July 24, 2019
Ross Stores opened 22 Ross Dress for Less and six dd’s Discounts stores across 10 states in June and July. These new locations are part of the Company’s previously announced plans to add approximately 100 stores in 2019, including 75 Ross and 25 dd’s locations. As part of the latest wave of openings, Ross entered the state of Ohio with two new stores; it now operates 1,772 total stores in 39 states, Washington D.C., and Guam. Another five of the 28 stores were opened in the Company’s newer markets of Illinois, Indiana, Kentucky and Missouri. The Company remains confident that it can grow to 2,400 Ross Dress for Less stores and 600 dd’s Discounts locations over time
(click here to request a list of future openings).
GNC Holdings reported U.S. and Canada segment sales decreased 8% to $476.1 million. E-commerce sales comprised 8.1% of U.S. and Canada revenue, compared with 8.3% last year. The decrease in revenue was primarily due to negative same store sales of 4.6%, which resulted in a revenue decrease of $17.5 million, and the closure of Company-owned stores, which conibuted a $14.9 million decrease in revenue. In domestic franchise locations, same store sales decreased 1.8%. International revenue decreased 18.9% to $39.4 million, mostly due to the ansfer of the China business to the newly formed (HK) joint venture in February. Manufacturing/Wholesale segment sales decreased 64.4% to $18.5 million, primarily due to the ansfer of the Nua manufacturing business to the newly formed manufacturing joint venture with International Vitamin Corporation in March 2019. As a result, overall sales decreased 13.6% to $534.0 million, and EBIA slipped 4.9% to $60.1 million. For fiscal 2019, the Company is expecting to generate free cash flow of $90.0 million – $100.0 million.
During the first six months of fiscal 2019, GNC opened 66 locations (13 Company-owned, three domestic franchises and 50 international locations) and shuttered 245 underperforming locations (159 Company-owned, 33 domestic franchises, and 53 international locations). It also acquired 14 franchised stores and converted four Company-owned stores into franchises.
As previously disclosed, the Company's store optimization program identified 700 – 900 underperforming stores in the U.S. and Canada that will be closed within the next three years. During its earnings call with analysts discussing its results, management indicated it now expects the final number to be closer to the top end of this range. The Company also commented that it currently has a little over 800 mall locations (store concenation map below), and over the long-term it could bring that down to 400 – 500. Management noted mall locations represent 28% of its U.S. and Canada stores (61% sip centers), and that these locations are EBIA positive, despite mid to high single digit negative comps.
The Company also noted it is now offering GNC products in 250 of the nearly 1,000 Hudson News locations, and as part of its partnership with Dick’s Sporting Goods launched las fall, has expanded its relationship to an additional 35 stores in addition to the 10 pilot stores. The Company also signed a new partnership agreement that will give it a presence in Brazil.
On July 17, Amazon reported the results of its Prime Day, which spanned two days from July 15 to July 16. Sales surpassed the previous Black Friday and Cyber Monday combined ($7.75 billion). However, this was due to Amazon extending the length of its event. Prime Day was initially 24 hours in 2017, 36 hours last year and now 48 hours in 2019. Other retailers increased competition as well. According to RetailMeNot, the total number of retailers actively competing with Amazon on Prime Day grew from seven on the first Prime Day in 2015 to over 300 retailers in 2019. July 16 also marked the highest recorded number of “new” Prime memberships in the Company’s history, with July 15 being the second highest. Third-party sellers’ (mostly small and medium-sized businesses) sales exceeded $2.00 billion, the highest recorded figure for the group over a two-day period. Over 100 million Prime members purchased 175+ million items. Amazon also noted that Prime members now span 200 counies. In the U.S. members have access to more than 10 million items for one-day delivery coast to coast. Additionally, Prime Now receives grocery delivery from Whole Foods in nearly 90 U.S. meo areas.
Amazon continues to expand its cashless Amazon Go concept in Chicago, IL with two new stores, bringing the total number of Go stores in the city to six. The stores will be 1,425 square feet and 930 square feet, and an exact opening date has not be disclosed. The Company also said that Seattle will get a fifth 1,150 square-foot store “soon.” There are currently 13 Amazon Go stores operating in Seattle, Chicago, San Francisco and New York City, with another one slated to open in San Francisco.
