February 7, 2024
In the RITE AID CORPORATION, DIP case, Rite Aid completed the sale of Elixir to MedImpact Healthcare Systems for approximately $575 million.
The Court issued a final order approving store closing sale procedures and a consulting agreement with liquidators SB360 and Hilco. According to sources, the liquidators were hired at the request of the Debtors secured lenders to facilitate the liquidation of closed stores. As previously disclosed, mediation between the Debtors, each DIP Lenders Agent, the steering committee of the Ad Hoc Group of Secured Noteholders, the Creditors’ Committee, and the Tort Claimants Committee are ongoing, in an attempt to reach resolution on various issues including the Plan of Reorganization and the sale of the retail assets. The mediation is expected to terminate no later than February 9, 2024. Sources indicate the Debtors are negotiating the sale of the retail assets with at least two potential buyers.
The Debtors notified the Court they are closing 17 additional stores. To date, the Debtors have notified the Court of 404 store closures. The Debtors also notified the Court they rejected 36 leases.
The UFCW, which represents more than 100,000 Kroger and Albertsons workers, hosted a press conference to further its opposition to the proposed Kroger-Albertson merger. During the conference, the union provided updates on its meeting with Kroger, Albertsons, and C&S, and discussed what it characterized as a better path forward for the companies as separate entities and urged them to invest in adequate staffing in their stores. According to the union, the companies continued to claim that the merger will help them compete against companies like Walmart and Amazon, and that C&S would be able to effectively compete with them, which is an assertion the union does not agree with. In addition, union reps said that C&S indicated it would oppose union efforts at non-union facilities that it acquires. Kroger responded saying the merger is "inherently pro-union" and noted that it added over 100,000 union jobs since 2012 and invested in $1.90 billion in wage and benefit growth since 2018. Both Kroger and C&S have also committed to not closing stores or laying off frontline workers as a result of the merger.
According to reports, Express has been meeting with lenders to explore restructuring options, largely due to operational deterioration, negative cash flow, and strained liquidity. Express has been struggling with fashion misses, the pullback in discretionary spending, and online competitors (such as Shein and Temu) making inroads with the Company's younger demographic and threatening its business model.
Separately, Shein was sued last week by e-commerce apparel and lingerie brand, For Love & Lemons, allegedly for infringement of some of its copyrighted materials. Victoria's Secret is an investor in For Love & Lemons and carries the brand on its online marketplace.
After opening only a handful of stores over the last five years and none since 2021, Walmart has announced a new five-year plan to build or convert more than 150 locations in addition to remodeling 650 stores over the next 12 months. The first two stores to open, both Neighborhood Markets, are set to open later this Spring in Santa Rosa Beach, FL, and Atlanta, GA. Walmart U.S. President and CEO John Furner noted that the Company is finalizing construction plans on 12 new stores it aims to start building this year, which includes converting one smaller location to a Walmart Supercenter. Walmart added that both new and remodeled stores will reflect the retailer’s “Store of the Future” concept, with improved layouts, expanded product selections and innovative technology to make shopping trips more convenient.
Overall, Walmart has remained a winner as it continues to attract budget-minded shoppers to its stores, prompting management to raise its guidance three times this fiscal year. In its latest quarter (3Q), the Company posted sales and comps (ex-fuel) up 5.2% and 4.7%, respectively.
Amazon reported its third consecutive quarter of double-digit sales growth, driven in part by a robust holiday shopping season. 4Q23 sales came in above the high-end of guidance ($167 billion), advancing 14% to $169.96 billion (up 13% excluding the favorable impact of foreign exchange). By segment, advertising services, representing 8.6% of sales, continued to lead growth, jumping 26%, followed by third-party sellers, who saw sales advance 19% and represented 25.6% of all sales during the quarter. Meanwhile, Amazon Web Services (AWS) and subscription services increased 13%, and Physical stores, which primarily includes Whole Foods and Amazon Fresh saw growth of 4%. Amazon’s largest segment, online stores, representing 41.5% of the consolidated business, was up 8%.
In response to macroeconomic challenges, The Raley’s Companies announced that 72 employees across multiple banners including Bashas’ and fieldTRUE, will have their roles eliminated, effective immediately. All 72 positions are corporate employees working in administrative support roles, however 25 of the employees were offered other positions within the Company’s stores. Additionally, the Company is eliminating 38 more administrative support jobs in which those roles are not currently filled. In all, these job eliminations represent a reduction of just 0.2% of its 21,000 total workforce.
Publix opened a 55,000 square-foot store in Wesley Chapel, FL on January 25, which is larger than its usual store size of 45,000 to 50,000 square feet. The new prototype store has a large selection of foodservice items, upstairs and outdoor seating, and an adjacent Public Liquors. This is the third store under this larger, more experience-focused prototype, with the first opening in Tampa, FL in early 2023 and the second in Louisville, KY.
