December 21, 2022
Stater Bros.' momentum continued in FY22 with estimated sales increasing nearly 10% as the Company benefited from elevated at-home eating, high single-digit grocery inflation, and two new store openings. To differentiate itself from the competition, Stater Bros. continues to remodel its store base and has also introduced a newly modernized brand which focuses on personalized service, affordable fresh food, and family meals. The newest remodeled and smaller-format stores now include wider aisles while maintaining some of the on-trend perimeter staples such as bakery, sushi, meat, and seafood departments. The Company is also working on improving and extending its omnichannel reach, which heretofore it has trailed the competition. Though the Company is performing well, its geographic market, Southern California, remains one of the most competitive grocery areas in the country. Since entering Southern California in 2016, Aldi now has 92 stores in the area with 61 stores within five miles of Stater Bros (as shown in the map below).
Quiznos, the QSR sandwich chain, signed a new multi-unit development agreement with franchisee Sam Patel to open 10 new restaurants across Northern Georgia. The new locations will be a mix of stand-alone drive-thru units and non-traditional locations built inside renewed fuel stations Patel owns along Interstate 75. The agreement follows a schedule of two units built per year for the next five years in Adairsville, Calhoun, Dalton, Resaca, Ringgold and Chatsworth. Under this agreement, the first location is scheduled to open in early 2023. The Denver, CO-based Quiznos currently has 274 stores across the U.S.
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Three years after construction began on a new Austin, TX grocery store, H-E-B is now ready to open the two-story site in February 2023. The pandemic delayed the completion of the 97,000 square-foot location that marks the Company’s first expansion into Central Texas. The new store will feature a True Texas BBQ restaurant and will include a full bar and indoor and outdoor seating. It will also have a South Flo Pizza restaurant and a coffee shop that will serve house-made breakfast tacos. Curbside and home delivery services will be available. San Antonio-based H-E-B is planning to add more Central Texas locations, including a new 121,000 square-foot store in Georgetown, and a flagship store in Southwest Austin. In November, the grocer also opened three stores on the same day, one in Plano and two in the Houston area.
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Reitmans (Canada) Limited reported 3Q23 sales increased 15.4% to C$205.6 million, due to comp growth of 16.5% from both higher in-store and online traffic and larger baskets. The Company’s e-commerce sales represented 26% of total sales. Despite higher discounts and promotional activity, gross margin improved 20 bps to 57.1% on higher overall transaction values and lower air freight costs as global shipping industry disruptions began to stabilize in 3Q22. However, higher operating costs, reduced Federal subsidies, and lower restructuring recoveries led to a 24.4% decline in adjusted EBITDA to C$18 million. The Company had nine fewer stores, and ended the quarter with 404 stores, consisting of 235 Reitmans, 91 Penningtons, and 78 RW&CO.
Inditex reported sales for the nine months ended October 31, 2022 of €23.10 billion, up 19% from the prior-year period on positive sales across all geographical areas on higher traffic. In addition, online sales were above record figures of YTD21. EBITDA increased 20% to €6.50 billion. Subsequent to quarter end, store and online sales between November 1 and December 8 increased 12%.
The Company’s store count declined by 350 units over the past year, ending with 6,307 units. See the chart below for a breakdown of the Company’s store count by banner compared to the prior-year period.
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P.F. Chang's opened a New York City flagship restaurant marking the brand's first full-service location in Manhattan. The 7,300 square-foot space spanning three stories is the Company’s fourth flagship restaurant; the other flagships are in Honolulu, HI, Las Vegas, NV, and Atlantic City, NJ. The banner already operates two of its fast-casual concept stores, P.F. Chang's To Go, in Manhattan.
All P.F. Chang's existing locations are scheduled for renovations, including new music, lighting, décor, uniforms, and menu presentation. Additionally, the Company is continuing to expand the number of P.F. Chang's To Go units, with 19 locations across Texas, Florida, Colorado, Illinois, Washington, D.C., and other locations.
Albertsons announced that the State of Washington Supreme Court continued the temporary restraining order against its previously announced $6.85 per share Special Dividend while the Court considers the state’s appeal. The Company has filed a motion to expedite the Court’s review.
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Food City, a banner of K-VA-T Food Stores, Inc., opened a 54,000 square-foot store in Alcoa, TN to replace an existing outdated location. The new grocery features an in-store bakery and deli, hot food bar, salad bar, hickory wood smoker, stone hearth pizza oven and fresh sushi and includes a floral boutique, pharmacy, Starbucks café, and an off-site Food City Gas N’ Go. Last month, the Company broke ground on a 53,300+ square-foot supermarket in downtown Chattanooga, TN expected to open in late Summer 2023. For more scheduled openings, see our Retail Openings & Closings map below.
