July 10, 2018
The Fresh Market
Yesterday, The Fresh Market announced plans to close 15 stores in Georgia, Illinois, Indiana, Kentucky, North Carolina, New Hampshire, Tennessee, Virginia and Wisconsin. The closures represent approximately 8.5% of its 176-store base and follow the Company’s closure of 13 stores in May 2016, 5 stores in April 2017, as well as its announced suspension of all active and future store development in January 2018. This recent news was not a surprise, considering that comps have been falling in the mid to high-single digits for the better part of the last two years. The below Store Concentration Map details the 15 store closures
Toys "R" Us, DIP
Hobby Lobby, Burlington Stores, and TJX Companies are among the retailers expected to fill the spaces vacated by the now defunct Toys “R” Us, DIP, according to Conor Flynn, CEO of Kimco Realty Corp. Hobby Lobby, which was described as particularly aggressive, operates more than 800 stores, with plans to open 60 new stores and hire 2,500 new employees this year. In June alone, it opened seven new locations. Burlington Stores operated 647 stores at the end of the first quarter and plans to add at least 35 new stores this year. Burlington previously picked up over 30 Sports Authority locations when that business liquidated. The typical Toys “R” Us store is 35,000 square feet, an ideal size for off-price retailers, fitness centers, and specialty grocers. The smaller Toys “R” Us stores, roughly 20,000 to 25,000 square feet, are suitable for retailers such as TJX, whose brands include T.J. Maxx, Marshalls, HomeGoods, Sierra Trading Post, and Homesense. TJX opened a net 71 stores in the first quarter for a total of 4,141 locations. Kimco Realty Corp has interests in about 475 shopping centers, which included about 20 Toys “R” Us stores at the beginning of the year.
Amazon continues to assert its position in the healthcare industry, with the recent purchase of PillPack and its collaboration with JP Morgan and Berkshire Hathaway on a healthcare partnership to reduce employee healthcare costs. Amazon has also reportedly been undercutting pharmacy chains on non-prescription medicine. Median prices for over-the-counter, private-brand medicine sold by Walgreens and CVS Health were reportedly about 20% higher than Basic Care, the over-the-counter drug line sold exclusively by Amazon. Amazon began selling the Basic Care line in August with roughly 35 products and has since expanded its range to 65 drugs.
In fall 2018, Amazon will open its second Amazon Go location in Seattle, WA. The new store will be about 3,000 square feet, significantly larger than the existing 1,800 square foot Seattle store about a mile away. The Amazon Go concept replaces cashiers and self-checkout with a grab-and-go approach. Amazon confirmed in May that it has stores planned for Chicago and San Francisco, but no timetable for opening the locations was revealed. It is also rumored to be opening stores in Los Angeles and other parts of Seattle as well.
Amazon is planning to send out a print toy catalog for the holiday shopping season, which would also be handed out at its Whole Foods stores. The 100-page catalog would be inspired by the iconic “Big Book” catalog from the now-bankrupt Toys “R” Us. Meanwhile, Amazon’s fourth annual Prime day, to be held July 16 - 17 (36 hours, six hours longer than last year), will include an additional 10% off hundreds of sale items and deep discounts on select popular products in its Whole Foods stores. Amazon Prime Rewards Visa card members will also earn 10% back at Whole Foods during the sales event, up to $400 in purchases. Prime Day will reach more international customers this year; in addition to enabling shoppers in the U.S., the U.K., Canada, Mexico, Spain, Japan, Italy, India, Germany, France, China, Canada, Belgium and Austria to participate. Amazon is opening the sale to Prime members in Australia, Singapore, the Netherlands and Luxembourg.
Finally, earlier today Amazon said it plans to build a one million square-foot fulfillment center in Ottawa, its fifth facility in the province of Ontario. The facility will be used to pack and ship large items.
