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May 20, 2020


Yesterday, Pier 1 Imports filed a motion seeking Court approval to begin an orderly wind-down of its retail operations. The Company intends to initiate liquidation sales once store locations can reopen, in compliance with COVID-19 guidelines from local government and health officials. As part of the wind-down, the Company intends to sell its inventory and remaining assets, including its intellectual property and e-commerce business, through a Court-supervised auction. Customers continue to order through, and orders are being processed and filled.

CEO Robert Riesbeck said, “This decision follows months of working to identify a buyer who would continue to operate our business going forward. Unfortunately, the challenging retail environment has been significantly compounded by the profound impact of COVID-19, hindering our ability to secure such a buyer and requiring us to wind down.”

Pier 1 expects to conduct an auction of its assets under bidding procedures established by the Court on February 18. The Company has proposed July 1 as the asset bid deadline, July 8 as the auction date and July 15 as the sale hearing date.

When the case commenced, the Company closed about half of its 900 stores, including all of its stores in Canada. Click hereto request a list of the additional/remaining stores that will be closed.


On May 15, J.C. Penney Company filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of Texas. The proceedings have been designated as case number 20-20182. As part of a prearranged Plan of Reorganization, the Company announced it has entered into a Restructuring Support Agreement (RSA) with lenders holding 70% of its first lien debt to reduce the Company’s outstanding indebtedness. Management said the RSA is expected to reduce several billion dollars of indebtedness, provide increased financial flexibility to help navigate through the Coronavirus pandemic, and better position J.C. Penney for the long-term. The Company noted that as of May 15 it had $500.0 million in cash on hand and it received commitments for $900.0 million in DIP financing from its existing first lien lenders, which includes $450.0 million of new money.

On May 16, the Court issued interim orders authorizing the Debtors to use $500.0 million in cash collateral and pay prepetition claims of $10.0 million held by 503(b)(9) claimants.

On May 18, the Company stated that it plans to close 242 of its 846 stores (a 28.6% reduction) during the bankruptcy proceedings. The specific locations have not been announced yet. The Company projects this will result in a $1.70 billion decrease in total annual store revenue (based on FY2019 results) and an increase in average revenue per store of $1.6 million for the remaining units. Click here to request more information.


According to reports on May 12, a sale or merger of the Company with Saks Fifth Avenue was proposed by one of Neiman Marcus, DIP’s creditors, hedge fund Mudrick Capital Management LP, in a move that would challenge the pre-negotiated Plan to reorganize under Court supervision. Mudrick stated that a combination with Saks would result in better financial recoveries for creditors than the current plan to restructure the Company’s debt, with debtholders becoming the majority owners. The proposal states that a combination with Saks would create between $2.80 billion and $4.70 billion of value, which could be achieved by Neiman Marcus permanently closing at least 22 stores which overlap Saks locations, and by achieving other cost cutting measures. Click here for more information.


It was previously reported that Amazon Retail LLC acquired leases for Fairway Group Holdings Corp., DIP’s Woodland Park and Paramus, NJ locations as part of Bankruptcy Court supervised auction in March. Reports state that Amazon may be considering acquiring Fairway’s Douglaston and Westbury, NY locations. Village Supermarket (a Wakefern member), which acquired four of Fairway’s Manhattan stores at the March auction, took possession of those units last week.


Amazon is once again taking on new e-grocery customers, mostly ending the waitlist for new online food shoppers that it created a month ago, as it found its systems stressed by the pandemic and shifting customer needs.

Amazon continues to convert some Whole Foods stores to “dark stores” that are focused solely on online shopping and delivery. So far, the Company has converted five stores in New York City; San Francisco; Baltimore, MD; Austin, TX; and Castle Rock, CO to dark stores. It plans to shut the doors of its DePaul, IL store in Chicago today and convert it to online delivery only. 