On Monday, Inspire Brands announced the sale of the fast casual restaurant chain Rusty Taco to the private equity firm Gala Capital Partners, details were not disclosed. Inspire acquired Rusty Taco in 2018 as part of its acquisition of Buffalo Wild Wings and has since grown the concept to over 30 locations at present. In addition to BWW, Inspire owns several other major restaurant companies, including Dunkin’, Sonic, Arby’s, and Jimmy John’s. Gala operates restaurants as a franchisee of Del Taco, Jack in the Box, Applebee’s, and Famous Dave’s, and owns Cici’s Pizza, Dunn Brothers Coffee, among other investments.
Darden’s 2Q23 sales increased 9.4% to $2.49 billion, driven by a comp increase of 7.3% and the addition of a net 35 new locations. By banner, comps were up 7.6% at Olive Garden, 7.3% at LongHorn, 5.9% at Fine Dining, and 7.1% at Other Business. The Company indicated that TTM sales for the 52-week period ended December 9 reached $10 billion for the first time in company history. However, due to higher food and beverage costs and restaurant labor costs, operating income declined 4% to $233 million. Looking ahead, the Company updated its FY23 outlook, raising its sales, comp, and capex guidance, and narrowing on the high end its EPS outlook.
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Buoyed by industry tailwinds, Pet Supermarket generated strong results in 2021. Sales are estimated to be up low double digits to $615 million as consumers continued to spend on their pets following multiple years of increased pet ownership. Though the Company continues to make significant investments to grow its e-commerce business, margins and profitability also likely improved, in line with industry trends, leading to improved cash flows. This period of positive performance followed a very active year strategically for the Company, during which time it was separated from its sister company Pet Valu. Meanwhile, major competitor Pet Supplies Plus currently has 640 stores in 40 states, and it plans to open 20 more locations over the next five years. Looking forward, we expect Pet Supermarket’s performance to moderate though remain positive as inflation softens consumer spending. See the chart below for a comparison of the Company’s store openings/closings compared to two competitors over the last few years.
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According to reports, West Marine has been experiencing operational, leverage and liquidity challenges. This occurred against a background of supply chain shortages, increased costs, inflationary pressure, and high fuel prices this past summer, as well as a late start to the boating season due to poor weather, which negatively impacted demand for the Company's products. EBITDA declined over 40% YOY during the peak seasonal periods (2Q22 and 3Q22). The operational downturn, combined with significant debt, which funded the 2021 LBO by private equity sponsor Catterton Partners, has resulted in significant leverage. The Company reportedly burned over $50 million in cash during the TTM period ended October 1, 2022, and had only $15 million of remaining borrowing availability under the $125 million ABL Facility, as of that date. To support liquidity, Catterton provided a $75.5 million incremental first lien term loan, of which West Marine has borrowed $55 million. Commitments under the incremental term loan can be increased to $120 million. The yield of 26% on the Second Lien Notes, due 6/1/29 implies concern on the part of investors. Moody's Investors Service downgraded the Company's rating two notches to Caa2 (eight notches below investment grade) from B3. The Company is a specialty marine aftermarket retailer which currently operates 237 stores across the U.S. and Puerto Rico. The average West Marine location is approximately 15,000 square feet. The largest concentration of stores is in Florida and California which comprise 23% and 10%, respectively, of the store base.
LL Flooring provided a business update, noting plans to slow new store openings. The Company recently opened two new stores in Bellingham, WA and Joplin, MO, bringing total new store openings to 18 in 2022. However, in 2023, LL Flooring plans to open just three or four new stores, and it will continue to evaluate new openings based on the operating environment. The Company operates 442 stores nationwide. This is a change of course from FYE21, when LL Flooring announced plans to open 100 new stores by the end of FY24, representing store growth of about 7% per year. At that time, the Company was expecting to open 20 – 25 new stores during 2022, followed by an average of 37 stores per year in FY23 and FY24. However, about halfway through the year the Company became more cautious on its outlook due to consumer spending headwinds related to inflation.
Publix announced plans for a fourth store in Kentucky slated to open in 2Q24. The 48,387 square-foot location will be in Louisville and will include a Publix Pharmacy and an adjacent Publix Liquors. Earlier this year, the Company revealed that it was expanding to the Bluegrass state with two stores in Louisville and a third in Lexington. Publix has been opening new locations at a fast pace. Just this month eight stores have debuted in Naples, Orlando, Rockledge, and Saint Augustine, FL; Lebanon and Gallatin, TN; and McDonough and Statesboro, GA.
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Savi Provisions, an Atlanta-based neighborhood market with 15 stores supplying locally sourced gourmet and organic foods, fine wines, and spirits, opened a new location at Crabapple Market in Milton, GA, about 30 miles north of Atlanta. The 3,600 square-foot store offers a catering menu as well as an in-store café serving gourmet sandwiches, omelets, and burritos. According to Nielsen, Savi is supplied by H.T. Hackney.
