June 29, 2022
We previously reported on June 6 that Franchise Group and Kohl’s had entered into exclusive negotiations regarding Franchise Group’s potential acquisition of Kohl’s for $60 per share, or about $8 billion in total. The three-week exclusive negotiation period was set to end this past weekend, but no further information has been disclosed yet. Subsequently, reports indicated that Franchise Group was considering lowering its bid to acquire Kohl’s to closer to $50 per share amid concerns that the acquisition might not be the best use of Franchise Group’s capital, as well as general concerns over a weakening U.S. economy that may enter a recession, which would deteriorate sales at retailers like Kohl’s.
With the new reports, the apparent value for Kohl’s has slid by some $2 billion since speculation of a takeover began earlier this year. The reports also seem to support speculation that a deal may fall through. Click here to request more info.
Publix recently broke ground on its first location in Louisville, KY. The 55,700 square-foot store will mark Publix’s entrance into Kentucky, its eighth state of operation, and is scheduled to be completed in 4Q23. The store will include a drive-thru pharmacy and a 3,200 square-foot Publix Liquors, the first located outside of Florida. A second Louisville store is expected to open in 1Q24, and a third is slated for Lexington in late 2024. The adjacent map displays future grocery openings in the Louisville/Lexington metro markets. Click here to request a sample list of future store openings.
Wawa will expand the number of locations it operates in central Pennsylvania, with plans to double its store count over the next three to five years; the first new central Pennsylvania store is likely to open as early as 2024. There is the potential to add up to 40 additional stores in the region.
Earlier this month, Wawa announced it will expand into the Nashville, TN market with its first location in state slated to open in 2025. The Company’s plans call for the opening of up to 40 convenience stores in the area over the subsequent few years. Wawa also announced plans to expand in the Southeast, the Florida Panhandle, and North Carolina. Click here to request a sample list of future store openings.
Rite Aid reported lower 1Q22 sales and EBITDA, which were in line with its expectations. Retail Pharmacy sales were essentially flat, as positive comps were offset by the net year-over-year closure of 145 stores. Comps grew 4.6%, including a 6.6% increase in pharmacy sales, which benefitted from improved maintenance and acute scripts, offset by fewer COVID vaccinations and testing. The latter also impaired Retail EBITDA, which fell 22% to just $74 million, or a 1.7% margin. Front-end comps were down 0.5%.
Despite speculation of possibly hundreds of additional closures, management did not reveal any additional plans. As for the new smaller-format store it is testing in rural, underserved markets, Rite Aid plans to open 5 to 20 in Indiana, Upstate New York and Virginia in FY23. Click here to request a sample list of recent and future closures.
LL Flooring announced the opening of six new stores between April and June, bringing its total store count to 437. New stores opened in Cumming, GA; Battle Creek, MI; Eau Claire, WI; Mount Holly, NJ; Mooresville, NC; and Winchester, VA. To date in 2022, LL Flooring has opened 13 new stores. See the Company’s store concentration below. Click here to request more info.
Kroger announced the addition of a new, 300,000 square-foot customer fulfillment center (CFC) in Aurora, CO, in partnership with Ocado Group. Kroger currently operates CFCs in Monroe, OH; Groveland, FL; Forest Park, GA; Dallas, TX; and Pleasant Prairie, WI, with additional CFCs slated for California; Frederick, MD; Phoenix, AZ; Romulus, MI; Cleveland, OH; Charlotte, NC; as well as south Florida and the Northeast.
In other news, Kroger plans to invest $70 million to expand its Tamarack Farms Dairy facility by 35,000 square feet, with the implementation of an aseptic milk line. Tamarack Farms Dairy serves about 160 stores in Ohio and West Virginia, providing products for Kroger’s e-commerce channel.
Advance Auto Parts (AAP) opened its first 22 stores in the Los Angeles, CA market, part of the Company’s strategic expansion in the West. As background, AAP announced its plan to expand into California in spring 2021 by leasing 109 Pep Boys stores and converting them to AAP stores; more than half of these former Pep Boys stores are located in the Los Angeles area. Management stated there are more than 7.6 million registered vehicles in Los Angeles, and most residents in the area fit the profile of “the classic do-it-yourselfer.” As of April 23, AAP operated 4,687 namesake stores and 311 Worldpac branches. More than 170 units are located in Calfornia, compared to AutoZone’s 645 stores and O’Reilly Auto Parts’ 573 units in the state. Click here to request a sample list of future store openings.
Our report takes a closer look at the Company’s operational and competitive status, including market position, real estate and sales trends, and provides visual competitive analyses as well as key real estate metrics like store count, average sales per square foot, and the new Real Estate Intelligence analytics solution. Click here to request a copy of the full report.
Ahold Delhaize opened a new 50,000 square-foot Giant Food store in Philadelphia, PA, the first of two openings in the metro market this summer. The second is slated to open in early July. With the addition of these stores, Giant will have added seven locations in the Philadelphia area over the past year and a half.