Kroger plans to invest $17.0 million in its 674,000 square-foot distribution center in Boone County, KY and add 250 associates. The investment will be used to support its e-commerce and digital services. The DC opened in October 2017 to service the Company’s direct-to-store distribution centers across the eastern half of the country, as well as Kroger’s growing e-commerce and digital business. According to the Company, “This significant investment in the distribution facility and our associates will allow us to more efficiently reach our customers and help to deliver on new ways to shop with Kroger, as we redefine the grocery customer experience through Restock Kroger.” In other news, Kroger plans to launch a new apparel brand called Dip, in partnership with fashion designer Joe Mimran. The Company has previously launched the Club Monaco, Joe Fresh and Pink Tartan apparel brands.
Key Food Store Co-operative
Key Food Stores Co-operative announced seven new locations have been added to the Gala Foods Supermarkets banner as of June. This gives Aurora Grocery Group, parent company of Gala, a total of nine Gala Foods supermarkets across Massachusetts, Connecticut, New York and New Jersey. The seven stores are being rebranded from the Compare banner, which Aurora Grocery Group had initially licensed under about 30 years ago. The stores have already undergone major remodels and will offer delivery and online shopping options.
Publix Super Markets
Publix Super Markets has acquired a lease from Southeastern Grocers’ Winn-Dixie chain in Gulf Shores, AL, its second store in the area. Southeastern Grocers, which recently emerged from Chapter 11, has closed 94 stores as part of its financial restructuring. The acquisition comes on the heels of Publix’s purchase of the three remaining Florida Safeway stores from Albertsons last month.
Village Super Market
Village Super Market, a member of the Wakefern cooperative, recently opened the first ShopRite supermarket in the New York City borough of the Bronx. The 38,000 square-foot store, which is located in a former Key Food, focuses on fresh, locally sourced foods and expanded prepared food offerings.
Southeastern Grocers, parent company of BI-LO, Fresco y Mas, Harveys Supermarket and Winn-Dixie, filed a motion to reject its Montgomery, AL distribution center lease. The Debtor has agreed to a payment of $3.6 million to the lessor for all damages and claims. The Company has until October 23 to reject the Montgomery lease as well as an Orlando, FL distribution center lease, which it is also expected to reject. A hearing date for the motion is set for August 21. C&S Wholesale, which operates both facilities for Southeastern Grocers, filed WARN notices indicating it plans to lay off 195 workers at its Montgomery warehouse and 328 workers at its Orlando warehouse. The layoffs in Orlando will begin August 27 and run through September 10. The warehouse is closing because of the reduced number of locations it would be servicing in the area. C&S operates four other DCs in Florida, located in Plant City, Miami, Baldwin and Jacksonville.
Lowes Foods will open a new store in Forest Acres, SC on July 18. The 51,500 square-foot store will feature expanded prepared food offerings, an assortment of organics, bulk foods, and the Lowes Foods-To-Go online personal shopping service. Alex Lee is the parent company of Lowes Foods, which operates about 100 supermarkets throughout North Carolina, South Carolina and Virginia.
Ahold Delhaize’s Giant Food division will invest $21.0 million to open a new store in Olney, MD next spring. The 41,000 square-foot store will replace a nearby location and will offer expanded prepared food and organic selections. It will also have a pharmacy, self-checkout, a PNC bank branch and a Starbucks. Giant Food operates 169 stores in Virginia, Maryland, Delaware and D.C.
Bashas has remodeled a Food City store in south Phoenix, AZ. The store now offers expanded produce and Mexican food options, including increased seating for Dos Ranchitos Cocina, a cafeteria-style Mexican restaurant.
Big Y Foods
Big Y Foods opened its newest Big Y Express Gas kiosk in front of its Big Y World Class Market in Stafford Springs, CT. This is the eighth Big Y Express location and the first in the state. The other seven, the first of which opened in 2013, are located in Massachusetts.