Amazon announced plans to open two new Ohio fulfillment centers, in Akron and Rossford. Each fulfillment center is more than 700,000 square feet and will be used to pack small items such as books, eleconics and toys. The Akron warehouse is expected to open during 4Q19 and the Rossford a year later. This will bring the number of locations it operates in the state to ten.
In other news, Amazon reached a deal with Germany and Ausia to shut down antiust probes into how it handles other merchants on its site. Amazon agreed to change its business services agreement worldwide in mid-August to address a number of complaints from sellers. Meanwhile, the Company faces a full-blown EU antiust investigation that could be announced as soon as this week. The investigation targets Amazon’s online business model as a host to many smaller retailers. The EU has been asking how Amazon might use data it collects from sellers on its Marketplace platform, such as seeing what products do well and whether Amazon uses that data advantage to launch its own similar items.
As previously reported, u Kids, managed by former executives of Toys “R” Us, announced initial plans to open up to 10 stores this year, each averaging 10,000 square feet (click here to request updates on the locations of these stores). More recently, the Company refined its plans, indicating it intends to open only two stores this year, averaging about 6,500 square feet each, with further plans to open 10 additional stores in 2020. The new stores are expected to be smaller than the former Toys “R” Us stores, which averaged 20,000 square feet to 50,000 square feet (or 30,000 square feet to 70,000 square feet if combined with Babies “R” Us). The two locations are planned for Houston, TX and Paramus, NJ. u Kids is working in a partnership with a technology retailer, b8ta, which owns 50% of the venture and will provide data and analytics to u Kids to enhance customer engagement and product relevance.
On Monday, Bed Bath & Beyond Inc. announced the elimination of the President and COO role held by Eugene A. Castagna. Mr. Castagna's lay off, effective immediately, comes as part of the Company's ansformational review, which includes a reduction in corporate staff by approximately 7%, including vice presidents, directors, managers and professional staff. As a result, the Company expects to generate annual net savings of about $30.7 million; due to the timing of these changes, approximately $18.9 million of net savings are anticipated for the remainder of fiscal 2019. The Company also expects to incur pre-tax cash resucturing charges of about $12.0 million in fiscal 2019, primarily for severance and related costs, all of which will be expensed in the second quarter.
Bed Bath & Beyond Inc. affirmed its estimated fiscal 2019 full year net earnings per diluted share to be at the lower end of $2.11 to $2.20, excluding goodwill and other impairments, severance and shareholder activity costs. The Company expects to see a gradual improvement in its quarterly net earnings per diluted share, with the vast majority to be earned in the second half of the fiscal year.
Mary A. Winston, Interim CEO, and Member of the Board of Directors stated, "As we reset our approach to the business ansformation underway, we are executing against 4 key near-term priorities including resetting the cost sucture. While decisions that impact our staff are difficult, today's action is an important step in simplifying our corporate sucture and insuring our resources are aligned with the business we are managing today. We remain confident in the underlying business and our ability to leverage the sength of the Bed Bath & Beyond brand and our lasting connection with customers to deliver on our near-term priorities and ansform the Company."
Retail Bankruptcies - Special Update
AggData’s Chapter 11 Recap takes a look back at the previous six months of retail bankruptcy activity from all 94 U.S. jurisdictions and presents the data by month, indusy and state of primary operation.
ascena retail group announced that its wind down of Dressbarn continues to progress according to plan and that all retail stores are expected to close by the end of 2019. Management noted that it received “overwhelming” support from landlords for its plan. The Company also noted it is current, and expects to remain so, with vendors and suppliers. Dressbarn has commenced store-closing or inventory clearance event sales at 53 stores that are slated for closure by the end of August. Dressbarn also announced that it has retained Hilco Seambank to solicit interest in the intellectual property assets, which include U.S. and international ademarks, domain names, and other assets. Click here to request a list of closed Dressbarn locations.
On July 20, Dollar General held the grand opening of its 16th disibution center in Longview, TX. At full capacity, the one million square-foot facility is expected to support approximately 1,000 Dollar General stores. It is the second DC in the state. Another DC is currently under consuction in Amsterdam, NY. Dollar General operated 15,597 stores in 44 states as of May 3.