Meanwhile, Food Lion recently open a new store in Charlotte, NC.
The Supreme Court has agreed to review the Mall of America’s challenge to Sears’ 2019 bankruptcy sale. Sears was an original anchor tenant of Mall of America, agreeing in 1991 to lease the space for nominal annual rent, court papers say. According to reports, the annual lease is $10 for a now-vacant Sears store. When Sears Holdings went bankrupt, Mr. Lampert and his hedge fund, ESL Investments Inc., formed a new company called Transform Holdco LLC to buy the best-performing Sears and Kmart stores. The mall has argued that Transform Holdco isn't a suitable lessee. Mall of America appealed to the high court after the Second U.S. Circuit Court of Appeals in New York declined to hear the mall's challenge to Mr. Lampert's acquisition of the Sears lease. Transform asked the Supreme Court not to take up the appeal and disputed Mall of America's assertion that federal appeals courts are split.
The provision at issue reduces the risk buyers face when purchasing assets in bankruptcy, Transform said, encouraging transactions that return as much value as possible to creditor. Without such protections, potential buyers would be less willing to buy assets out of bankruptcy "or would substantially discount the price, if the purchaser were forced to take the risk of an appeal upsetting its expectations". Transform said Mall of America also told the Supreme Court that Transform originally waived its arguments related to the bankruptcy provision but changed its position after a federal judge ruled against it earlier in the appeal. Addressing the case, therefore, gives justices a vehicle to thwart similar legal "gamesmanship" by litigants, the mall said. Transform denied Mall of America's claim that it engaged in legal "gamesmanship," saying the circumstances of how it litigated the appeal "reveals a more complicated picture." Click here to request more info.
Gap opened four “laboratory” stores, one under each of its banners: Gap, Old Navy, Banana Republic, and Athleta, at its newly remodeled 544,000 square-foot hub in San Francisco, CA. The stores are designed to enable the brands to test product and technology innovations. They are part of Gap’s two-year renovation of its headquarters, which now includes 15 floors of office space, a rooftop cafeteria and outdoor dining terrace, a coffee bar, and a lounge in the lobby. In addition, the ground floor features a “co-lab” workspace, or “maker studio,” where visitors can watch Gap teams at work.
JD Sports reported strong results for the year ended January 29, which the Company attributed to robust performances at its sports fashion retail banners, partially offset by supply chain disruptions and the impact of the COVID-19 pandemic. Sales were up 39% to £8.56 billion (US$10.45 billion). In the U.S., Finish Line’s revenues increased by £99.9 million to £1.80 billion (US$2.21 billion). Management said that it is encouraged by the progress it is making in the U.S., with 87 JD stores operating at year end. The Company intends to further expand the JD banner in 2022 through both new stores and the conversion of existing Finish Line stores.Click here to request a sample list of future openings.
Reitmans (Canada) reported 1Q23 sales increased 27% to C$154 million, as government restrictions on retail were lifted for the entire quarter, compared to a partial lockdown in the prior-year period (240 of its 415 stores were closed during some part of 1Q22). As of April 30, the Company operated 406 stores consisting of 237 Reitmans, 92 Penningtons, and 77 RW&CO.
Chick-fil-A is testing an express drive-thru lane in about 60 restaurants nationwide and could expand the pilot to other locations in 2023, depending on results. Customers who order through Chick-fil-A’s app have the option of picking its “Drive-Thru Express”. After arriving at the restaurant, those customers would follow express lane signs and use the app to scan a QR code before pulling up to the window to pick up orders. Several other chains, including Taco Bell, McDonald’s and Burger King, are exploring mobile pickup lanes as well. Click here to request a sample list of future openings.
More than 330 Hudson’s Bay Company (HBC) warehouse workers belonging to the Unifor Ontario union have gone on strike, after HBC refused to offer a compensation increase for the past year. Unifor says the employees worked without a contract for more than a year during the pandemic but postponed bargaining when their collective agreement expired in May 2021 during the COVID-related surge in online sales. HBC opened its website to third-party sellers in March 2021, in an effort to expand e-commerce sales. The Company indicated that it remains willing to continue discussions “in good faith.” According to HBC’s statement, “We have made fair, reasonable and competitive offers which included meaningful wage increases for associates.”
In other news, the Company is closing its downtown Cincinnati, OH Saks Fifth Avenue store. A closure date was not provided. The nearest locations under the banner are in Columbus and Beachwood, OH.
Our Hot Market Report takes a closer look at the Minneapolis, MN real estate landscape, and provides visual competitive analyses as well as key real estate metrics such as future openings, store count, market share, digital insights, and demographics. Click here to request a copy of the full report. Click here to request a copy of the full report.
