February 20, 2020
On February 17, Pier 1 Imports, Inc. filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court in the Eastern District of Virginia. The proceedings have been designated as case #20-30805. The Debtors have entered into a Plan Support Agreement with a majority of their term loan lenders. The Debtors stated they plan to simultaneously pursue a sale of all or substantially all of their assets, either as a going-concern or as a liquidation, while potentially pursuing a standalone going concern reorganization. The Company intends to use this process to complete the previously announced closure of up to 450 store locations, which includes the closure of all its stores in Canada. Click here for a list of 398 closing stores identified to date.Pier 1 is also in the process of closing two distribution centers to reflect its revised store footprint.
The Court has authorized the Company to use cash collateral and continue operating its cash management system. It also established bidding procedures and confirmed the administrative expense priority of outstanding orders. The Court approved access to up to $256.2 million in DIP financing, including a $200.0 million revolver, a $15.0 million FILO term loan, and a $41.2 million asset-based term loan. Bank of America will be the administrative agent under the revolver and FILO term loan, and Pathlight Capital will be administrative agent under the ABL term loan. Outstanding prepetition bank loans will be rolled up into the respective DIP facility obligations.
On February 18, Bed Bath & Beyond announced an agreement to sell PersonalizationMall.com to 1-800-FLOWERS.com for $252.0 million. PersonalizationMall.com (PMall.com) will still provide personalized product and services to Bed Bath & Beyond, but now 1-800-FLOWERS.com can expand partnerships with other retailers and incorporate the offering to complement its core business. Bed Bath & Beyond will continue to pursue any additional asset sales, together with outside advisors, to support its transformation efforts. The Company purchased PMall.com for $190.0 million in cash in 2016, with the intention to offer personalization for customers and potentially scale its e-commerce opportunity.
Bed Bath & Beyond announced its updated capital allocation plan for fiscal 2020, which includes up to $1.00 billion in spending balanced across share buybacks and dividends, debt reduction, and business reinvestment. About $350.0 million – $400.0 million of the anticipated spend will be allocated to capital expenditures, including store refreshes, adding Buy Online Pick-up In Store options in all locations, and increased spending on IT and supply chain. The Company’s broader goals are to declutter the store, reduce inventory levels, and improve the customer shopping experience online and in-store. Click here to request a list of future openings and closings.
Lidl launched in the U.S. in June 2017, opening 20 stores in Virginia, North Carolina, and South Carolina. With plans to have 100 stores within the first year and a half, the Company has now just about reached that goal, one year beyond the initial timeframe. Lidl is taking its time with the Best Market conversions and its New York entry, which will be a multiyear processes. The large New York metro market offers significant opportunity, as it has not seen much innovation or investment from its major grocers; A&P went through two bankruptcies and liquidated, Pathmark was acquired by A&P before its own failure, King Kullen has been shrinking and is being sold to Stop & Shop, and Best Market, which grew through the acquisition of previously failed operators, has now been bought by Lidl. According to our Retail Openings & Closings tool, upcoming openings (in addition to New Jersey and the Best Market conversions) will focus on Georgia, where the new distribution center will be built, Maryland, Pennsylvania, Virginia, and Texas. Lidl will open two new stores in New Jersey on February 26 in Howell and Cherry Hill. Click here to request a list of future openings.
Costco will close a 155,000 square-foot store in Phoenix, AZ later this year. The Company did not renew its lease, and no reason for the closure was provided. It is one of six Costco stores in Phoenix. Click here to request a list of future openings and closings.
U.K. retailer Wren Kitchens will make its U.S. debut this summer in Milford, CT, on the site of a former Babies “R” Us. Several more openings are planned throughout the year in the Northeast. The 31,000 square-foot store will feature more than 100 kitchen displays and will include the use of 3D virtual reality, kitchen design tools, and an array of remodel options. Wren Kitchens will also open its first U.S. manufacturing facility this spring, a 252,000 square-foot facility in Hanover Industrial States, in Northeast Pennsylvania, with future plans to develop its headquarters in the state. Founded in 2009, Wren Kitchens is a family-owned business operating 90 locations across the U.K. It manufactures all kitchens in its own factories, then delivers them fully built, with doors, drawers, and wirework pre-installed.
