February 27, 2018
Brookshire Grocery Co.
Brookshire Grocery Co. will acquire eight Winn-Dixie store locations in southern Louisiana from Southeastern Grocers. Subsequent to this, it was announced that the 11-store Shoppers Value chain is acquiring seven Winn-Dixie locations in Louisiana and Mississippi. Shoppers Value said it will take three to six months to renovate the stores and open them under the Shoppers Value banner. Shoppers Value had previously acquired two damaged Winn-Dixie locations in 2017. It’s unclear whether any of these 15 stores are part of the 200-store closure that Southeastern Grocers is reportedly considering. The below store concentration map displays current Winn-Dixie and Brookshire stores in the Louisiana area.
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Loblaw
Loblaw’s fourth quarter revenue fell 0.9% to C$11.03 billion. Retail sales were down 1.2% to C$10.72 billion, impacted by the disposition of gas operations. Food retail comps increased 0.6%, and drug retail comps rose 3.4%, including 2.5% growth in pharmacy and 4.1% growth in the front store. Operating income was $56.0 million, a decrease of $336.0 million compared to 4Q16. The decrease included $373.0 million in unfavorable year-over-year impacts. Net income dropped 83.6% to $38.0 million, hit by $107.0 million in costs related to the announcement of its PC Optimum loyalty rewards program and the fallout from its admission of participation in an alleged industry-wide, price-fixing conspiracy. The Company also recorded a $189.0 million charge related to its merger of the Shoppers Optimum and PC Plus programs this year under the PC Optimum brand.
Loblaw said it is prepared for another challenging year in the grocery industry, as it readies for increased labor costs and the impact of recently announced drug reform. It expects a $190.0 million increase in labor costs this year after minimum wage hikes and a $250.0 million negative impact to its 2018 operating income from health-care reform. Over the past year, the Company opened 22 food and drug stores and closed 19 food and drug stores.
Looking ahead at fiscal 2018, Loblaw expects positive comp growth and stable gross margin in its retail segment and to deliver essentially flat adjusted net earnings growth. The Company anticipates investing approximately $1.30 billion in capital expenditures, including $1.00 billion in the retail segment.
In other news, Loblaw is working with Metrolinx to offer a new “PC Express” service in five GO Transit stations in the Greater Toronto Area. The service will allow commuters to pre-order groceries online for pick up during their next day’s commute. It will begin in five GO Transit stations this spring and is expected to expand in phases to additional sites in the region.
Toys "R" Us
Reliable sources indicate Toys “R” Us plans to close another 200 stores and lay off a significant portion of its corporate staff following deteriorating sales during the holiday season. This follows the commencement of store-closing sales at 150 stores earlier this month. If the Company carries through on a new round of closings, the store count would decrease to about 441, down from 791 on the petition date.
Bloomin' Brand
Bloomin’ Brand reported fourth quarter sales growth of 8.3% to $1.09 billion. U.S. comps increased 3.3%, consisting of growth of 4.7% at Outback Steakhouse, 1.3% at Carrabba’s Italian Grill, 0.6% at Bonefish Grill, and 3.1% at Fleming’s Prime Steakhouse & Wine Bar. Comps for Outback Steakhouse – Brazil were up 4.9%. Net income was $16.4 million, compared to a loss of $4.3 million last year. According to CEO Liz Smith, net income growth was driven by Outback’s remodels, loyalty rewards program, the brand’s expansion in Brazil and new delivery and takeout options at all its restaurants. During the quarter, the Company opened seven new restaurants, including four in international markets.
The results came a day after Barington Capital Group L.P., which represents a group of shareholders of Bloomin’ Brands, issued a statement on February 21 in which it suggested that Bloomin’ Brands should spin off its smaller brands — Bonefish Grill, Carrabba’s and Fleming’s — into a new entity, leaving Outback Steakhouse to operate independently in order to improve strategic focus and operating execution at each brand. Barington expressed concern over what it called the Company’s “sustained period of under-performance relative to its peers and the market as a whole under its current management team.” In a response, Bloomin’ Brands said it welcomes open communication with shareholders and constructive input.
In other news, Bloomin’ Brands has opened three Express locations in Florida that combine elements of both the Outback and Carrabba’s menus. Express locations are for delivery and takeout. CEO Liz Smith said that the new, smaller locations are intended to expand the Company’s reach and help with its “off-premise” strategy. The Company plans to have eight in total by the end of this year but did not elaborate on where the additional five might be located.
Amazon
Amazon reportedly plans to build on the success of its checkout-free Amazon Go store in Seattle, WA by opening six more locations, possibly in Seattle and Los Angeles. Sources indicate that in Los Angeles, Amazon has held talks with billionaire developer Rick Caruso about bringing a Go store to The Grove, his 600,000 square-foot outdoor shopping mall. In Seattle, Amazon had identified at least three locations for additional Go stores as of last year.
