January 20, 2021
In a letter to Staples owner Sycamore Partners, The ODP Corporation responded to Staples’ January 11 acquisition proposal under which it would acquire ODP for $40 per share in cash. As part of the deal, Staples would have acquired ODP’s retail and e-commerce operations, divested the B2B commercial business unit, and sold the CompuCom IT services business. ODP’s board unanimously concluded “there is a more compelling path forward to create value for ODP and its shareholders.” Instead, ODP said it is pursuing a comprehensive strategy that includes building on its B2B strategy and other growth initiatives “that are already creating value for our shareholders.” It also plans to move forward with the sale of CompuCom, which it initiated as a result of a strategic review in November. The Company said it remains open to combining its retail and e-commerce operations with Staples “under the right set of circumstances and on mutually acceptable terms.” ODP is looking for a deal that could be executed more efficiently and with far greater certainty, with less regulatory risk. One option it suggested is a joint venture, and another is a retail-only acquisition.
Macy’s opened a 20,000 square-foot Market by Macy’s store in West Bend, TX, in the Dallas-Fort Worth area. This is the second Market by Macy’s in Texas, joining a store in Southlake. The stores sell an edited assortment of the brands and items available at a full-line Macy’s, which average 180,000 square feet. Located in strip-centers, these smaller stores are the Company’s effort to move away from its dependance on malls. Both stores have full-service and self-service checkouts as well as same-day DoorDash delivery and BOPIS capabilities. One of the differences between Market by Macy’s and Macy’s Backstage (which average 30,000 square feet) is that Backstage stores offer prices 20% – 80% off original prices, while Market by Macy’s offers “a range of accessible prices.” Click here to request a list of store openings and closings.
Grocery Industry Quarterly Sales Analysis
It’s been more than ten months since the COVID-19 pandemic began, creating a tremendous disruption in the lives of North American consumers. The pandemic has resulted in an explosion in sales of food to be consumed at home, and its impact on grocery shopping habits remained a powerful factor for the supermarket industry during the third quarter of 2020. However, same-store sales and revenue growth are trending downward after their peaks earlier in the pandemic. Click here to request a full report on the Grocery Industry, documenting industry trends and how competition stacks up in terms of sales performance metrics.
Trader Joe’s plans to open its first store in Harlem in New York City. The 28,000 square-foot store will join Target as an anchor to the upcoming Urban League Empowerment Center. Target is slated to occupy 44,000 square feet in the mixed-use project. The new Harlem location will be the Company’s 13th store in New York City. Click here to request a list of future store openings.
Last week, Amazon announced it will open two new Amazon Fresh grocery stores in Seattle and Bellevue, WA. Both sites are under construction, and opening dates have not yet been disclosed. The first Amazon Fresh store opened in California last summer; there are now six such stores nationwide. Locally, in addition to the new Fresh stores, Amazon has announced two new Amazon Go locations since the start of the pandemic. Its Washington state portfolio now contains 11 Whole Foods locations, seven Amazon Go convenience stores, two Amazon Go groceries, two bookstores, and three Amazon 4-star stores featuring top-rated products from Amazon.com.
Last week, travel convenience store retailer Hudson announced it will use Amazon’s Just Walk Out technology at select locations. The grab-and-go technology will first appear at a new Hudson Nonstop store in Dallas Love Field Airport in the first quarter of this year. Additional rollouts are planned in North America later on in 2021. Shoppers will be able to enter participating locations using their credit card and will be charged for the products after they walk out of the store.
In other news, a coalition of public interest advocates is asking the FTC to investigate whether Amazon violates consumer protection laws with its process for canceling Prime subscriptions. In a letter to the FTC, the group said the steps required to cancel Prime “are designed to unfairly and deceptively undermine the will of the consumer,” and may violate FTC rules as well as other consumer protection laws.
Amazon Web Services opened its first office in Greece to support what it reported to be a growing number of companies and public sector agencies using its cloud services.
The Company also announced plans to open two new logistic centers in Italy at an investment of €230.0 million to meet the increasing demand for delivery and warehouse services during the pandemic. The new facilities are expected to open in fall 2021. Click here for a list of Amazon future openings.
