November 20, 2019
Last week, Amazon opened an “Amazon 4-star” in Oakbrook. IL. It is the seventh Amazon 4-star to open nationwide and follows an opening in Frisco, TX earlier this month. Three more are expected in coming months in Corta Madera, CA; Burlingame, CA; and Norwalk, CT. All items in the store are rated 4 stars and above, are top sellers, or are new and trending on Amazon.com.
Meanwhile, Amazon has confirmed plans to open a new grocery store in California located in Woodland Hills. No further details were disclosed.
Amazon recently opened a new corporate office in Las Vegas, NV. The 30,000 square-foot space is expected to incorporate 125 new positions and will focus on human resources.
The company is in the planning stages for a new fulfillment center in Raleigh, MS, its second center in the state. The one million square-foot facility will handle larger items.
Amazon plans to protest the award last month of a 10-year, $10.00 billion Pentagon cloud-computing contract to Microsoft that many assumed would go to Amazon. Amazon says that politics got in the way of a fair contracting process; however, U.S. Defense Secretary Mark Esper rejected any suggestion of bias in the Pentagon’s decision.
Casey’s General Stores plans to build a new warehouse, logistics and distribution facility in Joplin, MO. The new facility is the Company’s third DC and will initially serve approximately 400 to 600 stores. Casey’s operates over 2,100 convenience stores throughout the Midwest and South.Click here to request a list of future openings.
Last week upscale handbag and accessories retailer Mark Cross opened its first retail location in decades, in Manhattan, NY. Mark Cross was founded in 1845 as a bridle, harness, and saddle maker, before transitioning to luxury leather goods. It closed all of its stores in the late 1990s but was revived under new owner Neal J. Fox in 2011. This represents a shift in its retail strategy, as the Company has been focused on wholesale and e-commerce.
Tupperware opened a holiday pop-up shop in downtown Manhattan, called TuppSoho. The shop will be open through December and features a selection of signature Tupperware products, interactive food and product demonstrations, and spotlights on the Company’s 75-year history. Tupperware also unveiled a redesigned website that makes shopping and connecting with local Tupperware representatives easier.
Lululemon Athletica plans to open a 19,700 square-foot store in the Mall of America in Bloomington, MN today. The format is modeled on Lululemon’s largest and most experiential to date, a 20,000 square-foot store that opened in Chicago, IL in July. Click here to request a list of future openings and closings.
Gap opened pop-ups for two of its smaller divisions, its men’s performance activewear brand Hill City, and its children’s apparel brand Janie and Jack. Hill City, which Gap launched online last year, opened a pop-up inside six Athleta stores in Northern California and one in Oregon. Janie and Jack, which Gap acquired early this year from Gymboree, DIP, opened a pop-up inside two Banana Republic stores (San Francisco and New York). Hill City opened its first physical store last month, a 12-month temporary location in San Francisco, CA. Last year, 50 Athleta stores gave a “first look” at Hill City apparel. This year, shoppers can buy products in the select Athleta locations until early spring 2020. Click here to request a list of recent and future openings and closings.
On November 15, Famous Footwear, a division of Caleres, opened a two-level, 8,400 square-foot flagship store in Herald Square in New York City. It is the largest of Famous Footwear’s 32 locations in the New York metro area. Famous Footwear operates more than 950 stores across the U.S. and Canada.
Strategic Sales Insights - Five Below
Five Below is a rapidly growing value retailer that sells everything from sports equipment to bluetooth headphones and yoga mats, for $5 or less, targeted at the tween and teen customer base. By fiscal year end February 2019, Five Below’s store count nearly quadrupled to 750 locations since its 2012 IPO. Five Below uses a formula that has largely shielded it from competing with Amazon. Our report takes a close 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 store and sales per square foot.
REI opened four new stores on November 15 in Farmington, UT (unknown store size), Huntsville, AL (20,000 square feet), Oklahoma City, OK (23,000 square feet), and Williston, VT (31,000 square feet). The Oklahoma and Vermont stores are the first in each of those states, while the Huntsville store is the second in Alabama (the first opened on October 4) and the Farmington store is the third in Utah. Over the course of 2019, REI has opened eight new stores, relocated two existing stores to larger locations, and opened three new boathouses. In addition to expanding its brick-and-mortar presence, REI grew its rental and used gear business this year, and debuted a new in-store experience in North Conway, NH that combine retail, experiences, and rentals. Over the last five years, REI’s membership has grown 27%, and revenue has grown 25%. For this year’s Thanksgiving and Black Friday, REI will keep stores closed and process no online sales, as has been its practice since 2015. Click here to request a list of future openings.
Bloomingdale’s, a division of Macy’s, opened a new three-level, 150,000 square-foot full-line store in Norwalk, CT, its first store opening since 2015, when it added a location in Honolulu, HI. It is also the only Bloomingdale’s in Connecticut. The store includes the Company’s rotating themed pop-up concept, The Carousel @ Bloomingdale’s. The current installation, called Gift Hub, is in partnership with Google Nest and houses an assortment of tech and entertaining essentials.