Tops Markets signed franchise agreements to develop Spot Express cafes in two stores located in Amherst and Tonawanda, NY. Spot Express stores have a smaller footprint than aditional Spot cafes and a limited food and beverage menu. They’re marketed as a quick-serve version of full cafés, better suited to high-affic areas with limited space.
In other news, Tops continues to expand online grocery delivery through its partnership with Instacart. The Company recently launched same-day home delivery in eight more stores, in Vermont, Pennsylvania and New York.
TJX Companies’ off-price retail model continues to drive business, as evidenced by the Company posting its 23rd consecutive year of comp growth in fiscal 2019. TJX reported $38.97 billion in sales for fiscal 2019, up 8.7% from the previous year. Top-line growth resulted from increased customer affic across all business segments, culminating in significantly better than expected 6% consolidated comp growth for the year. Revenue growth was further boosted by the net opening of 236 stores, primarily throughout the U.S. Our report takes a close look at the Company’s operational and competitive status, including market position, real estate and sales ends, and provides visual competitive analyses as well as key real estate meics like store count, average sales per store and sales per square foot.
According to published reports, Kroger plans to replace a West Chester Township, OH store with a much larger 117,000 square-foot Marketplace store. Kroger’s Marketplace stores include clothes, home goods, and toys in addition to full-service grocery, pharmacy and health and beauty care departments and are larger than the aditional 65,000 square-foot Kroger. The new Kroger store is expected to open July 1, 2022. Kroger opened another West Chester store in January. Click here to request a list of Kroger future openings.
Ahold Delhaize’s Giant Food Stores will open its second Giant Heirloom Market in the University City neighborhood of Philadelphia, PA on August 2. The 9,950 square-foot unit will offer a wide selection of fresh, local and seasonal foods, grab-and-go meals, and a curated selection of wine and beer. The store will also highlight the Company’s private-label brand, Nature’s Promise. The first Giant Heirloom Market in Philadelphia opened on January 25 and two more stores are also planned for the city (one in the Northern Liberties neighborhood and one in Queen Village).
H Mart will open a 35,000 square-foot store in a mall in East Rutherford, NJ that is slated to open October 25. The Asian-American supermarket will include a Market Eatery restaurant concept. H Mart operates close to 100 stores across the U.S.
Yesterday, Krispy Kreme debuted a new store concept in Concord, NC that features ice cream, as well as digital and tech enhancements. It will be the Company’s first redesigned store in more than a decade. Krispy Kreme plans to open 45 new locations across the U.S. through 2020.
Stage Stores announced plans to convert an additional 100 stores to Gordmans off-price in 2020, bringing the total number of 2020 off-price conversions to 250. Inclusive of the 100 additional conversions planned for next year, 2020 Gordmans store count will now exceed 400 stores, and 2020 Gordmans sales are expected to be “well in excess” of 50% of total company sales. This year, the Company expects to complete 89 conversions, including 37 completed in March, 35 completed in June, and 17 planned for September. Stage expects to end fiscal 2019 with 158 Gordmans stores. The Company also raised the low end of its store closing guidance for fiscal 2019 to 55 – 60 stores from the previous guidance of 40 – 60 stores.
L.L. Bean announced plans to open a 13,000 square-foot store just outside of Toronto, Canada on August 23. The Company launched a Canadian website last month, following its announcement last year that it would be looking to open its first stores in Canada over the next decade. L.L. Bean owns 28 stores, a call center and a disibution center in Japan, where it has operated since 1992. However, in Canada, it is partnering with Toronto-based Jaytex Group on the L.L. Bean-branded stores.
ABC Supply opened a new location in Boise, ID, joining two other Idaho branches in Shelley and Nampa. The Company operates more than 760 locations nationwide. In the past two months, ABC has opened locations in Stockton, CA; Ypsilanti, MI; and Twinsburg, OH. In addition, ABC’s subsidiary L&W Supply has opened three new branches in the past month, including a Boise, ID location.
