openings in 2017 to 18, compared to 39 in 2016, and announced a “more modest” capital plan in 2018.
Sobey's
Sobey’s reported second quarter sales growth of 1.6% to C$6.03 billion. Comps rose 0.6%, driven by traffic, basket size and pricing strategies. Food inflation was positive, contributing to the increase in sales. The Company reported an operating loss of $11.7 million, compared to operating income of $53.3 million last year. EBITDA fell 39.8% to $113.0 million, mainly as a result of an increase in selling and administrative expenses, one-time costs of $129.2 million related to Project Sunrise, and increases in incentive compensation accruals due to improving performance. These increases were partially offset by benefits related to Project Sunrise and other cost efficiencies. The Company posted a net loss of C$31.9 million, compared to net income of C$19.1. The Company announced that it will move forward with plans to convert up to 25% of its 255 Safeway and Sobeys full service format stores in Western Canada to its discount FreshCo banner over the next five years.
IKEA
IKEA is building a 289,000 square-foot store in Live Oak, TX. The Company will break ground in spring 2018, with an opening planned for summer 2019.
Jack in the Box
Earlier today Jack in the Box announced it entered into a definitive agreement to sell Qdoba Restaurant Corporation subsidiary, which operates and franchises more than 700 Qdoba Mexican Eats restaurants, to certain funds managed by affiliates of Apollo Global Management, LLC. The Apollo funds will purchase Qdoba for approximately $305.0 million in cash. The transaction is expected to close by April 2018. The Company expects to use proceeds from the sale to retire outstanding debt under its term loan, as required by the terms of its credit facility.
Darden Restaurants
Darden’s second quarter sales increased 14.6% to $1.88 billion, including 11.5% growth from the addition of 153 Cheddar's Scratch Kitchen restaurants and 28 other net new restaurants. Blended same-restaurant sales from Darden's legacy brands increased 3.1%, consisting of 3% growth at Olive Garden, 3.8% at both The Capital Grille and LongHorn Steakhouse, 6.8% at Eddie V’s, 2% at Yard House, 2.5% at Bahama Breeze, and a 0.5% decline at Seasons 52. Same-restaurant sales for Cheddar's Scratch Kitchen were down 2.0%. Net income increased 6.5% to $84.7 million.
Darden increased its fiscal 2018 guidance and now expects same-restaurant sales growth of 2%, compared to previous guidance of 1% – 2%; total sales growth of 13%, compared to 11.5% – 13%; EPS of $4.45 – $4.53, compared to $4.38 – $4.50; and 40 new restaurant openings, compared to 35 – 40 previously.
Pier 1 Imports
Pier 1 Imports’ third quarter sales decreased 1.4% to $469.2 million, as comparable sales declined 0.7%, reflecting an estimated impact of approximately 100 basis points related to the hurricanes in Texas and Florida. E-commerce represented about 26% of net sales, compared to 20% in the prior-year period. Operating income fell more than a third to $13.4 million. President and CEO Alasdair James commented, “Our third quarter financial performance was impacted by the hurricanes in Texas and Florida, as well as deeper than expected promotional activity in October and November. We saw improved sales in November, including a solid Black Friday weekend, driven by our strong promotional message. However, overall trends dropped considerably during the first two weeks of December. We have adjusted our promotional plans for the remainder of the holiday season, and significantly revised our financial guidance to reflect the current tone and volatility of business. We recently completed a rigorous strategic review…. We are building a three-year strategic plan to transform the business, and are beginning to set things in motion with initiatives, testing and select organizational changes in the key areas of sourcing, supply chain, real estate, marketing and promotional effectiveness. We look forward to sharing our detailed blueprint in early 2018.” Looking ahead to the fourth quarter, the Company expects sales growth of 1% to 3% and comps of -3.5% to -1.5%. For fiscal 2018, Pier 1 is anticipating approximately flat sales and comps of -1% to flat.
Lewis Drug
Lewis Drug opened a new, 25,000 square-foot store in Kansas City, KS last week. It replaces a location just a few blocks away, which will close later today. The Company also announced in September plans for a new downtown Sioux Falls, SD location.
Costco
Costco reported first quarter sales growth of 13.2% to $31.81 billion. One less sales day during 1Q18 was partially offset by pre-Thanksgiving and Black Friday/Holiday weekend sales falling in 1Q18 compared to 2Q17, producing an estimated net benefit of 1.5% in the U.S. Comps, excluding gas and the effect of foreign exchange, rose 7.9%. e-Commerce comps increased 42.1%. The Company recently launched two new vehicles for grocery e-commerce including Costco Grocery, which offers delivery of about 500 dry grocery and other consumable items within two days, and an expanded partnership with Instacart for same-day delivery for perishable items. Net income increased 17.4% to $640.0 million, impacted by a $41.0 million tax benefit. The Company added a net of 23 new warehouse clubs over the past year, bringing its store count to 746.
Amazon
Amazon is expanding its same-day delivery and one-day shipping service to thousands of additional markets across the U.S., just in time for last-minute holiday shopping. The market expansion brings the services to large cities and smaller towns in states including Arizona, California, Florida, Illinois, Indiana, Maryland, Minnesota, Nevada, New York, Oklahoma, Texas, Virginia, Washington and Wisconsin. Previously the services were available in 5,000 cities and towns and now will be accessible in more than 8,000.
French economy minister Bruno Le Maire has launched a lawsuit against Amazon for imposing unfair commercial relationships to suppliers in the country. The legal action follows an investigation from the DGCCRF, the French body in charge of fraud control. The DGCCRF said in a statement yesterday that Le Maire is seeking a fine of €10.0 million euros (US$11.8 million). Investigators from the DGCCRF established that Amazon imposed a series of abusive clauses to its commercial partners in France, including the possibility to change or terminate contracts unilaterally. The DGCCRF says the French government wants "to better regulate the activity of large digital platforms and to ensure greater transparency, balance and loyalty in their relations with companies."
In other news, Italy's tax authority said on Friday it had reached an agreement with Amazon to settle outstanding tax claims covering the period 2011-2015. Amazon will pay €100.0 million (£88.4 million) to resolve the dispute. In April, Amazon was reportedly accused of evading €120.0 million – €130.0 million in taxes in Italy
According to a report by market research firm Euromonitor International, Amazon likely doubled its sales to become the biggest internet retailer in Mexico this year, helping to grow the country's e-commerce market by a third. Amazon will generate $502.2 million in Mexico sales this year compared with $243.9 million last year. Online sales still account for slightly over 3%, compared to nearly 12% in the U.S. Euromonitor forecasts the Mexican online market would be worth $7.10 billion next year, rising to $14.00 billion by 2022.
According to the head of Amazon Germany, Ralf Kleber, Amazon plans to open brick-and-mortar stores in the country, although no launch date was disclosed. Mr. Kleber said that Amazon’s stores in Germany could start out on a small scale, in the same way that Amazon Fresh, its online grocery service, was first tested for six years in Seattle before gradually expanding to other cities.
Ruth's Chris Steak House
Ruth's Hospitality Group completed the acquisition of six Hawaii Ruth's Chris Steak House locations from long-time franchise partner Desert Island Restaurants, for $35.0 million.