Wawa announced plans to continue expanding in Maryland, as it broke ground on another store in Baltimore. The Company said it will open five new stores across Maryland in 2020 and another 10 – 15 over the next five years. Click here to request a list of future openings.
The planned opening of 20 Aldi stores in November and nine more locations in December will bring its store count to almost 2,000. Aldi currently operates 1,963 stores nationwide, putting it on a trajectory to achieve a five-year plan communicated in June 2017 to operate 2,500 stores by the end of 2022. Click here to request a list of Aldi future openings and closings.
K-VA-T recently opened a Food City in Abingdon, VA, its largest construction project to date. The 62,000 square-foot store is a replacement for a nearby location and features a Food City Gas N’ Go with a seven-pump station, as well as Food City’s GoCart curbside pickup service.
Today, Northgate González Market will open a 42,000 square-foot supermarket in Riverside, CA, marking its first move into the Inland Empire. The Company said that Riverside County’s demographics, with more than half the population having Latino roots, are attractive. Northgate González already has 40 stores in Southern California. The new supermarket, which occupies the space of a shuttered Toys R Us, will offer inventory imported from Mexico and a medical clinic.
Big Y Foods opened a Big Y Express Gas Station and Convenience Store in front of its newly remodeled Big Y World Class Market in Manchester, CT. It is the 10th Big Y Express location; the first opened in 2013. It stands at 2,575 square feet and has 10 pumping stations.
On November 16, Chuy’s Holdings announced the closure of four underperforming restaurants, which it expects to complete by the end of 4Q19 (click here to request a list). Chuy’s operated 103 restaurants as of the end of the third quarter on September 29 and has since opened one more location, completing its planned six openings for the full year.
KFC is piloting its first drive-thru only restaurant in Newcastle, Australia. The prototype has five drive-thru lanes, including ones dedicated to customers who order and pay through the brand’s app or website, along ones for more traditional on-the-spot orders. Click here to request a list of future openings.
Bashas’ and Food City stores across Arizona are expanding their baby departments, bringing more than 600 additional items to the stores’ baby departments and growing the in-store footprint by 50%.So far, 12 stores have completed baby department upgrades and expansions, and by January 2020, more than 20 will have undergone the upgrades. The expansion will be fully implemented at its more than 100 stores in the state during the next two years.
Toys "R" Us Canada - Spotlight Report
Toys “R” Us Canada Ltd. had been a profitable subsidiary of Toys “R” Us, Inc., operating 82 stores prior to the U.S. parent’s Chapter 11 filing on September 19, 2017. Toys “R” Us Canada sought protection in parallel proceedings under the Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice. No stores were closed during the restructuring, and in June 2018 Fairfax Financial Holdings Limited acquired the Company out of bankruptcy. We recently issued a Spotlight Report discussing industrywide developments, expansion plans, real estate trends, and payment history.
H.E. Butt opened a new 102,000 square-foot store in Northpark, TX on November 13.
Ahold Delhaize recently opened a new two-level, 13,000 square-foot Giant Heirloom Market in Philadelphia, its third in the city.
Cardenas Markets will open a new store in Whittier, CA in May 2020. The new location marks its first opening west of Pomona and is part of the Company’s future expansion plans toward Los Angeles and Orange counties. Currently, most of its Southern California locations are in the Inland Empire. The 34,640 square-foot store will operate in an existing site formerly occupied by Stater Bros. Cardenas Markets operates 59 stores (52 under the Cardenas banner and seven under the Los Altos Ranch Market banner).
Last week, Starbucks opened the world’s largest coffee shop, in Chicago, IL. The 35,000 square-foot Starbucks Roastery has five floors, three coffee bars, a cocktail bar and an artisan bakery/cafe. It is the Company’s sixth Roastery. Other locations include Tokyo, New York and Milan.
Menards is in the process of constructing a new location in Athens, OH, with an expected completion date of summer 2020. The new store will be the Company’s 21st in Ohio. Menards is also in the process of building a store in South Union Township, PA, which will be its first in Pennsylvania. An opening date has not yet been set, but the Company’s contract with the redevelopment authority stipulates that a store must be opened by the end of 2022. Menards currently has 326 locations in 14 states; stores are typically 200,000 square feet, and the Company generally spends about $10.0 million to open a new unit. Click here to request a list of future openings.
The Tile Shop relocated a store from Independence, MO to Lee’s Summit, MO. The new 21,000 square-foot location offers nearly 6,000 tile designs and has in-store design experts available to guide customers through the entire project process. The Tile Shop operates 142 stores in 31 states and Washington D.C.
Last week, Kroger named Pleasant Prairie, WI as the site of its sixth Customer Fulfillment Center (CFC). In June, Kroger broke ground on its first CFC in Monroe, OH and has since announced additional locations in Florida, Georgia, Texas, and in the Mid-Atlantic region. The Pleasant Prairie CFC will measure 350,000 square feet and is expected to become operational 24 months after the site breaks ground (date not disclosed). It will serve customers in Wisconsin, northern Illinois, and northwest Indiana. Earlier this month, Kroger said that the Company along with Ocado will utilize small, medium and large facilities to fill orders according to market demands. Kroger said the larger facilities, which have been ranging between 335,000 square feet and 375,000 square feet and projected to cost around $50.0 million each, are proving more expensive to build than the Company anticipated.