Big Y Foods has partnered with Takeoff Technologies to build an automated micro-fulfillment center (MFC) to support its online grocery business. The facility, which will fill delivery orders, will be next to the Big Y grocery store in Chicopee, MA. Though construction has not started yet and no opening date has been announced, the Takeoff MFC is expected to go into operation in about six months. Built into existing stores or as a standalone facility, Takeoff’s MFCs typically are 10,000 to 14,000 square feet and accommodate up to 30,000 items. Big Y Foods operates 69 Big Y supermarkets, 10 Big Y Express convenience and fuel locations, one Fresh Acres Market specialty supermarket, and one Table & Vine wine, beer, spirits and specialty foods store. For online grocery delivery service, the Company has partnered with Instacart since 2017. In the U.S, Takeoff already has opened MFCs with Albertsons, Ahold Delhaize, Wakefern, and Sedanos, with more facilities planned. This year, Takeoff and Loblaw also are slated to pilot an automated warehouse now being built inside a Real Canadian Superstore in greater Toronto.
On February 13, the Court issued an order authorizing the sale of substantially all of Forever 21, DIP’s assets to a consortium composed of Simon Property Group Inc., Brookfield Property Partners LP, and Authentic Brands Group for $81.1 million. In addition to the sale price, the purchasers will assume certain liabilities. The order approving the transaction gives the buyers the right to close certain stores, although details were not provided. The Company estimates it owes $120.0 million in unpaid administrative claims to vendors who provided goods during the bankruptcy proceedings. This may raise the possibility of administrative insolvency. The Court also issued an order extending the periods during which the Debtors have the exclusive right to file a Chapter 11 Plan and to solicit acceptances thereof, through and including April 27 and June 25, respectively. The previous period to file a Chapter 11 Plan expired on January 25 but was automatically extended through the date of the order. Click here to request more information.
Publix will open a new store in Buford, GA on February 26. The 48,100 square-foot store will be the Company’s second in the city and 21st in Gwinnett County. Click here to request a list of future openings.
Price Chopper (McKeever Enterprises, Inc.) plans to invest more than $54.0 million on new stores and remodels during 2020. Preliminary projects include two new stores in Gardner, KS and Smithville, MO and remodels for its Overland and Leavenworth, KS stores and Kansas City, MO store. This year’s investment is more than the previous two years combined and brings the Company’s total investments to more than $104.0 million in just three years. Price Chopper (not related to Golub Corp.) currently operates 51 stores throughout the Kansas City, KS-MO market that are locally owned by the Ball, Cosentino, McKeever, and Queen families.
At Home announced the opening of six new stores this month, growing its national footprint to 218 locations across 39 states. The Company sells more than 50,000 home décor items in stores averaging just over 100,000 square feet. Click here to request a list of future openings.
Through its partnership with Instacart, Wegmans will expand its delivery radius from the store it opened in Brooklyn this past October, its first in New York City. The service will now be offered to all Manhattan ZIP codes. The 74,000 square-foot Brooklyn store was Wegmans’ 101st location and 47th New York store. Click here for a list of the Company’s planned new locations.
In late October, Marathon Petroleum Corp. (MPC) announced it would spin off Speedway, with plans to make the convenience store chain an independent company by the end of 2020. Reports began to surface in late January that the Company had received offers for Speedway. Now sources indicate potential buyers include Seven & i Holdings Co. Ltd. and TDR Capital. Seven & i Holdings is working with advisors, as it considers acquiring Speedway, and TDR is interested in merging the chain with one of its portfolio companies, EG Group.
Redner’s Markets has announced plans to open a 49,000 square-foot store in Lewes, DE in spring 2021. The Company has nearby locations in Sussex County, with stores in Georgetown & Milford. Redner’s currently operates 44 grocery stores and 21 Quick Shops in eastern Pennsylvania, Maryland, and Delaware.