Conn’s HomePlus opened a nearly 40,000 square-foot store in Santa Fe, NM on June 17. As shown in the adjacent map, nearby competitors include two Office Depot stores and one Best Buy. The space previously housed a Sports Authority (closed in 2016) and a Mervyn’s department store (closed in 2008). Conn’s now operates six stores in New Mexico, including four in Albuquerque and one in Las Cruces. For FY23, the Company expects to open 20 – 34 new stores in existing states, including 10 to 14 standalone locations and 10 to 20 in-store locations. During 1Q23, the Company opened three new stores, including two in Florida, bringing its total count to 161. Click here to request a sample list of future openings.
Darden’s 4Q sales increased 14.2% to $2.60 billion, driven by a blended same-restaurant sales increase of 11.7% and sales from 33 net new restaurants. The increase was fueled by the Company’s fine-dining restaurants, which include The Capital Grille and Eddie V’s, and which posted same-store sales growth of 34.5%. This unit was hardest hit by the pandemic, but its sales surpassed 2019 levels in 4Q22. 4Q EBTIDA was $431 million, up slightly from $430 million last year.
Looking ahead to FY23, Darden expects sales of $10.20 – $10.40 billion, comp growth of 4% – 6%, 55 to 60 new restaurant openings, capex spending of $500 – $550 million, total inflation of approximately 6%, and EPS of $7.40 – $8.00.
Albertsons’ stock received a modest bounce last week, after the Company announced it extended with its sponsors a lock-up agreement, previously set to expire this month, through September 10. The Cerberus-led sponsor group owns 366 million shares (at FYE February 28, the sponsors controlled about 75% of common stock). The extension will allow Albertsons to continue reviewing its potential strategic alternatives, without the sponsors selling large chunks of shares, which could negatively impact the share price. Speculation of a sale of the Company has cooled.
The more likely outcome is a sale leaseback of the Company’s real estate, which was last valued at more than $11 billion. Proceeds could then be used to repurchase sponsor shares.
Empire Company Ltd., parent of Sobeys, reported results for 4Q22 ended May 7. Food retail sales increased 13.3% to C$7.84 billion, reflecting an additional week of operation, the acquisition of Longo’s, higher fuel sales, increased food inflation, and the expansion of FreshCo in Western Canada and Farm Boy in Ontario. Same-store sales (excluding fuel) were down 2.5%. Operating income for the Food retailing segment increased mainly due to improved earnings as a result of higher sales and gross profit, partially offset by higher SG&A expenses.
Empire plans to expand its FreshCo discount grocery business in Western Canada, growing the banner to 40 stores; its footprint in the region increased 40% in 2H22. In FY23, capex is expected to be $800 million, with roughly half of that to be spent on store remodels and new locations. The Company expects to open four FreshCo stores in Alberta, four Farm Boy stores in Ontario, and two Longo’s stores in Ontario. Currently, Farm Boy has 44 stores, and Longo’s has 36 locations. Another 25% of capex funds will be allocated to advanced analytics technology and other technology systems.
In FY22, Empire launched its Ocado-powered curbside pickup at another 68 stores, for a total of 98 stores now providing the service. With its four CFCs and “spoke” facilities in Etobicoke, Ottawa and Quebec City, Empire expects its online grocery delivery and pickup services to reach approximately 75% of Canadian households.
Wakefern announced that PA-based Gerrity’s Supermarkets, owned by the Fasula Family, has become the 48th member to join its cooperative; it was previously supplied by C&S Wholesale Grocers. Founded in 1895, Gerrity’s operates 10 supermarkets, three Ace Hardware stores and a home office. The stores will be rebranded as Gerrity’s The Fresh Grocer, a Wakefern trademark.
K-VA-T Food Stores recently opened a new 54,000 square-foot Food City in East Ridge, TN. The Company has plans for another Chattanooga-area location and two other stores in Tennessee and Georgia. In April, K-VA-T opened a 54,100 square-foot store in Cookeville, TN, and announced it is joining the Ace Hardware family of stores. The Company plans to open a line of Curt’s Ace Hardware in select locations starting this summer.
Last week, Grocery Outlet opened a new store in Brawley, CA. The Company has more than 400 locations throughout California, Idaho, Maryland, Nevada, New Jersey, Oregon, Pennsylvania, and Washington. Stores are owned by independent operators based in the communities they serve. Click here to request a sample list of future openings.
Coborn’s recently reopened its Owatonna, MN Cash Wise Foods following significant updates that include an expanded in-store floral department, a designated area for curbside pickup, an onsite pharmacy and an express fuel station. With this store completed, the Company has now built or updated over two dozen of its Cash Wise locations to its “next-generation” format. Coborn’s has built or remodeled several other locations in Minnesota and North Dakota.
Starbucks will revamp three of its Seattle stores, including the original Starbucks at Pike Place Market, as part of its “Heritage Market” initiative. The three locations will offer customers an elevated experience.