Premier Brands Group (fka Nine West Holdings) announced the sale of apparel brand Anne Klein to WHP Global, a new brand management platform led by Wave Hill Partners founder Yehuda Shmidman. The transaction amount was not disclosed. WHP Global is backed by a $200.0 million commitment from private equity firm Oakee Capital Management. Anne Klein, which generates an estimated $700.0 million in global retail sales, is its first acquisition. Premier Brands will continue to operate brands such as Gloria Vanderbilt, Kasper, and Napier. Former brands Nine West and Bandolino were sold last year to Authentic Brands for $340.0 million. Mr. Schmidman also serves as vice chairman of u Kids, which acquired certain brands from Toys “R” Us, DIP.
Nordstrom’s Anniversary Sale began on July 19 and runs through August 4. However, members of its loyalty program were granted early access on July 12, with certain “Icon” level members gaining access starting July 9. As a result of the early access, the Company is already dealing with inventory issues. Customers have complained about order cancellations on items that have run out. The Company addressed the shortage by saying it is constantly restocking many items. Click here to request a list of future openings & closings.
Dallas, TX Meo Area - Hot Market Report
The Dallas Meo Area is the fourth largest meopolitan area in the U.S.; with 7.5 million residents as of 2018, the area’s population grew 17.3% since 2010 and was the fastest growing meo area in the U.S. between 2017 and 2018. Dallas is the largest meo area in both Texas and the South, and the 10th largest in the world. As the economy continues to expand, one third of Texas’ new arrivals over the last decade have settled in/around Dallas. The growth is a function of the favorable business environment (Dallas is home to 24 Fortune 500 companies), affordable housing, and good public schools. As the saying goes, everything is bigger in Texas, so it comes as no surprise that the largest grocery retailer in Dallas is Walmart, followed by Kroger and Albertsons. Our report takes a closer look at the Dallas real estate landscape, and provides visual competitive analyses as well as key real estate meics such as future openings, store count, market share, and demographics.
After folding the Jet.com operations into the rest of the Company’s digital operations, Walmart is shuffling the finance team. The Company is merging the U.S. e-commerce finance into the greater U.S. finance team. Michael Dastugue, the Company’s U.S. finance chief, will lead the combined U.S. segment finance team in his current role. Steve Schmitt, the finance chief for Sam’s Club, will be CFO for the U.S. e-commerce division. Brandi Joplin, the chief accounting officer for Sam’s Club, will succeed Mr. Schmitt as Sam’s Club’s CFO. The shuffling is intended to “support the business in a more integrated and customer-cenic manner.”
Sherwin-Williams reported second quarter sales increased 2.2% to $4.88 billion, due primarily to higher paint sales volume in North American stores, a new customer program launched in 2018 and selling price increases. This was partially offset by demand softness in some end markets outside the U.S. and unfavorable currency anslation rate changes. Sales in the Americas increased 5% to $2.76 billion, and comps were up 4.3%. Consumer Brands’ sales increased 3.4% to $804.5 million, and Performance Coatings sales decreased 3.8% to $1.32 billion. Adjusted EBIA rose 8.5% to $921.5 million. In other news, Sherwin-Williams, along with two other companies, settled litigation with 10 California cities and counties that started nearly 20 years ago. Terms of the settlement were not disclosed. The litigation was related to a challenge of the companies’ legal advertising of lead-based paints over a century ago when lead-based paints were the “gold standard” and specified for use by the federal government, as well as state and local governments. The agreement among the parties dissolves the residential lead paint abatement program that plaintiffs sought from the Court and represents a significant reduction in their recovery.
On July 22, Starbucks announced a new deal with restaurant tech startup Brightloom in which it granted Brightloom a license for elements of Starbucks’ software in exchange for an equity state in the startup and a seat on its board. Brightloom, which was called Eatsa prior to its rebranding on Monday, previously operated a chain of seven restaurants where customers ordered via kiosk and did not need to interact with any employees. Brightloom is now seeking to sell its systems to other chains. The Starbucks investment is said to be part of an overall $30.0 million fundraising effort. Two international franchisees, Alsea and Alshaya, are also part of the funding round.