Chapter 11 Recap: 2020 Year in Review
2020 will be remembered as the year the COVID-19 pandemic, with its requisite stay-at-home orders and store closures, decimated a number of U.S. retail companies. More than three dozen significant retailers filed for bankruptcy during the year, along with hundreds of smaller retail outlets. Many of the filings did not come as a surprise, as the majority of these operators were struggling prior to the pandemic – COVID-19 simply pulled the bankruptcy process forward. Click here to request a copy of the full report.
Yesterday, Bed Bath & Beyond announced the completion of the sale of Cost Plus World Market to Kingswood Capital Management, a Los Angeles, CA-based private equity firm. Terms of the deal were not disclosed. Cost Plus has 243 stores, an e-commerce site, two distribution centers, and a corporate office. Both companies have agreed to a transition services agreement following the close of the transaction. Click here to request a list store closures.
Earth Fare plans to open a 24,140 square-foot store in St. Johns, FL in 2Q21. The Company currently operates 17 stores along the Eastern and Southeastern U.S.
Kroger is testing a new store smart shopping cart called KroGO at its store in Madeira, OH. The cart has a built-in scale and camera, providing a shopping experience with less contact and faster checkout. Click here to request a list of future store openings.
Conn’s opened a new 46,000 square-foot store in Mobile, AL on January 8, joining four other Conn’s HomePlus stores across the state. The Company will open two 43,000 square-foot stores on February 5 in Tampa and Bradenton, FL, which follows the opening of a 413,000 square-foot distribution center in Lakeland later this month. Conn’s currently operates one store in Florida, in Pensacola. The new stores will bring Conn’s store base to 149 locations in 15 states. Click here to request a list of future store openings.
Marc Lore announced his intention to retire as Walmart’s EVP, president, and CEO of U.S. e-commerce; he will continue to serve in a consulting role through September. Mr. Lore joined the Company in September 2016 when Walmart acquired Jet.com for $3.30 billion. He founded Jet.com, and other internet companies including Diapers.com, that he sold to Amazon. The U.S. retail e-commerce activities will now report to John Furner, CEO of Walmart U.S.
In other news, Walmart is reportedly building a new health venture through Store No. 8, its incubation arm. The venture will build programs that will enable shoppers to make healthier decisions based on their own data. The venture is said to be in early, exploratory stages.
Walmart also announced that it is partnering with financial-technology investment firm Ribbit Capital for the creation of a new fintech start-up. The venture will combine Walmart’s retail knowledge with Ribbit’s fintech expertise (with the Company’s current portfolio including investment platform Robinhood, consumer technology platform Credit Karma, and innovative payment platform Affirm), for the purpose of developing and offering innovative financial solutions to customers. The Company will be majority-owned by Walmart, although exact details on the percentage of ownership were not yet disclosed.
Yesterday, Walmart and Western Union announced a new agreement that will enable Western Union money transfer services at Walmart locations across the U.S. for the first time. The services will include domestic and international money transfers, bill pay and money orders. Services will be offered at more than 4,700 Walmart stores, with a rollout planned to begin in spring 2021. Click here to request a list of future store openings and closings.
Earlier this month, Boscov’s announced it would close six in-store restaurants by the end of the month, five in Pennsylvania (Wilkes-Barre, Hazleton, Pottsville, and two in Reading) and one in Delaware (Dover). The Company cited the impact of COVID-19 on the restaurant industry as the reason for exiting the business. The family diner-style establishments operated as Boscov’s Greenery Restaurant. The spaces used by the restaurants will be repurposed into additional store space for home décor.
Barneys at Saks opened on the fifth floor of the Saks Fifth Avenue flagship store in Manhattan, NY, occupying 54,000 square feet and offering 16 labels that are new to Saks. The opening is part of Authentic Brands Group’s plan to revive the luxury brand after acquiring its intellectual property out of bankruptcy in 2019. Authentic Brands partnered with Saks to serve as the exclusive Barneys retail and e-commerce partner in the U.S. and Canada. On January 25, Barneys at Saks plans to open a 14,000 square-foot standalone location in Greenwich, CT, on the site of a former Saks location.
In the Francesca’s Holdings bankruptcy case, the Debtors filed a motion to reject four additional leases. The stores are located in New York, NY; Atlanta, GA; Dania Beach, FL; and Boston, MA.