Guthrie’s, an Auburn, AL-based chain that calls itself America’s Original Chicken Finger Restaurant, announced that it’s expanding nationwide with up to 100 new units. Through a 50-unit area developer agreement and an option for another 50 restaurants, Stephen Galbraith and Matt Dahlhauser of Dahlhauser Galbraith Operating Companies, LLC, are planning to expand Guthrie’s west into Nevada, Idaho, Arizona, New Mexico, and Colorado. Galbraith and Dahlhauser already own five existing Guthrie’s restaurants in Alabama and Georgia. The Company currently has 46 locations in Alabama, Arkansas, Florida, Georgia, Kentucky. Mississippi, and Ohio.
On December 19, Designer Brands acquired Topo Athletic, a premium athletic and outdoor footwear brand; details were not disclosed. Topo's founder and CEO, Tony Post, will remain in that role, reporting to Bill Jordan, president of Designer Brands. Topo joins Designer Brands' other Owned Brands, which include Hush Puppies, Lucky Brand, Crown Vintage, Jessica Simpson, Vince Camuto, Le Tigre and several others.
During 3Q22, sales of Owned Brand products increased 25% and accounted for 27% of Designer Brands' total sales. This was up from 23% in 2Q22 and 22% in 3Q21. Management plans to increase that share to 33% of total sales by FY26.
Nordstrom announced plans to open a 23,000 square-foot Nordstrom Rack in Pinole, CA in Fall 2023. This store will bring Nordstrom’s store count in California to 60 Rack stores, 23 full-line locations, five Locals, and one asos I Nordstrom.
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Last week, Sears Hometown, DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for Delaware. The Debtors plan to liquidate after a dispute with Transform Holdco LLC (formerly Sears Holdings Corporation), upon which they relied for inventory and financing as part of a longstanding relationship which started in 2016. Transform Holdco declined to provide further inventory to the Debtors after they ran low on cash and breached certain debt covenants. The Debtors separated from Sears Holdings Corporation in October 2012. The Debtors filed a motion to reject six unexpired leases. Sears Hometown sells home appliances, hardware, tools, and lawn and garden equipment. As of the Petition Date, the Debtors and their independent dealers operated 121 stores across 26 states and in Puerto Rico.
Kroger is adding more fast-casual restaurants as store-in-store outlets in its supermarkets. The Company has added two new Saladworks locations in the Columbus, OH area and is ready to launch a second Zalat Pizza outlet in the Houston market. Saladworks first debuted in Kroger-operated stores in November 2020; since then it has expanded to other Kroger locations. Zalat Pizza operates 18 independent locations throughout the Dallas-Fort Worth area and seven in the Houston region; its new in-store restaurant is opening two months after the first restaurant launched at Kroger’s Cypress, TX store in October.
Whole Foods is set to open its 18th New York City grocery store with a 42,000 square-foot location in the One Wall Street building in Manhattan’s downtown financial district. The store will house a prepared-foods section with a “food hall feel” and offer more than 1,000 local items from the metro area. Whole Foods, a subsidiary of Amazon, opened 11 stores in 2022, most recently in Culver City, CA, Grand Rapids, MI, and Pittsburgh, PA.
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The fast-casual healthy food chain sweetgreen has entered its fifth new market of the year with its first restaurant in Tampa, FL. The 2,860 square-foot location offers core and seasonal salads, warm bowls and sides and features indoor and outdoor seating. Two additional Tampa locations are scheduled to open in 2023. Last month, the Company reaffirmed its outlook of opening at least 35 net new restaurants in FY22.
Wakefern Food’s ShopRite banner opened a location in Huntington, NY. The 65,000 square-foot store is owned and operated by the Greenfield family, who operate five other ShopRites on New York’s Long Island. The family’s newest store offers a kosher bakery, a prepared food department, an in-store Nuts Factory, and a large selection of fresh produce and organic, gluten-free, and local products. Wakefern is the country’s largest retailer-owned cooperative and includes more than 300 ShopRite supermarkets in New Jersey, New York, Pennsylvania, Connecticut, Delaware, and Maryland.
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T&T Supermarket, a banner of Loblaw, opened a 70,000 square-foot store in Montreal, in the borough of Saint-Laurent. This is the chain’s first in Quebec and the largest in Canada. The store offers more than 20,000 products, including a wide variety of fresh produce, premium fruits and gifts, live seafood, and trendy snacks; fresh food and products prepared and cooked in-store or sourced from across Asia; a variety of imported beers and wines from Asia; and 400 private label products. T&T now operates 30 stores, with other locations in British Columbia (13), Ontario (10), and Alberta (six).
Nick the Greek, an up and coming fast casual restaurant franchisor, has sold a controlling interest to the largest franchisee of Jack in the Box restaurants, Anil Yadav's YTG Enterprises LLC. Nick the Greek will continue to be run by its founding management team, who retain a substantial minority stake in the business. The Company currently has 48 units throughout California, Nevada, Kansas, Utah, and Texas, and approximately 70 additional units in development. YTG Enterprises operates nearly 600 restaurants nationwide, across both company-owned and franchised brands, including Taco Cabana, Denny's, and TGI Fridays, as well as Jack in the Box.
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