Amazon has begun selling its in-house delivery service to third-party vendors in Australia. Three months after opening in Australia, Amazon said merchants could pay it to pack and ship their products through its new Fulfillment by Amazon (FBA) program. Prime will be available by the middle of the year. This means that Amazon, not its thousands of Australian vendors, takes responsibility for meeting delivery estimates in a country of 24 million people spread over a significantly sized island (the size of mainland U.S.) with little inland transport infrastructure.
In other news, Amazon’s stock reached an all-time high of $1,522.84 yesterday.
Jack in the Box
Jack in the Box reported first quarter sales fell 16.6% to $294.5 million, impacted by one less week. System-wide comps fell 0.2%, consisting of 0.2% growth at Company-owned stores and a 0.3% decline at franchises. During the quarter, the Company signed an agreement to sell Qdoba to Apollo Global Management. The transaction is expected to close by April. As a result of the pending sale, operating results for Qdoba are included in discontinued operations for all periods. Qdoba generated a net loss of $600,000 for the current quarter compared to net earnings of $1.4 million in the prior-year quarter. Operating earnings rose to $1.23 million from $1.07 million last year.
Looking ahead at fiscal 2018, Jack in the Box expects system-wide comp growth of 1% – 2%, adjusted EBITDA of $260.0 million – $270.0 million, and capex of $30.0 million – $35.0 million.
Bi-Mart
Bi-Mart announced the closing of its Clarkston, WA store on March 7, citing the store’s performance as the primary factor in the decision. The Company is on track for two additional openings in the near future, with the Port Orchard store anticipated to come on line in the late spring/early summer and construction underway on a new store in Star, ID. The Company recently broke ground on a new 185,000 square-foot distribution center in Eugene, OR, signaling plans for additional growth.
Macy's
Macy’s reported fourth quarter sales increased 1.8% to $8.67 billion, and comps were up 1.4%. Operating income rose 48.8% to $1.21 billion, primarily due to $234.0 million in book gains for the sale of the Union Square Men’s building in San Francisco, CA, which was sold in fiscal 2016. During the quarter, the Company opened two freestanding Bluemercury beauty specialty stores, bringing the total Bluemercury locations to 137. Over the course of fiscal 2017, the Company opened 36 Bluemercury stores, in addition to two Macy’s stores, 30 Backstage off-price stores within existing Macy’s stores, and one Bloomingdale’s licensed location in Kuwait. It also closed 16 stores, which includes the recently announced closure of a store in Homestead, PA. The Company also recently announced it will close a store in Redmond, WA in early 2019, which will bring the total to 83 of the approximately 100 store closures announced in August 2016. During fiscal 2017, the Company’s asset sales totaled $411.0 million in cash proceeds; over the last three fiscal years, the Company has completed transactions totaling $1.30 billion in cash proceeds. During February 2018, the Company signed an agreement to sell floors 8 through 14 of its State Street store in Chicago, IL to a private real estate fund sponsored by Brookfield Asset Management, for which it will receive $30.0 million when the transaction closes during the first half of fiscal 2018. Macy’s is now exploring opportunities to sell the 240,000 square-foot I. Magnin portion of the Union Square building in San Francisco, which is a separate structure from its main store (which comprises 700,000 square feet without the Men’s building or I. Magnin).
Nordstrom
Published reports indicate that the Nordstrom family is finalizing plans to submit an offer to take Nordstrom private; it postponed its plans late last year due to difficulties arranging debt financing for its bid ahead of the holiday shopping season. According to reports, the group met with investment banks the week of February 12 and plans to submit an offer as early as next month once the banks receive approval from their credit committees to provide the financing. Nordstrom previously formed a special committee of its board to consider any offer received from the family, which owns 31.2% of outstanding shares of Nordstrom. The family is working with buyout firm Leonard Green & Partners to provide equity financing on the deal. Nordstrom is scheduled to report fourth quarter results on March 1.
Camping World
On February 26, Camping World opened a Gander Outdoors location in Winston-Salem, NC, in the former 42,000 square-foot Gander Mountain store space. The Company purchased the designation rights to certain Gander Mountain, DIP assets at the Bankruptcy auction in May 2017, and it is in the process of reopening 68 of the units under the Gander Outdoors banner, with completion targeted for May 2018. The Winston-Salem location is one of six Gander Outdoors stores planned for North Carolina, with three more coming in March (Fayetteville, Gastonia and Mooresville) and another two in April (Greensboro and Monroe). So far 14 of the Gander Outdoors stores have opened this year, with 54 openings remaining. Camping World’s fourth quarter results will be released after the market closes later today.