In late August, Schnucks will open a 57,600 square-foot store in Maplewood, MO in a former Shop ‘n Save, which decided not to renew its lease. In April, Supervalu announced it plans to divest the Shop ‘n Save grocery chain. The Maplewood location will open its doors ahead of another new 37,000 square-foot Schnucks in Warrenton, MO that is currently under construction and scheduled to open in late fall. Meanwhile, on July 8 the Company closed two underperforming stores in Rockford, IL.
Walgreens Boots Alliance
Last week, Walgreens Boots Alliance completed the previously announced agreement to acquire a 40% minority stake in Sinopharm Holding GuoDa Drugstores Co., Ltd., a leading retail pharmacy chain in China. GuoDa operates more than 3,800 retail pharmacies in approximately 70 cities. Walgreens acquired the minority stake through a capital increase worth RMB2.767 billion (US$416.0 million) and will account for the stake as an equity method investment.
Canadian Tire Corporation
On July 3, Canadian Tire Corporation announced it closed on the acquisition of the company which owns and operates the Helly Hansen brands and related businesses. Helly Hansen is a leading global sportswear and workwear brand based in Oslo, Norway. That same day, it closed a private placement offering of C$650.0 million of unsecured medium term notes, consisting of C$250.0 million in 2.65% Series E Unsecured Medium Term Notes due July 6, 2020 and C$400.0 million in 3.167% Series F Unsecured Medium Term Notes due July 6, 2023. The Notes are rated BBB+ by S&P Global Ratings.
Macy’s recently informed customers of a breach in which a third party gained access to accounts on Macys.com and Bloomingdales.com between April 26 and June 12. While it said only a small number of customers were affected, it didn’t specify how many and only indicated that the data was obtained by a source other than Macy’s. According to the Company, it investigated the matter, addressed the cause of the breach, and implemented additional security measures as a precaution. This year, more than five million credit and debit card records were believed to have been stolen from Lord & Taylor, Saks Fifth Avenue, and Saks Off 5th by a hacking syndicate, and there was also a security incident at Sears that compromised nearly 100,000 accounts.
In other news, Macy’s is accelerating the expansion of its Bluemercury banner, with plans for 30 standalone stores and shops within Macy’s stores in 2019, on top of 25 planned for this year. So far two were opened this year, with the remaining 23 expected to open by fiscal year end. As of the end of its first quarter, Macy’s operated 159 Bluemercury locations (139 freestanding and 20 inside Macy’s stores).
A 35,000 square-foot Stein Mart store in Sandy Springs, GA is closing in early September, after more than 20 years in operation. Stein Mart ended the first quarter with 289 stores in operation, including 15 stores in Georgia.
Published reports indicate that Lafayette, CO (just east of Boulder) is offering Kohl’s Corporation nearly $2.0 million in incentives to bring a Kohl’s to the city’s new Promenade development, where Tractor Supply and 24-Hour Fitness are also opening locations. Kohl’s has reportedly signed a 15-year lease for the Lafayette site. The planned 55,000 square-foot store, which is still in the approval process, would be a scaled down version of its big-box store layout, which averages 88,000 square feet. However, it is expected to include the same amount of inventory. Kohl’s operates 24 stores in Colorado, including a location in Louisville that is just a few miles away from the projected new store.
Nordstrom plans to open two Nordstrom Local stores in Los Angeles, CA, one downtown and one in the Brentwood neighborhood. The Company opened the first and so far only Nordstrom Local last October in Los Angeles (Melrose). The 3,000 square-foot store is designed as a neighborhood hub that offers an array of services, including onsite tailoring and alterations, curbside pickup and in-store pickup of online orders. It has no dedicated inventory, but customers can have online orders shipped there to try on clothes in the store’s fitting rooms. In Brentwood, Nordstrom Local will open in a 1,200 square-foot location, and downtown it will open in a 2,200 square-foot location. There are 16 full-line stores in the Los Angeles area. Reports also indicate that Nordstrom plans to expand Nordstrom Local to Manhattan.