Ingka Centers, IKEA’s shopping mall business, said it is looking to enter the U.S. in the next couple of years. The Company is reportedly in talks to purchase properties in several major cities, including New York, Los Angeles, San Francisco, and Chicago. Properties of interest include old post offices, department stores, and existing malls that can be converted. While it appears to be an unlikely time to be planning expansion during an ongoing pandemic, the current environment presents opportunities to purchase cheap real estate before consumer demand rebounds. In January, Ingka purchased Kings Mall in London, with plans to open in April 2021. Ingka operates 45 shopping centers in Europe, Russia and China. Over the past month, 15 of the 38 Ingka properties that were closed due to the pandemic have reopened (Ingka operates another seven properties across Sweden and Finland that never closed). In China, shopping centers in Beijing and Wuxi retained 67% and 81% of foot traffic in April compared to the prior-year period, while a center in Wuhan (the source of the outbreak) retained just 45% of sales. In Poland, Ikea-anchored shopping centers reported an 87% return of normal traffic. Properties in Russia, Italy, Portugal, Spain, Britain and Slovakia remained closed through April but are beginning to reopen this week. 

COVID-19 Reopenings


Belk announced the opening of all of its stores in Virginia (18) and Louisiana (5) on May 18. Kentucky (7) stores will follow on May 20, and West Virginia (3) and Maryland (2) stores will open May 22. All 290 locations were temporarily closed on March 30. In our May 12 issue of this publication, we reported that 252 locations across North Carolina, South Carolina, Georgia, Tennessee, Arkansas, Oklahoma, Florida, Texas, Alabama and Mississippi were reopened, under reduced operating hours and with limited customers in-store. By the end of this week, all stores will be reopened. The Company also launched curbside pickup at most locations last week. 


Designer Brands started reopening stores across the U.S. and Canada on April 30 (all 666 North American locations have been temporarily closed since March 17), where state governments have lifted restrictions, and nearly 200 U.S. and Canada stores have opened so far. It should be noted that approximately 15% of the Company’s stores are located in New York and California, which have been heavily impacted by the pandemic.

Meanwhile, Designer Brands will delay its Form 10-Q filing for the quarter ended May 2, to no later than 45 days after June 11. 


The Children’s Place reported preliminary results indicating that 1Q20 sales are expected to decrease 38% to $254.0 million due to COVID-19 temporary store closures. To fulfill online demand, the Company enabled ship-from-store capabilities in approximately 85% of its U.S. stores in late April, which more than doubled its daily shipping capacity. From the start of 2Q20, or May 3, through May 16, digital demand was up more than 400% from the prior-year period. Turning to the balance sheet, The Children’s Place had $72.0 million in cash with no long-term debt as of May 2. As of the same date, there was $235.0 million outstanding on its $360.0 million revolver; the Company did not disclose revolver availability. Related to stores, the Company reopened stores in Alabama, Arkansas, Idaho, Mississippi, Montana, Nebraska, North Dakota, Oklahoma, South Dakota and Utah yesterday (May 19). The Company will continue to reopen on a phased timeline, as state and local guidelines allow. Currently, more than 40% of The Children’s Place U.S. stores are in states and counties that have not yet been authorized to reopen stores to the public.


Big Y Foods is planning to open a World Class Market in Clinton, CT, located within a 180,000 square-foot retail center. The 55,000 square-foot store will be the Company’s 72nd supermarket, all of which are located in Connecticut and Massachusetts. The retail center is expected to open in 2021.


Caleres has begun to reopen its retail stores under its core Famous Footwear banner and its branded Allen Edmonds, Naturalizer, and Sam Edelman locations, in areas where restrictions have been relaxed or lifted. The Company expects to have 435 locations open by the end of May and anticipates the vast majority of its stores will reopen by the end of June. The Company has also implemented contactless curbside pickup at approximately 170 locations across the country, with the expectation that this service will be expanded to nearly 300 stores by May 22. As of February 1, the Company operated 1,177 stores comprised of 228 Brand Portfolio locations and 949 Famous Footwear locations.


Tapestry, parent of Coach, Kate Spade and Stuart Weitzman, started to reopen stores in North America, Europe, and in additional markets in Asia as government regulations ease. As of May 15, more than 300 locations in North America were offering curbside or store pickup services. In addition, about 20 stores in Europe, 35 in Japan, 35 in Malaysia, and nearly 30 stores in Australia, are open to customers. All stores in China and South Korea had previously reopened. Meanwhile, Tapestry’s office in New York is expected to remain closed until at least mid-June, with the majority of employees not expected to return until September. 


