January 8, 2020
Bed Bath & Beyond is actively pruning its real estate holdings to generate cash and completed a $250.0 million sale-leaseback transaction with an affiliate of Oak Street Real Estate Capital. This transaction includes 2.1 million square feet of commercial space, including stores, office space and distribution centers. Proceeds will be used for buybacks, debt reduction and business operations. This follows a significant change in senior management in mid-December, as new CEO Mark Tritton attempts to turn around the business. The Company continues to work with outside financial advisors to assess and optimize its real estate holdings and financial performance, suggesting the possibility of further transactions or store closures. Click here to request a list of future openings and closings.
Reports indicate that Topgolf International has selected banks for an IPO that could value the Company at about $4.00 billion. The Company is working with Morgan Stanley, JPMorgan Chase & Co., and Bank of America. The IPO is expected to come as soon as this year. Topgolf currently has $525.0 million in outstanding debt. Private equity firm Providence Equity Partners made a “sizable minority investment” in Topgolf in 2016, followed by Callaway Golf Co. in 2017. Click here to request a list of future openings.
Chewy.com plans to invest more than $35.0 million to expand its operations in Lackawanna County, PA, creating 1,000 new, full-time jobs, and retaining 2,401 existing jobs throughout the state over the next three years. It plans to build a one million square-foot fulfillment center in Archbald. It will be the Company’s third Pennsylvania location and tenth in the country.
Yesterday, reports indicated that Macy’s is closing six locations, with clearance sales beginning this month and running for eight to 12 weeks. The Company will offer insights on its real estate strategy and upcoming growth plans during the investor conference on February 5.Click here to request a list of closings.
On January 6, Yum! Brands announced an agreement to acquire The Habit Restaurants for $14.00 per share, or $375.0 million in aggregate. Yum! plans to fund the acquisition with cash and revolver borrowings, and expects the deal will close by the end of the second quarter of fiscal 2020. Following completion of the acquisition, The Habit will continue to be managed by its President and CEO, Russell Bendel, and CFO, Ira Fils, with Mr. Bendel reporting to Yum!’s CEO, David Gibbs.Click here to request a list of future openings for Yum! Brands and The Habit Restaurant.
During the last week of December, Amazon issued a press release highlighting holiday season activity. Customers shopped at record levels, and billions of items were ordered worldwide. Independent third-party sellers’ (mostly SMBs) worldwide unit sales were up double-digits from last year. Some of the best-selling products were the Echo Dot, Fire TV Stick with Alexa Voice Remote, L.O.L Surprise!, iRobot Roomba Vacuum, HAUS LABORATORIES (makeup), AmazonBasics, Carhartt, and Champion items. The most popular categories include toys, fashion, home, and beauty.
Amazon plans to open a new one million square-foot fulfillment center in Deltona, FL that will distribute large items. The Company first launched fulfillment operations in Florida in 2013 and currently operates facilities in Orlando, Miami, Tampa, and Jacksonville.
In a recent interview, A.C. Gallo, president and chief merchandising officer of Amazon’s Whole Foods, said the Company is focused on the next generation of natural food retail. Mr. Gallo commented, “We need to figure out a way to go beyond organic. Organic is great in terms of growing safer food, but it doesn’t really take into account everything that might be going on in the environment around it.” He said the Company’s priorities for 2020 include ensuring that its products foster ethical and sustainable growing practices. Click here for a list of future openings and closings.
Kroger recently broke ground on a new store in Dayton, OH that is has been planning since 2014. The 124,000 square-foot supermarket will replace an existing 58,000 store about a mile away. The new store will feature designated areas for online order pick-up and pharmacy pick-up, drive-thru banking lanes, a Starbucks and a 24-hour fuel center.
Stater Bros. announced plans for a new 44,380 square-foot replacement store in Whittier, CA. The Company expects to break ground in the summer of 2020 and anticipates its opening in spring 2021. Stater has also announced plans for stores in Ladera Ranch, Ontario Ranch and Calimesa.
Sprouts will open two new Washington stores in Seattle (March 18) and Silverdale (April 15). Both stores are about 27,000 square feet.
Wegmans Food Markets will invest $175.0 million to establish a regional distribution operation in Hanover County, VA.Click here for a list of the Company’s planned new locations.
According to reports, Fairway Market is preparing a second restructuring as early as this month, after failing to find a buyer for its 14 stores. The Company’s owners, including Brigade Capital Management and Goldman Sachs Group, made it known they were seeking bidders in September, but the asset has been openly available since prior to the last filing in 2016. There is way too much debt to sell the Company as a whole. At this point, cherry pickers could focus on a few of the NYC locations and potentially look to keep the banner. Suburban stores have never met expectations, and many are not likely to survive.
Lidl US plans to invest $100.0 million to build a regional distribution center in Covington, GA. The 925,000 square-foot facility will serve as the Company’s fourth regional DC. Lidl currently only has four stores in the state and more than 70 across nine East Coast states. With other DCs located in Graham, NC; Perryville, MD; and Fredericksburg, VA, it would appear the current intentions for expansion would be toward the Southeast.Click here to request a list of future openings.