Following the closure of Zulily, asset management firm Gordon Brothers will acquire and sell the retailer's inventory and assets. Gordon has been engaged to sell over $85 million of inventory and assets of two 775,000 square-foot fulfillment centers on behalf of Zulily ABC LLC. In late December 2023, Zulily said it entered into an assignment for the benefit of creditors and would cease operations. Management of Zulily's liquidation transitioned to Douglas Wilson Companies.
Nordstrom plans to open two new Nordstrom Rack stores in North Carolina, in Raleigh and Mathews. The 32,000 square-foot Raleigh store and the 25,000 square-foot Matthews store are slated to open in fall 2024 and spring 2025, respectively. The Company operates two Nordstrom stores and five Nordstrom Rack stores in North Carolina.
Academy Sports and Outdoors voluntarily prepaid $100 million of outstanding borrowings under its Term Loan, due November 6, 2027, using cash on hand. The Company did not incur any prepayment penalties in connection with the transaction. Following the prepayment, the remaining outstanding balance under the Term Loan was $91.8 million and, based on projected variable interest rates, the Company expects to realize interest savings of $29 million over the remaining duration of the Term Loan, including $8.5 million in FY24.
Beacon completed the acquisition of Roofers Supply of Greenville, headquartered in Greenville, SC, with two additional branches located in Charlotte and Raleigh, NC. Beacon indicated that the acquisition grows its service geography and design services in the Carolinas, particularly for commercial roofers. The Company completed nine acquisitions in 2023, and this marks its first for 2024.
Tractor Supply announced its capital plans for 2024 include opening 80 Tractor Supply (up from 70 in 2023) and 10 to 15 new Petsense by Tractor Supply stores. In 2025 and beyond, the Company plans to accelerate its growth to 90 new stores per year. Currently, Tractor Supply operates 2,216 locations, with the long-term aim to reach 3,000 locations.
4Q23 sales decreased 8.6%, with comps down 4.2%. The comp decline was driven by a comparable average ticket decline of 1.5% and a comparable average transaction count decline of 2.7%. It reflected continued strength in year-round consumable, usable and edible (C.U.E) categories, which was offset by softness in cold weather products, discretionary categories, and, to a lesser extent, big ticket items.
Indigo Books & Music received a non-binding proposal to be acquired by two companies owned by Indigo’s controlling shareholder Gerald Schwartz, Trilogy Retail Holdings Inc. and Trilogy Investments L.P., for $2.25 in cash per common share. Trilogy currently owns an aggregate of 16.8 million common shares of Indigo, representing approximately 60.63% of the issued and outstanding common shares of the Company.
Cineplex completed the sale of its amusement business, Player One Amusement Group (P1AG), to the private equity firm OpenGate Capital for C$155 million. As part of the deal, Cineplex and P1AG entered into a long-term agreement for P1AG to continue supplying and servicing amusement games at Cineplex's theaters and location-based entertainment venues (Playdium and The Rec Room). Cineplex plans to use the proceeds from the transaction to pay down revolver borrowings. P1AG generated C$153.8 million in revenue during the first nine months of FY23, which was up 23% from C$125.5 million in the prior-year period. Adjusted EBITDAaL (EBITDA after deducting cash rent paid or payable related to lease obligations) for YTD23 was C$30.4 million, representing a 19.7% EBITDAaL margin.
CVS Health is closing 25 of its MinuteClinic locations in metro Los Angeles, CA by February 25. Following the closures, 11 MinuteClinic locations will remain in the greater Los Angeles area. CVS added that its more than 550 CVS Pharmacy locations will continue to offer some services, such as flu, COVID-19, and other vaccines. MinuteClinic has over 800 locations in 28 states.
Walgreens is laying off 145 employees, mostly in its corporate workforce. In November, the Company laid off 5% of its corporate workforce, capping off a year of hundreds of announced store closures, a previous round of layoffs, and a turnover in its c-suite that included the departure of its CEO, CFO, CIO, chief medical officer, and chief marketing officer.
January Employment Situation... Employers added 353,000 jobs in January on a seasonally-adjusted basis, the Bureau of Labor Statistics reported last week, with the unemployment rate remaining unchanged at 3.7%. January's job growth was nearly twice what forecasters expected. The report also provided adjusted data for job growth in 2023, adding more than 100,000 to the figure previously released for December. Altogether, employers added 3.1 million jobs in 2023, up from 2.7 million initially reported. It should be noted that the unemployment rate has been under 4% for 24 months.
Meanwhile, Fed Chair Jerome Powell signaled that rate cuts would not begin until at least May, citing a desire to see more evidence that inflation is returning to its target.
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