On May 18, Kirkland’s announced that 301 of its 405 stores are now open to customer traffic, while another 95 offer contactless curbside pickup. The Company’s nine remaining units will reopen based on state and local regulations. Since its stores temporarily closed on March 19, Kirkland’s e-commerce sales have risen 96% to $23.7 million. The Company has $29.0 million of cash and another $23.0 million available on its credit facility. 


On May 15, Williams-Sonoma announced that it amended its term loan and revolving credit facility on May 11. The amendment extended the maturity date of the $300.0 million term loan by one year, or from January 8, 2021 to January 8, 2022, and added $200.0 million to the existing $500.0 million unsecured line of credit. The Company did not draw any additional loans under the line of credit as of May 11, and there was $300.0 million in its term loan outstanding and $500.0 million in its revolving loan outstanding as of the same date.

The Company also extended the temporary closure of its U.S. and Canada stores through May 31, in locations where retail restrictions have not been lifted. It will continue to reopen stores on a market-by-market basis, consistent with state and local regulations. As of February 2, there were 614 total stores, which included 572 stores in the U.S. and 20 stores in Canada; the remaining stores were located in Australia and the U.K.


Yesterday, Darden Restaurants provided an update on its operations. Since April 27, the Company has been reopening dining rooms at limited capacities from 25% to 50% depending on local or state regulations. As of May 17, 49% of Darden’s restaurants have reopened dining rooms, and management expects to reach 65% by the end of May. For the fourth quarter to date through May 17, Darden same-restaurant sales declined 47.9%. Same-store sales fell 39.4% at Olive Garden, 45.8% at LongHorn Steakhouse, 63.1% at Fine Dining, and 65.5% at “Other Business.” Based on results for the week ended May 17, the Company’s ongoing weekly cash burn rate has improved to less than $10.0 million, including capital expenditures. Given the increased confidence in cash flow projections and stabilization in the credit markets, Darden fully repaid its $750.0 million credit facility on May 5. With $700.0 million of cash on hand as of May 17, the Company is well positioned for the near term. Including cash available through the credit facility and cash on hand, Darden has access to over $1.40 billion of liquidity.


On May 13, Lidl opened a new prototype store in an Atlanta, GA shopping center in a former Earth Fare location. The store is unlike the Company’s three other freestanding locations around Atlanta that feature a signature design with an arched roof and large windows. Freestanding stores are typically 25,000 – 36,000 square feet, but stores in shopping centers drop to around 20,000 square feet. The reduced size gives Lidl greater flexibility related to real estate decisions. Click here to request a list of future openings.


Apple posted a letter on its website detailing plans to restart its retail operations. All stores outside of China were closed in March, around the same time that all stores in China reopened. Last week, a few stores opened in Idaho, South Carolina, Alabama and Alaska. While more than 80% of Apple’s 510 stores worldwide remain closed, the Company plans to reopen another 25 stores in the U.S., 12 in Canada, and 10 in Italy over the coming week. The U.S. openings will be in Florida, Hawaii, Oklahoma and Colorado, with some California and Washington locations offering curbside service only. The stores that will allow in-store customers will limit them to Genius Bar reservations and BOPIS.


Starbucks is reportedly reaching out to many of its landlords and asking for a break on rents for the coming year, as it continues to deal with the financial fallout of the pandemic. In a letter to landlords sent by COO Roz Brewer, the Company said, “Effective June 1 and for at least a period of 12 consecutive months, Starbucks will require concessions to support modified operations and adjustments to lease terms and base rent structures.” Starbucks demanded the rent relief one day after the Company announced it would reopen 90% of its 8,900 Company-owned U.S. stores by early June. Starbucks reportedly stayed current on all its rents during March and April, even as stores were shuttered.


On May 14, Denny’s Corporation amended its credit agreement with Wells Fargo Bank, waiving the financial covenants for a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio until the end of the first quarter of FY21 on March 31, 2021.