Dick's Sporting Goods
This week a Dick’s Sporting Goods store is opening in Richmond, VA. The 47,000 square-foot store took over space from a former A.C. Moore that relocated last fall. Meanwhile, Dick’s recently registered with the Hawaii Department of Commerce and Consumer Affairs, an indication that it may be eyeing a new location in Hawaii. Dick’s currently sells University of Hawaii merchandise on its website but does not have a physical location on the island. Dick’s would be the first big-box sports retailer in Hawaii since Sports Authority closed its eight stores in 2016.
Essendant and Genuine Parts Company
In April, Essendant and Genuine Parts Company (GPC) inked a deal under which Essendant agreed to combine with GPC’s S.P. Richards business. This agreement remains in effect, and Essendant’s board continues to recommend that its shareholders vote in favor of the transaction. In June, Sycamore Partners notified the FTC of Staples’ April 29 unsolicited proposal to acquire Essendant. On July 2, Essendant was informed that the FTC intends to issue a civil investigative demand to Essendant in connection with Sycamore’s notification. Essendant said it believes that the FTC has issued Sycamore a second request with respect to this filing. Staples has not entered into a confidentiality agreement nor has it otherwise engaged in discussions with Essendant with respect to its proposal to acquire Essendant.
Construction is underway on an Ace Hardware in Butte, MT, a 20,000 square-foot location that will replace a 10,000 square-foot nearby store. In November 2017, the project received $200,000 in economic development money from Butte-Silver Bow’s Council of Commissioners. At that time, the project was estimated to cost $5.9 million, but the price has increased to $6.8 million due to new land acquisitions at the site, which currently sits at around four acres. The store is slated to open during late January 2019. Once open it will be the largest of the four Ace Hardware stores in Montana. The other stores are located in Anaconda, Whitehall and Deer Lodge.
The Walking Company Holdings
The Walking Company Holdings announced that it emerged from Chapter 11. The Company now operates 185 stores, down from 208 stores when it filed for bankruptcy four months ago; 23 stores were closed during the proceedings. Management said it has “sufficient capital” to achieve long-term growth objectives, based on an investment of $10.2 million in new equity from certain shareholders as well as an “enhanced” financing package from Wells Fargo.
Abercrombie & Fitch
Abercrombie & Fitch revealed the locations of two college campus sites it aims to use as “learning labs,” providing insight into operating small spaces with an omnichannel platform. One will be located in Columbus, OH serving The Ohio State University, and the other will be in Los Angeles, CA serving the University of Southern California. Each location will be half the size of an average Abercrombie & Fitch store (which average 7,000 square feet) and fully integrated with omnichannel functions, including a 30-inch interactive screen to allow customers to shop Abercrombie’s entire e-commerce site. Customers will also be able to order in store, collect online orders, and ship from the store directly. Both stores are due to open next month.
Authentic Brands Group
On July 5, Authentic Brands Group (ABG) announced it completed its acquisition of Nine West and Bandolino from Nine West Holdings, DIP. The acquisition increases ABG’s footwear and accessories business to more than $2.00 billion in global retail sales, bringing its total brand portfolio to nearly $8.00 billion. As part of the acquisition, ABG assumes all licensing partnerships and marketing activities for the Nine West and Bandolino brands. Marc Fisher Footwear will operate the footwear businesses and Signal Products will operate the handbag and small leather goods businesses. The Company said its initial focus for Nine West and Bandolino will be on developing near-term and long-term strategies to reinforce the brands’ fashion positioning in key markets around the world. It will also accelerate the acquired brands’ ongoing expansion into new territories and categories, including sportswear, outerwear, swimwear, intimates, fragrance, sleepwear and home. Of ABS’ 33 brands, the most well-known are Nautica, Aeropostale, Juicy Couture, Jones New York, and Frederick’s of Hollywood.
On July 3, Boot Barn acquired certain assets of Drysdales, Inc., a footwear retailer with two stores in Tulsa, OK. Terms of the deal were not disclosed. As part of the transaction, Boot Barn purchased inventory and offered employment to the Drysdales team at both store locations. Boot Barn funded the acquisition from cash on hand.