Circuit City
Circuit City has delayed its online relaunch, following reports in January that the relaunch would occur on February 15. Visitors to its website received a message saying, “We have been working around the clock to ensure that our site is optimized for our customers! Due to an overwhelming amount of preliminary traffic, we are reinforcing things a bit. Though we regret that our launch will be slightly delayed, we are looking forward to offering you the best possible online shopping experience in the immediate future.” Once operating more than 1,500 stores across the U.S. and Canada, the Company liquidated in 2009, then operated as an e-commerce retailer until 2012, when the brand was acquired by online electronics retailer TigerDirect. In 2015, current CEO Ronny Shmoel acquired the brand, domain and associated trademarks for Circuit City. In addition to plans to relaunch online, the Company plans to open kiosks, stores within other stores, and eventually its own showrooms.
Lowe's Canada
On February 26, Lowe’s Canada rebranded 17 locations in Quebec, Ontario from the Marcil brand to RONA. As part of the rebranding, the stores doubled the number of products available to 40,000 in store and online, and introduced new product categories such as home appliances and a wide seasonal department. Lowe’s rapidly grew its Canadian presence in 2016 when it bought RONA for $2.30 billion, and acquired 22 Reno Depot home improvement stores, two Contractor First businesses, and three Dick’s Lumber outlets in Canada, in addition to the licensing rights to the Ace Hardware name in Canada as part of the deal. Following this most recent rebranding, RONA now has 451 locations. Meanwhile, Lowe’s Canada converted five RONA stores into Lowe’s stores, bringing its Canadian store count to 62 units.
Universal Standard
Universal Standard, a plus-size apparel retailer launched in 2015, announced it closed a $7.0 million round of Series A funding led by Imaginary Ventures, with additional participation from actress Gwyneth Paltrow, Blake Mycoskie (founder of Toms shoes), and Sweetgreen co-founders Jonathan Neman and Nicolas Jammet. The Company plans to use the new capital to extend its size range from the current sizes 10 to 28 to sizes six to 32 and to add new executives. It also plans to expand its showroom format nationwide. It currently has two showrooms, one in New York and the other in Los Angeles, where customers can shop the full collection and consult with in-house stylists. In addition, the Company launched its first activewear collection, a five-piece line that sells from $45 to $85.
Carter's
Carter’s reported fourth quarter sales increased 10% to $1.03 billion, reflecting growth in all business segments and contributions from the 2017 Skip Hop (contributed $32.9 million) and Mexico (contributed $8.8 million) licensee acquisitions. Operating income improved 4.6% to $145.8 million, or 17.9% to $167.4 million on an adjusted basis due to improved gross margin as a result of favorable product costs and other sourcing efficiencies, and SG&A expense leverage. U.S. retail sales increased 7.2% to $565.7 million, and comps were up 4.5% (e-commerce comps were up 19.1% while store comps were down 1%). The Company opened 19 stores and closed 10 underperforming locations in the U.S. International segment sales increased 20.7% to $131.8 million, reflecting contributions from the Skip Hop and Mexico acquisitions and growth in Canada and China. Canadian comps slipped 0.2% and were comprised of a 2.6% store comp decline, partially offset by e-commerce comp growth of 20%. Commenting on the tax reform impact, CEO Michael D. Casey said, “The Tax Cuts and Jobs Act of 2017 is expected to have a significant and positive impact on our Company’s future earnings, cash flow, and ability to invest in its growth strategies. In 2018, we plan to reinvest approximately half of the $40.0 million benefit from the lower corporate tax rate in brand marketing and improved e-commerce capabilities. Given the significant and unexpected benefit in 2017 of the historic tax reform legislation, we are also announcing today that our board approved $20.0 million in special compensation awards to all of our Company’s eligible full-time and part-time employees provided through enhanced retirement plan contributions and bonuses.”
AutoZone
AutoZone’s second quarter sales increased 5.4% to $2.41 billion, and comps were up 2.2%. However, operating income dropped 46.6% to $205.1 million due to higher operating expenses as a result of an impairment charge totaling $193.2 million related to the IMC and AutoAnything businesses that are being sold. Adjusted operating profit increased 3.8% to $403.4 million. During the quarter, the Company opened 35 new stores and closed one underperforming location in the U.S., opened three new stores in Mexico and two in Brazil, ending with 6,088 locations worldwide. Commenting on results, CEO Bill Rhodes said, “Our ongoing initiatives, which include enhanced inventory availability, commercial acceleration and omni-channel, are gaining traction and, as expected, our business improved due to the more harsh winter conditions we experienced in late December and January. Based on the results of a strategic review of our business priorities, we have determined IMC and AutoAnything serve niche markets that are not core to our strategic priorities going forward and those two businesses are being sold. Exiting these two businesses will allow us to intensify our focus on our core DIY and DIFM operations both domestically and internationally, which we continue to believe are very attractive markets.”