Denny’s also provided an update on its business operations. As of May 13, 312 restaurants remain temporarily closed (272 domestic, 40 international), indicating 82% of domestic locations are open. In recent weeks, 521 restaurants across 21 states have reopened dining rooms with capacity limitations. Domestic system-wide comparable restaurant sales fell 6.3% in the first quarter and reached a weekly low point of 80% in the week ended March 25. Comps have improved through April and early May, but remain significantly negative, with a 68% decline in the week ended May 6.


Loves Furniture has purchased the inventory and assets of 27 Art Van Furniture, Levin Furniture, and Wolf Furniture stores. The locations, which are across Michigan, Pennsylvania, Ohio, Illinois, Virginia and Maryland, will be rebranded and open under the Loves Furniture banner. The 167-store Art Van Furniture, DIP filed Chapter 11 on March 8 (the case was converted to Chapter 7 on April 7). Robert Levin, the former owner of Levin Furniture, previously signed a letter of intent to acquire 44 Wolf and Levin branded stores, but that transaction was terminated on March 24, likely due to COVID-19. Art Van Furniture was in the process of liquidating its remaining stores, though going-out-of-business sales were halted, while non-essential stores were forced to close by state mandates.

Entrepreneur and investor Jeff Love founded Loves Furniture earlier this year in Detroit, MI. Loves hired about 30 former Art Van Furniture executives and expects to add more than 1,000 employees across the region. 


On May 15, Columbia Sportswear reopened 30 stores in 10 states (Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Oregon, Texas and Pennsylvania), bringing back more than 250 of its furloughed retail workers. The Company will require face coverings for employees, adjust store layouts for social distancing, and delay the restocking of clothes tried on in fitting rooms for 24 hours. This latest round of openings followed its first store reopening in Nebraska earlier last week. Columbia had shut down all 122 outlet stores and 21 branded stores across North America in mid-March. 

Earning Reports


Walmart’s 1Q21 sales and operating results were significantly affected by COVID-19. Unprecedented demand for products across multiple categories led to strong top-line results, with total revenues up 8.6% to $134.60 billion. Certain incremental costs negatively affected operating income, including costs associated with enhanced wages and benefits as well as safety and sanitation. Walmart U.S. comps increased 10%, led by strength in food, consumables, health & wellness and some general merchandise categories. Walmart U.S. e-commerce sales increased 74% with strong results for grocery pickup and delivery services, and marketplace. Due to continued strength of the brand, the Company will discontinue, which it acquired four years ago for $3.30 billion. Sam’s Club comps rose 12%, led by in-club transactions. E-commerce sales jumped 40%. Operating income was $5.20 billion, an increase of 5.6% and included lower losses in Walmart U.S. e-commerce compared to Q120. Click here to request a copy of the 1Q Sales Report.


With temporary store closings related to COVID-19, The Container Store experienced top-line challenges due to declining traffic in 4Q. Quarterly sales contracted 4.7% to $241.3 million, while annual sales increased 2.3% to $915.9 million. With mass merchants remaining open as essential retailers, The Container Store likely faced increased competitive pressure over storage items. Fortunately, there was a demand surge for its products, as customers began to shelter in place and had free time to organize. Customers were engaged in do-it-yourself home projects and were able to use new virtual in-home design services for Custom Closets that launched in April. As a result, quarter-to-date customer orders quadrupled starting March 29, and The Container Store expects that it retained 76% of its retail sales generated during the same timeframe last year. Still, the Company is not immune to COVID-19 headwinds, as store comps plunged approximately 45% in April; this does not include $11.0 million of online orders placed but not yet delivered. With this demand spike, it is likely that the Company experienced distribution center capacity constraints, as the Company recently opened its second facility in Aberdeen, MD, which was fully operational in late FY19. To align expenses with current sales trends, Container Store implemented cost reductions, including employee furloughs and salary cuts, and suspended all discretionary spend. In addition, vendor payment terms were extended, and rent payments were negotiated on alternative terms.