Southeast Enterprise Holdings Inc. (SEH) acquired 47 Dunkin’ Brands restaurants in the Miami, Ft. Lauderdale and West Palm Beach Markets. Financial details were not disclosed. Within the agreement, SEH acquired a Store Development Agreement for six restaurants in Southwest Broward County and Northwest Dade County over the next five years.
Southeastern Grocers’ Winn-Dixie opened a new store in Jacksonville, FL, replacing a former Publix that closed on December 19.
BJ’s Wholesale Club will open a new store in Pensacola, FL on March 6. The 134,700 square-foot club replaces a former Sears that closed in July 2018. Click here to request a complimentary list of future openings and closings.
Kowalski’s Markets plans to open two new grocery stores in Minneapolis-St. Paul shopping malls, both in former Herberger’s stores. The Company reportedly signed a lease for a 30,000 square-foot store at Rosedale, expected to open in early 2022, and plans to sign another lease at Southdale soon. Kowalski’s currently operates 11 stores in the Twin Cities.
Allegiance Retail Services LLC recently opened a Foodtown store on Roosevelt Island in New York City. The store replaces a former Gristedes and is operated by the New York Food Group (John Catsimatidis, chairman, and Nick D’Agostino III, president).
Ahold Delhaize announced results for its fourth quarter and fiscal year ended December 29. In the fourth quarter, net sales at Ahold Delhaize USA grew 2.7%, to $11.47 billion. Comps, excluding fuel, increased 2.3%. For the full year, net sales rose 1.5% to $44.84 billion; comps, excluding fuel, were up 1.4%. A challenging sales environment for Stop & Shop, as well as additional capital investment in the brand (primarily for store renovations), created margin pressure, partially offset by margin growth at Food Lion, Giant/Martin’s and Hannaford. Online sales increased 42.7% in 4Q to $330.0 million (2.9% of total U.S. sales); for the year, online sales jumped 24.3% (2.5% of total U.S. sales) to $1.10 billion. In a separate press release, Ahold Delhaize announced plans to close the Midwest division of its Peapod online grocery sales business, which comprises $97.0 million (about 8.8%) of the $1.10 billion total online revenue in the U.S. Management said the decision will allow Ahold Delhaize USA to focus on expanding the leadership position of its brands on the East Coast and execute its strategy of enabling each local brand to be the leading omnichannel grocery retailer in their individual markets utilizing the capabilities of Peapod Digital Labs. There are no changes for customers in other markets. On Monday, the Company discontinued service for customers placing online grocery delivery orders in Illinois, Wisconsin and Indiana. Stemming from this decision, the Company will close a distribution center and food preparation facility in Lake Zurich, IL; distribution facilities in Chicago, IL, Milwaukee, WI, and Indianapolis, IN; and a pick-up point in Palatine, IL. This came as no surprise, with virtually every retail grocer now offering online shopping/delivery. Click here to request a list of future openings and closings.
Bed Bath & Beyond reported preliminary results for the first two months of its fourth quarter (December and January), highlighting the ongoing struggles the Company faces to improve its performance. Comps fell 5.4% in the period, driven by weak in-store traffic, inventory management issues, and increased promotional activity and markdowns. This is even after the positive shift of Cyber Monday to 4Q19 from 3Q18. By channel, sales fell 11% in store, while digital rose 20%. Markdowns and the shift to digital weighed on gross margins, which fell 300 bps. Inventory issues, including being out of stock of key holiday product, further impacted sales growth. Adjusted operating expenses rose 190 bps, excluding declines from the sale leaseback transaction and severance expense, driven by sales deleverage, ongoing technology costs and advertising expenses. While investors may give new management a chance to implement its turnaround strategies, this consistent poor performance raises the risk that it is not just the store or the experience but rather the brand and how it resonates with today’s consumers.
