March 3, 2021
On February 24, private equity group TPG Capital announced the sale of Arden Group’s Gelson’s Markets to Japan-based Pan Pacific International Holdings (PPIH). Terms of the deal, expected to be finalized in the second quarter, were not disclosed. TPG Capital, which acquired Gelson’s in 2014 and expanded the store count from 17 to 27, had been interested in monetizing its investment. PPIH, less well-known in the U.S., operates 638 stores worldwide, 582 of them in Japan, and generates top-line sales of more than $15.00 billion; in Japan, it is known for its Don Quijote stores, and in the U.S., PPIH already operates stores in Hawaii (Don Quijote, Marukai, Big Save, TIMES), and California (Marukai and Tokyo Central).
TJX Companies reported a 3% drop in 4Q21 comps, though this exceeded expectations. By segment, comps surged 12% at HomeGoods, increased 2% Internationally, and declined 7% at Marmaxx and 4% in Canada. The Company noted that 690 locations remained closed due to the pandemic, mostly in Europe. The lower sales, gross margin erosion, and higher COVID-related expenses pushed EBITDA down 30% to a still-healthy $1.08 billion. TJX ended the quarter with nearly $12.00 billion of liquidity. Management did not provide guidance but noted that early 1Q22 comps were positive. The Company is set to begin aggressively expanding again and expects to open 122 new locations in FY22. Click here for a list of future store openings and closings.
Amazon’s Whole Foods Market entered Wyoming, with the acquisition of independent supermarket Jackson Whole Grocer. The store, located in Jackson, will remain open during its conversion to the Whole Foods banner. The Company now has a presence in 43 states and operates 503 U.S. stores.
Dick’s Sporting Goods will open three namesake stores and one Warehouse Sale location this month, bringing its count to 730 units in 47 states. The Dick’s stores will open in Lewisville, TX and Las Vegas, NV this Friday; in Rockford, IL on March 20; and the Warehouse Sale unit will open in Pittsburgh, PA on March 31. Click here to request a list of future store openings and closings.
On February 24, Ruby Tuesday, Inc. announced its successful emergence from Chapter 11, following the issuance of a Court order confirming the Plan of Reorganization on February 17. Management said the proceedings enabled it to “shed liabilities, including leases from closed locations that were significantly impacted by COVID-19, and to strengthen the core business of 209 corporate-owned and operated locations.” Management noted that “the successful emergence from Chapter 11 will allow Ruby Tuesday to reinforce the brand’s commitment to its existing guests, while continuing to develop virtual ‘delivery-only’ brands to capitalize on its core strengths and increased off-premise business as part of a long-term growth plan. Ruby Tuesday is a healthier company now and is positioned to be more efficient, competitive and stable for the future.”
REI plans to open a 68,000 square-foot satellite office in Issaquah, WA, which will hold up to 400 employees once the pandemic is over. This is part of the Company’s plan announced in September to shift from a centralized headquarters to a more distributed and remote work model. While some essential onsite roles will require physical office space, most employees will have flexibility in where and how they work, including satellite offices, coffee shops, home offices, etc. Click here to request a list of future store openings.
Beginning Monday, Walmart removed the $35 minimum requirement for Express delivery, which allows customers to order items from Walmart’s food, consumables and general merchandise assortment. Express delivery costs $10 on top of the existing delivery charge. Express delivery is offered in nearly 3,000 Walmart stores, reaching almost 70% of the U.S. population.
In other news, Walmart has partnered with BigCommerce, an open e-commerce platform for fast-growing and established brands, which will enable eligible U.S. merchants to sell products directly on Walmart marketplace. This will give the merchants access to the more than 120 million unique consumers visiting the Walmart website each month.
Yesterday, KKR and Rakuten subsidiary, Rakuten DX Solution, announced they completed the previously announced share purchases in Seiyu GK from Walmart. Seiyu GK is a supermarket chain in Japan with more than 300 units. With the completion of the transactions, KKR owns a 65% stake in Seiyu, Rakuten DX Solution owns a 20% stake, and Walmart retains a 15% stake.
Finally, Walmart’s Flipkart has expanded online grocery sales to more than 50 Indian cities and intends to reach over 70 locations in the next six months. The Company said its grocery service had grown “exponentially” in the past year, driven by the pandemic. Click here to request a list of future store openings and closings.
Our Special Analysis outlines significant merger and acquisition activity during 2020, including notable asset sales within the Electronics/Office Products, Home Improvement/Building Materials, Sporting Goods, Toys/Books/Movies, Department Stores/Apparel/Jewelry, Auto Parts, E-Commerce, Specialty, Supermarket, Convenience, Drug, Casual Dining, and Mass Merchandisers/Deep Discount sectors. Click here to request a copy of the report.
Sephora plans to open more than 60 freestanding units as well as 200 in-store shops in Kohl’s department stores this year. The first standalone stores will open this month in the Pacific Northwest, Florida, Texas, Los Angeles, and Nashville. The first Sephora at Kohl’s in-store shops, which will average about 2,500 square feet, are set to open in California, New York, New Jersey, Ohio, Wisconsin, Illinois, and Minnesota. More than 100 makeup, skincare, hair, and fragrance brands will be featured. Sephora also plans to roll out BOPIS to all its freestanding stores by next month; the Company has offered “reserve online pickup in store” services, enabling customers to reserve products in local Sephora stores for up to 48 hours. Click here to request a list of future store openings.