Kohl’s closed all 1,159 of its locations as of March 20, and on May 8 it began to reopen, per state and local guidelines. Currently, approximately half of the Company’s stores are open. Management commented that stores that have opened are doing 50% – 60% of normal volume. In response to the COVID-19 pandemic, the Company has managed inventory receipts meaningfully lower; significantly reduced expenses across the business inclusive of marketing, technology, operations and payroll; decreased planned capital expenditures by approximately $500.0 million; suspended the share repurchase program; and suspended regular quarterly cash dividends beginning 2Q20. Kohl’s has also delayed payments to vendors. In order to increase financial flexibility, the Company replaced its $1.00 billion unsecured revolver with a $1.50 billion secured facility and drew down the entire amount.

In addition, on May 1, Kohl’s issued $600.0 million in principal amount of 9.5% Secured Notes due 2025. The Company burned $109.2 million of cash in 1Q20 compared to $102.0 million of cash burn in 1Q19. As a result, Kohl’s ended the quarter with $2.04 billion of cash.

1Q sales (for the period ended May 2) plunged 43.5% to $2.16 billion. Management noted that e-commerce sales increased 24% in the quarter and 60% in April. Gross margin eroded significantly due to markdowns to clear seasonal inventory and the shift to online. As a result, EBITDA tumbled deep into negative territory ($425.0 million). Debt increased 81% year-over-year to $3.57 billion due to the drawdown of the upsized revolver and the issuance of the new $600.0 million 2025 Notes. However, the Company has no debt maturities until 2023. Click here to request a copy of the 1Q Sales Report.


Dillard’s began closing stores on March 19 as mandated by state and local governments, and by April 9, all 285 locations were temporarily closed. On May 5, the Company reopened 45 Dillard’s stores in select markets where allowed and re-opened an additional 80 stores on May 12. Currently, these stores are operating with reduced hours. Including 24 clearance centers, the Company has reopened 149 locations to date. Next, Dillard’s plans to reopen 116 namesake stores and five clearance centers. This will bring the number of stores operating to 241 Dillard’s stores and 29 clearance centers. The 45 stores that opened on May 5 have produced sales of approximately 56% of last year’s performance while operating at reduced hours. The Company took a number of actions to enhance liquidity during the 1Q as the pandemic progressed, including extending vendor payment terms; canceling, suspending and significantly delaying merchandise shipments; reducing merchandise purchases during the quarter by 33%; reviewing and reducing discretionary operating and capital expenditures; reducing payroll expense; and implementing extraordinary measures to clear inventory.

1Q sales (for the period ended May 2) nearly halved to $821.6 million (comps were not reported due to the prolonged store closures). The Company began aggressively discounting merchandise to clear product beginning March 24 and, as a result, gross margin fell to just 16.2%, compared to 38.2% in 1Q19. Quarterly EBITDA plunged deep into negative territory at $164.6 million. Liquidity of $849.4 million remained adequate for working capital needs despite $131.3 million of cash burn during the quarter.


Jack in the Box reported 2Q20 results for the period ended April 12. System-wide comparable restaurant sales declined 4.2%, based on a 5.2% increase in the first seven weeks through March 8, offset by a 17% decrease over the last five weeks reflecting the industrywide impact of COVID-19. Consolidated sales advanced 0.2% to $216.2 million, but EBITDA declined 23.9% to $48.5 million and 710 bps on a margin basis to 22.4%, largely due to increased labor costs from a combination of higher minimum wage rates and management’s decision to maintain high restaurant staffing levels during the early weeks of the COVID-19 situation despite falling traffic. Substantially all restaurants remained open as of May 8 for carry out. Click here to request a copy of the 2Q Sales Report.


The Home Depot’s 1Q sales (for the period ended May 3) increased 7.1% to $28.26 billion, and comps were up 6.4% (U.S. comps rose 7.5%). Customer transactions were down 3.9%, as the Company took measures to intentionally limit customer traffic in stores to curb the spread of COVID-19. This included limiting store hours and canceling traffic-driving events such as Spring Black Friday. The Company said it believes this had a significant impact on sales in many markets. Home Depot also took several measures to support its associates, including expanded paid time off and weekly bonuses, which led to the incurring of $850.0 million of pre-tax expense. As a result, gross margin slipped 12 basis points to 34.1%, and operating income fell 8.9% to $3.28 billion. Click here to request a copy of the 1Q Sales Report.