Walmart’s 4Q revenues increased 2.1% to $141.67 billion. U.S. comps, excluding fuel, rose 1.9%, which was below expectations. Quarterly results were negatively impacted by a shorter holiday season and lower demand for apparel, toys and electronics. Walmart has been spending heavily to grow its online business and build up the digital capabilities of its stores, through services such as buy online, pickup in store (BOPIS). The Company said it expects online sales to grow about 30% in fiscal 2021, down from last year’s growth of 37%. For the holiday quarter, the Company reported a 35% rise, its smallest in nearly two years. Looking ahead, the Company expects fiscal 2021 EPS of $5.00 – $5.15 per share, excluding any potential financial effect from the Coronavirus outbreak in China. During its conference call with analysts, executives said that they expect a “couple of cents” of negative impact on 1Q21 results due to the outbreak. In other news, Walmart pulled the plug on its Jetblack Shopping service. Jetblack was a pricey personal shopping service provided to members in the immediate New York City area. It delivered any kind of product with the exception of fresh food. Walmart tried to find investment partners for the platform but was unsuccessful. Jetblack came out of Walmart’s innovation arm known as Store No. 8 and was launched more as an experiment than a profit generator. Most of the 350 staffers will be laid off, with some of the technology group joining Walmart. Click here to request a list of future openings and closings.
Denny’s 4Q revenues fell 28.7% to $113.8 million, consisting of 17.8% growth, to $66.5 million for franchise and license revenue, and a decline of 53.3% for Company restaurant sales. These changes were primarily due its refranchising and development strategy announced in October 2018, which included migration from a 90% franchised business model to one that is between 96% and 97% franchised; the strategy was substantially complete as of the end of calendar 2019. Domestic system-wide same-store sales grew 1.7%, including increases of 1.8% at domestic franchised restaurants and 0.5% at Company restaurants. In addition to refranchising, the Company plans to upgrade the quality of its real estate portfolio through a series of like-kind exchanges. During the quarter, nine Company restaurants were sold to franchisees. During fiscal 2019, Denny’s sold 105 Company restaurants to franchisees and completed 144 remodels, including 141 at franchised restaurants.
Looking ahead at fiscal 2020, Denny’s expects domestic system-wide comp growth to be flat to up 2%; 30 – 40 new restaurant openings; total operating revenue of $453.0 million – $459.0 million, including franchise and license revenue of $260.0 million – $263.0 million; and adjusted EBITDA of $97.0 million – $100.0 million.
CVS Health announced results for its fourth quarter and fiscal year ended December 31. The Company finished the year strong, with 4Q revenues improving 22.9%; growth was again driven by the Aetna acquisition, which contributed about 87% of the increase. The retail/long-term-care segment saw revenues increase 2.5% in the quarter, attributed to greater prescription volume, which was up 5.6% on a 30-day equivalent basis, and brand inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate. Retail comps improved 3.2% overall and were up against a tough comparison quarter last year at +5.4%. Quarterly revenue for the pharmacy service segment increased 6.2%, driven by brand inflation as well as increased total pharmacy claims volume. This growth was partially offset by continued price compression and an increased generic dispensing rate. The Company announced that current EVP Dr. Alan Lotvin will replace Derica Rice as president of CVS Caremark. The Company also named former Concerto Healthcare executive Alec Cunningham as EVP and COO of the Aetna insurance business, as it focuses more on government programs like Medicare Advantage. For fiscal 2020, the Company projected tepid earnings growth of just 1% - 3%. Cash flow from operations is expected to drop to $10.50 billion – $11.00 billion from $12.80 billion last year.
Advance Auto Parts reported fourth quarter sales increased 0.4% to $2.11 billion, and comps inched up 0.1%. Gross margin decreased 19 basis points to 44% due to the planned headwind from customer incentive discounts, partially offset by lower material costs. Operating income jumped 49.7% to $126.1 million, and operating margin expanded 197 basis points to 6%. During the quarter, the Company acquired the DieHard brand for $200.0 million using cash on hand. As of December 28, 2019, Advance operated 4,877 stores and 160 Worldpac branches in the U.S., Canada, Puerto Rico and the U.S. Virgin Islands.