On Monday, Payless opened a 4,000 square-foot store in North Miami, FL, its first new store since filing Chapter 11 in 2019 and shuttering all 2,500 locations and its e-commerce operations in North America. The brand relaunched last summer, and the Company expects to open hundreds of stores over the next five years. Payless continues to maintain a strong retail presence throughout Latin/Central America, the Caribbean, Southeast Asia, the Middle East, and India, with roughly 700 total units. Click here to request a list of future store openings.
Camping World’s 4Q20 results exceeded expectations, as the Company continued to benefit from consumers’ desire to get away during the pandemic. 4Q sales grew 17.5%, including a 24.8% increase in comps. While management admitted inventory levels (down 16% YOY) are not back to where they would like, Camping World is performing better than the overall sector, which is experiencing more significant inventory challenges. Management said it remains acquisitive and plans to significantly exceed its typical annual growth of adding 8 to 10 units in 2021, as the Company looks to expand into all 48 continental states. Camping World is also investing in digital initiatives and testing an online platform for RV purchases. The Company expects RV trends to remain strong in FY21 and raised its EBITDA guidance to $640.0 million – $690.0 million, from prior guidance of about $590.0 million.
As evidence of its plans to ramp-up expansion in 2021, Camping World signed a deal to acquire Triple A R.V. Center in Medford, OR. The acquisition is expected to close this month, after which the location will transition to the Camping World brand and open in late March. With this addition, the Company will have six units in Oregon. Camping World owns and operates a second location south of Medford under the Gander RV & Outdoors brand. The Company also inked a deal to acquire EZ Living RV in Braidwood, IL; the acquisition is anticipated to close later this month. The location will be converted to the Camping World brand and will be the chain’s sixth in Illinois. Finally, the Company opened a new location in Eau Claire, WI, bringing its store count to five in the state. Click here to request a list of future store openings.
Fry’s Electronics stated that it will cease operations and close its business permanently, citing challenges posed by the COVID-19 pandemic. The Company has implemented an orderly wind-down process that it “believes will be in the best interests of Fry’s, its creditors, and other stakeholders.” There has been no evidence of formal Court-supervised proceedings.
At its peak, Fry’s operated 34 uniquely designed stores, predominantly located in California and Texas, with a more limited presence in the Midwest and Southeast. Click here to request more information.
Best Buy had another strong quarter, as demand for consumer electronics continued in 4Q20 due to the pandemic and holiday shopping. 4Q sales rose 12% to $16.90 billion, driven by a comp increase of 12.6%. Domestic digital sales jumped 90%, as the consumer behavior shift continues and as customers take advantage of improved fulfillment options like BOPIS and curbside pickup. Had the Company not pulled forward its holiday promotions into October (its 3Q) to compete with Amazon’s Prime Day and other holidays, its 4Q sales would have been higher; comp growth in October was 33%, moderating in November and December before re-accelerating in January and February. The strongest categories were computing, appliances, gaming, virtual reality, and home theater. Sales in these categories may have further outperformed without the ongoing inventory constraints and supply chain issues that remain headwinds. Higher fulfillment costs related to digital and a less favorable product mix weighed on gross margin, though operating expenses levered on increased sales. Adjusted operating margin hit 6.9%, a huge leap ahead of the Company’s long-term 5% target. The Company’s 1Q21 guidance includes a 20% comp gain (following a 5.3% drop during 1Q20), gross margin slightly lower than last year due to increased promotions and delivery costs, and SG&A dollars rising 10%.
In other news, Best Buy cut 5,000 mostly full-time positions and added 2,000 part-time jobs, in an effort to right-size the number of available full-time and part-time positions. The cuts followed a 17% reduction in workforce over the previous fiscal year. Best Buy also plans to close more large-format stores, accelerating beyond the 20 stores per year it has closed in recent years. Click here to request a list of store openings and closings.
In the Christopher & Banks bankruptcy case, the Court entered an order approving the sale of the Company’s intellectual property to ALCC, LLC (the agent and lender under the prepetition term loan facility and an affiliate of Hilco Merchant Resources). ALCC is purchasing the Company’s inventory and avoidance actions, in addition to the IP assets. The purchase price consists of the value of the term loan ($8.1 million) along with certain assumed liabilities. Separately, the Court entered an order setting March 24 as the deadline to file proofs of claim for administrative expense claims arising between the petition date and February 28. Click here to request a list of store closures.
Ahold Delhaize USA announced that one of its distribution facilities, Freetown Grocery in Assonet, MA, became the first to transition procurement from a third-party vendor to the Company’s self-managed network. In October, the Company first announced its plan to transition six facilities under a three-year initiative to switch to a fully integrated, self-distribution model. Founded in 2004, Freetown Grocery is a 1.1 million square-foot facility serving the Company’s Stop & Shop banner. Stop & Shop continues to own the facility and fulfill orders, while Ahold Delhaize USA procurement handles replenishment and inventory. Other distribution centers transitioning services to the self-managed network this year include Freetown Fresh in Freetown, MA, as well as facilities in Jessup, MD and Carlisle, PA. Additionally, the Company plans to debut new facilities in Manchester, NH and Mauldin, SC. The Mauldin distribution center is in the process of being acquired by Ahold Delhaize USA’s Food Lion chain as part of its purchase of 62 BI-LO and Harveys stores from Southeastern Grocers, announced in June.
During a recent interview, Ahold Delhaize CEO Frans Muller said the Company plans “to make more acquisitions in the U.S. as the shift to e-commerce drives smaller businesses out of the market.” Mr. Muller said he expects considerable consolidation among small and family-owned companies lacking capital to expand into e-commerce or succession plans that make their businesses viable in the post-pandemic environment. Click here to request a list of future store openings and closings.