Costco announced that it is closing all its in-store photo centers as of February 14 and recommends that customers pick up all their orders by March 28. The Company explained that digital advancements in photo technology were behind the decision. Some services will be available on the website for delivery including prints, enlargements and posters; stationary and photo greeting cards; photo books and calendars; photo blankets and other photo gifts; and business printing products. Click here to request a list of future store openings.
Sheetz announced plans to open its first convenience stores in the Columbus, OH market beginning in April. The Company has reportedly confirmed 14 locations with half of those expected to have drive-thrus. Sheetz announced in September that it planned to open more than a dozen locations in the region by the end of 2021, followed by approximately a dozen more annually from 2022 through 2025. Click here to request a list of future store openings.
Sbarro opened its second restaurant in the Columbus, OH market inside a Turkey Hill convenience store, which is owned by EG America. It is part of seven planned openings in the market in 2021. Sbarro and EG Group, the parent company of EG America, also recently opened two stores in the U.K. and have several additional openings planned for this year. Click here to request a list of store openings.
In the ascena retail group bankruptcy case, the Debtors provided a list of additional planned store closures. The list includes four Ann Taylor units (Princeton and Marlton, NJ; Boston, MA; and Plano, TX), two LOFT stores (Boston, MA; and New York, NY), and one Lane Bryant (Albany, NY). The Debtors also filed a motion to reject 13 additional leases for stores operating under the Ann Taylor banner.
At an investor conference last week, Hibbett Sports said it is maintaining its 4Q20 guidance of high single to low double-digit comps. Management said the pandemic had specifically benefited certain categories, as consumers sought more casual merchandise like sandals, and fitness gear like running shoes to stay fit. As we have been reporting, lower inventory levels and reduced markdowns have helped margins. The Company also sees a $20.0 million – $40.0 million sales opportunity from competitor closures, including J.C. Penney and Stage Stores. Hibbett noted it is on every major supplier’s list of differentiated retailers, as brands like Nike and Under Armour trim retail partners and shift more sales to DTC.
From an investment perspective, the Company experimented with a new merchandising prototype last year, and elements of the prototype are being used to refresh stores, including new sneaker walls and display systems. In FY20, the Company completed 24 City Gear remodels and opened 30 new stores. For FY21, it plans to open double-digit net new stores for both Hibbett and City Gear banners, and will consider attractive acquisitions. After launching its e-commerce platform in 2017, it has seen strong growth in FY20, with online representing a mid-teen percent of total sales; it continues to add new services like store pickup options, and package insurance, while also monitoring which items it sells online to maintain profitability. Management believes its stores serve customers who are more likely to pay in cash and less likely to use online services. Click here to request a list of future store openings.
On January 14, Christopher & Banks Corporation filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of New Jersey. The proceedings have been designated as case number 21-10269. The filing was not a surprise; the Company had been reporting weak operating results. The Company had struggled with top-line results for several years and just started to gain traction before the pandemic. Sales failed to rebound after stores reopened, and the Company could not raise additional liquidity. Christopher & Banks is looking for a buyer for its website platform and IP assets.
The Court entered interim orders authorizing the Debtors to:
- Use cash collateral. The Debtors did not file a motion to access a DIP Facility. The Debtors stated, “Consensual use of cash collateral will provide sufficient liquidity to run going-out-of-business sales and market and sell the e-commerce business. Cash on hand and revenue from the store-closing sales are projected to be sufficient to support continued operations, as well as reduce the balance owed to the prepetition lenders through structured paydowns”; and
- Immediately commence GOB sales at all 449 stores (click here to request the list). The sales are expected to conclude by February 28. The Company leases all of its retail locations (which trade as Missy, Petite, Women; Christopher & Banks; and C.J. Banks), as well as a distribution center and corporate headquarters in Plymouth, MN. The Debtors do not own any real property. The Debtors engaged Hilco Merchant Resources, LLC to liquidate the inventory in their stores.
A hearing on final approval of the orders is scheduled for February 8.
The below retailers recently released their earnings reports. To request more information on these companies, or to discuss the financial performance with a retail industry expert, please click here.