As part of Ahold Delhaize’s previously announced three-year, $480.0 million transition plan to a fully integrated self-distribution model, the Company announced it will open a 975,000 square-foot warehouse and distribution space in Manchester, CT. The facility, previously a JC Penney distribution center, will service 200 Stop & Shop stores in southern New England and New York State with 50 million to 60 million cases of dry goods and nonperishable food items annually. Fresh perishable products for Stop & Shop stores would continue to be distributed from a center in Freetown, MA.
In other news, real estate investment and management firms Winstanley Enterprises LLC (Concord, MA) and Surrey Equities LLC (New York, NY) have partnered to acquire a 23-property Stop & Shop portfolio for $150.0 million. The 1.4 million square-foot portfolio consists of 14 stores in the New England region, along with other sites in New Jersey, New York, Pennsylvania, Virginia, North Carolina, South Carolina and Georgia. The properties are triple-net leased to Ahold Lease USA Inc., a subsidiary of Ahold Delhaize. Winstanley is also the Company leasing the Manchester DC mentioned above.
Modell’s Sporting Goods has entered into a lease on a new 312,000 square-foot distribution center in Bordentown, NJ, according to management. The distribution center will begin operating during fall 2020. Management said the new DC is better situated to service its stores and is more automated and cost-effective than its existing facility in the Bronx. In January 2019, we reported that the Bronx DC was part of a financing transaction, which gave the Company lease-back rights. An entity controlled by the Modell family owned the Bronx DC and received the proceeds. Management previously said the financing transaction had no impact on the Company.
On December 27, Destination Maternity, DIP reported closing a transaction under which Marquee Brands purchased Destination Maternity’s e-commerce business, intellectual property, store-in-store operations, and related assets for $50.0 million in cash. Marquee Brands is owned by funds managed by the private-equity arm of Neuberger Berman, an employee-owned investment manager. Proceeds from the transaction were primarily used to repay in full borrowings under the ABL Facility and Term Loan. We previously reported that the Company’s prepetition lenders, Wells Fargo and Pathlight Capital, had refused to provide a DIP Facility, but allowed the Company to access cash collateral in exchange for an adequate protection package during the Chapter 11 proceedings. We also previously noted that the Company will close its remaining 235 retail stores where liquidation sales are not already in process. In connection with the transaction, Lisa Gavales resigned as CEO. Following her resignation, Ms. Gavales will continue as a director of the Company, and Dave J. Helkey, CFO and COO, will take over Ms. Gavales’ duties. Mr. Helkey’s title will not change.
On December 31, Regis Corporation announced that The Beautiful Group (TBG) transferred back approximately 200 mall-based salons operating primarily under the Regis and Mastercuts brands that TBG previously acquired from Regis. As part of the transaction, TBG also transferred back the Mastercuts brand and other ancillary brands, and Regis terminated its remaining agreements with TBG, including its license of the Regis brand to TBG. The transferred salons are locations where Regis has continuing obligations under real estate leases. The remaining 300 TBG salons for which Regis has no lease obligations are expected to be closed by TBG.
Earning Reports
Pier 1 Imports reported third quarter sales decreased 13.3% to $358.4 million, and comps declined 11.4%. The Company estimates that the shift of certain holiday selling days, which were included in the prior year’s third quarter, negatively impacted 3Q20 comps by approximately 650 basis points. Margins faltered due to sales deleverage, with EBITDA loss widening 142.6% to $41.0 million. The Company announced that it expects to close up to 450 stores, or nearly 50% of its store fleet, significantly more than the 70 initially planned, driven by the ongoing deterioration in its performance. The Company also plans to reduce its headcount, which, according to reports, could include cutting up to 300 employees (40% of its headquarter staff). It is also cancelling orders, as it works to stabilize the business and prepare for a potential bankruptcy filing, amid rampant competition. Reports indicate that bankruptcy documents were drafted in December, and the Company is working to procure Chapter 11 financing, with the goal of a post-bankruptcy company with $900.0 million in sales. Pier 1 is also working to cut operating costs and to reduce its debt load, currently over $300.0 million. For the latest list of future closings, please click here.
Yesterday, Albertsons Companies announced results for its third quarter and 40 weeks ended November 30, 2019. Sales increased 1.9% to $14.1 billion the 3Q19 period, driven by the 2.7% increase in identical sales, partially offset by store closures and lower fuel sales. Identical sales continued to benefit from growth in online sales and own brands sales growth. Own Brands sales penetration reached a new high of 25.6%, and online sales grew 34%.
Rite Aid’s shares have nearly tripled in value since reporting 3Q20 results on December 19. Performance during the period beat analysts’ expectations on both the top and bottom line, driven by a 5.7% lift in PBM revenues and a 2.8% increase in pharmacy script volume. The solid performance during the period provides much needed momentum for the Company, as the new leadership team prepares to roll out a long-term strategy in March to revitalize Rite Aid pharmacies and reinvest in the expansion and integration of the PBM business.
On Monday, Rite Aid announced it has commenced an offer to exchange up to $600.0 million of its outstanding 6.125% Senior Notes due 2023 for newly issued 7.500% Senior Secured Notes due 2025. The exchange offer extends a portion of the old notes from April 2023 to July 2025.