At a recent conference, Albertsons announced it was piloting a grocery delivery subscription service (in 12 stores), which started in March. Initial results have been above forecast. Kenji Gjovig, VP of e-commerce marketing and merchandising at Albertsons, said the Company plans to expand the service after seeing “off the charts” results in the Phoenix, AZ and Southern California markets. Albertsons has been using Instacart for delivery, but bringing the service in house makes more sense to enhance loyalty and conol customer data.
On July 22, Vail Resorts entered into a definitive agreement to acquire 100% of the outstanding stock of Peak Resorts for $11.00 per share in cash, subject to regulatory review and shareholder approval. As part of the ansaction, valued at $264.0 million, Vail will acquire Peak’s 17 ski areas in the U.S. Peak’s resorts are located mostly on the East Coast, while Vail’s resorts are in the Western U.S., therefore the merger expands Vail’s presence throughout the couny.
Vail intends to finance the ansaction through a combination of cash on hand, borrowings on its existing revolver, and an expansion of its existing credit facility. In addition, Vail Resorts will be assuming or refinancing Peak Resorts’ outstanding debt.
The acquisition is expected to generate incremental annual EBIA of approximately $60.0 million in Vail Resorts’ fiscal year ending July 31, 2021, the first fiscal year with the full benefit of the acquisition’s synergies, with additional revenue expected in future years. Synergies are expected to come from additional revenue across the Vail Resorts network of resorts and cost reductions from eliminating certain duplicative adminisative functions, and greater efficiencies brought by Vail Resorts’ size and scale. After closing of the ansaction, Vail Resorts plans to invest $15.0 million over the next two years in one-time capital spending. The ansaction is expected to close this fall, and the parties expect operations at all Peak Resorts ski areas to continue in the ordinary course of business.
Kohl’s Corporation said it is hiring for an “early wave of seasonal positions” at 500 stores, about double last year’s early-hiring program. The rest of Kohl’s stores, disibution and e-commerce fulfillment centers will start seasonal hiring in August. Kohl’s said it is also looking for full and part-time workers for customer-service jobs. The Company indicated that it will need about 3,000 people nationwide this holiday season to support its initiatives like buy online and pick up in store. It will also ain new workers on tech-related activities, such as how to use handheld mobile devices to check out customers throughout the store. Last year, Kohl’s hired more than 90,000 workers for the holiday season. The Company also plans to open five new stores this fall, located in Willmar, MN; Plattsburgh, NY; London, KY; Indiana, PA; and Lafayette, CO.
On June 10, a group of shareholders of Hudson’s Bay Company submitted a proposal to acquire HBC at a price of $9.45 per share, payable in cash. On Monday, a competing cash offer was submitted by The Catalyst Capital Group, to purchase up to 14.8 million common shares of Hudson’s Bay at $10.11 per common share. The competing offer is equal to a 7% premium to the price offered by the conolling shareholders, and is open for acceptance until August 16. Catalyst stated it believes the proposal made by the conolling shareholders does not reflect the fair value of the Company’s common shares because it undervalues the Company’s real estate, retail operations, and iconic brands. HBC’s board has a special committee that is currently reviewing the conolling shareholders’ bid. Catalyst stated that if the special committee proceeds with the conolling shareholders’ proposal, Catalyst will vote against it.
In other news, Saks Fifth Avenue opened an 8,000 square-foot men’s shoe space as part of its Fifth Avenue flagship renovation in New York City. A selection of more than 60 brands will be available, including more than 2,000 SKUs, 160 exclusive styles, extended sizing, and merchandise personalization. Services include lace personalization, made-to-order opportunities from brands such as Pierre Corthay, Ermenegildo Zegna, Salvatore Ferragamo, Santoni, John Lobb, Bally and Artioli, and shoe repair stations and style advisors. The chain is a subsidiary of Hudson’s Bay Company. Click here to request a list of Hudson's Bay Company future store closings.
Red Robin Gourmet Burgers announced July 18 that it has received an unsolicited conditional proposal from Vintage Capital Management to acquire all of the outstanding common shares of Red Robin for $40 per share in cash. Red Robin’s board will review and consider the proposal to determine the course of action it believes is in the best interests of the Company’s shareholders.