The Rockport Company, DIP
The Rockport Company, DIP agreed to sell itself to private equity firm Charlesbank Capital Partners. The Company expects the sale, which requires approval by the Court, to close by July 31. Charlesbank made a $150.0 million stalking horse bid in May, prior to the Company’s bankruptcy filing on May 14, but the auction was canceled due to lack of interest from other parties.
Online mattress retailer Amerisleep opened its first Denver, CO store on June 23. At the store, customers can enter “Dream Suites” where they can evaluate one of five mattress models. The Company operates four stores in Arizona and one in Texas. According to Amerisleep, 80% of mattresses are still sold in stores, so having a brick-and-mortar presence is important to the Company. Physical store fronts also bring walk-in traffic and drive awareness that wouldn’t otherwise exist. Other online mattress companies include Casper and Leesa, both of which are beginning to establish physical footprints. While Casper operates 18 locations in 11 states, Leesa is selling its mattresses at nearly 100 West Elm stores. Later this summer, Amerisleep plans to open another Colorado location, in Cherry Creek, where Casper and Leesa also have a presence; it will open its second Texas location, in Fort Worth, this fall, where only Leesa has a presence.
Claire's Stores, DIP
Claire’s Stores, DIP is expected to receive a bid from junior bondholder Oaktree Capital Management, according to White & Case LLP, the law firm representing Oaktree. The firm is putting together an offer that it says would exceed Claire’s current value of $1.40 billion – $1.68 billion. Claire’s filed Chapter 11 in March and has been planning to exit bankruptcy with new financing from private equity owner Apollo Global Management and other first-lien bondholders, including Elliott Management Corp. and Monarch Alternative Capital L.P. Oaktree has objected to this plan, saying Claire’s should open the sale to all bidders, and last month the Court agreed, setting August 31 as the deadline for all offers.
PriceSmart’s third quarter net warehouse club sales increased 5.6% to $750.5 million, and total revenues (export sales, membership income, and “other” revenue) rose 7.1% to $782.2 million. Growth was driven by the opening of two new clubs in Costa Rica and the Dominican Republic. Operating income was $28.4 million, compared to $27.6 million in the prior year. Net income fell 0.8% to $18.7 million.
For the month of June, net warehouse club sales increased 5.9% to $243.7 million. For the ten months ended June 30, net warehouse club sales rose 5.2% to $2.56 billion. The Company opened two new stores over the past year, bringing the current store count to 41.
Reflecting the June 28, 2017 acquisition of CST Brands and the December 22, 2017 purchase of Holiday Stationstores, Alimentation Couche-Tard’s fourth quarter sales increased 41.5% to $13.61 billion. Same-store merchandise revenues increased 1.8% in the U.S., 4.3% in Europe and 3.6% in Canada. Same-store road transportation fuel volumes decreased 0.1% in the U.S. and 2.9% in Canada, while same-store volumes increased 0.1% in Europe. Synergies related to the CST integration reached approximately $153.0 million. Net income was $392.7 million, up from $277.6 million last year, boosted by a $69.7 million benefit related to U.S. tax reform. The Circle K rebranding project for all Statoil sites in Europe is now completed. The project was launched in Ireland, while the rollout continues in North America. More than 3,350 stores in North America and more than 1,650 stores in Europe now display the new Circle K global brand. In conjunction with its earnings release, the Company announced a C$0.01 increase in the quarterly dividend to C$0.10 per share.
Meanwhile, Alimentation Couche-Tard is expanding the market presence of its Circle K brand in Atlantic Canada. This follows its acquisition of CST Brands through a joint-venture agreement with Irving Oil Ltd. to rebrand 36 CST sites to Circle K and the Irving fuel brand. The deal, which brings the total number of Circle K sites in Atlantic Canada to 166, also includes selling 13 of these former CST retail sites to Irving Oil; the Company will continue to operate the sites.