Specialty Retail Shops Holding Corp., DIP filed a motion to extend the exclusive periods to file a plan and solicit acceptances to July 16, 2020 and September 16, 2020, respectively. The current exclusive periods expire on December 12, 2019, and February 10, 2020, respectively. The Debtors have completed substantially all their obligations under Chapter 11, and substantially all claims have been reconciled. However, McKesson Corporation is currently appealing the Plan, and the Debtors wish to secure additional time “out of an abundance of caution so that they can retain all the progress that has been made in these Chapter 11 cases in the unlikely event that McKesson’s appeal is successful.” The Debtors also filed a motion to establish December 31, 2019 as the supplemental administrative claims bar date, for administrative claims incurred between the initial administrative claims bar date of April 1, 2019, and the supplemental administrative claims bar date.
Earning Reports
The Home Depot’s third quarter sales increased 3.5% to $27.22 billion, and comps were up 3.6% (U.S. comps were up 3.8%). Operating income rose 2% to $3.95 billion. CEO Craig Menear commented, “Our third quarter results reflected broad-based growth across our business, yet sales were below our expectations driven by the timing of certain benefits associated with our One Home Depot strategic investments. We are largely on track with these investments and have seen positive results, but some of the benefits anticipated for fiscal 2019 will take longer to realize than our initial assumptions.” The Company updated its fiscal 2019 guidance, now expecting sales to grow 1.8%, down from prior guidance of 2.3% growth. Comps are expected to increase 3.5%, down from its prior outlook of 4% growth.
TJX’s consolidated third quarter sales rose 6.4% to $10.45 billion, driven by 4% comp growth. By segment, comps rose 4% at Marmaxx (U.S.), 1% at HomeGoods (U.S.), 2% at TJX Canada, and 6% at TJX International (Europe & Australia). Customer traffic was the primary driver of comp growth at all four divisions. Net income increased 8.7% to $828.3 million.
During the quarter, the Company returned a total of $778.0 million to shareholders. It repurchased $500.0 million of TJX stock, retiring 9 million shares, and paid $278.0 million in shareholder dividends. The Company also completed its investment of $225.0 million for a 25% ownership stake in Familia, Russia’s only major off-price apparel and home fashions retailer. The Company’s investment represents a non-controlling, minority position.
The Company added a net of 107 new stores during the quarter, bringing its total store count to 4,412 at the end of the quarter. Click here to request a list of future openings.
Looking ahead at fiscal 2020, TJX expects EPS of $2.61 – $2.63, representing an increase of 7% – 8% over the last year. Comps are expected to increase 3% on a consolidated basis and 3% – 4% at Marmaxx.
Walmart’s third quarter revenue increased 2.5% to $127.99 billion, including growth of 3.2% in the U.S., 1.3% internationally and 0.7% at Sam’s Club. U.S. comps rose 3.2% for the quarter and 6.6% on a two-year stacked basis. Market share gains were led by food and consumables, including fresh items. Walmart U.S. e-commerce sales surged 41%, driven by expansion of grocery delivery service.Walmart now has more than 3,000 locations for grocery pickup and more than 1,400 locations that offer grocery delivery. As a result of the continuing investments in online delivery, Walmart’s operating income declined 5.4% to $4.72 billion. CEO Doug McMillon commented, “Our strength is being driven by food, which is good, but we need even more progress on Walmart.com with general merchandise.”
Click here to request a list of recent and future openings and closings.
Sam’s Club comps increased 0.6%, and e-commerce sales rose 32%. Reduced tobacco sales negatively affected comps by 350 basis points. International sales growth was driven by the inclusion of Flipkart and strength in Walmex and China, partially offset by softness in the U.K.
Driven by strong results, Walmart now expects fiscal 2020 EPS to increase slightly over last year. Excluding Flipkart it expects it to increase in a high single-digit percentage range.
In other news, Walmart announced that Kathryn McLay, the Company’s EVP of Neighborhood Markets, was named president and CEO of its Sam’s Club division. Ms. McLay joined Walmart in 2015 as the VP of U.S. Finance and Strategy and later was promoted to SVP of supply chain.
Natural Grocers’ fourth quarter performance was relatively strong, with sales up 4.5% to $227.2 million, driven by 1.8% comp growth and more stores in operation. Growth was partially offset by one store closing during the quarter. Comp growth reflects a 1.7% increase in transaction size. Operating income decreased 19.7% to $2.8 million.
During fiscal 2019, the Company opened six new stores and relocated five stores. Since the end of the quarter, it opened one new store, its first in Louisiana, bringing its store count to 154 in 20 states. The Company has signed leases for five new stores and acquired the property for two more new stores to be located in Colorado, New Mexico, Oregon, Utah and Washington.
For fiscal 2020, Natural Grocers expects to open 5 – 6 new stores, comp growth of 0.5% – 2.5%, EPS of $0.37 – $0.45, and capex of $28.0 million – $33.0 million.
