November 25, 2020
Yesterday, in the JC Penney bankruptcy case, the Court entered an order confirming the Plan of Reorganization. The Plan provides for a sale transaction under which an entity controlled by Brookfield Asset Management, Inc. and Simon Property Group (OpCo) will purchase the Debtors’ operating assets and run the retail business as a going concern. OpCo will be the counterparty to the Debtors’ vendor contracts, and the tenant on its store leases. A newly-formed entity (PropCo) will hold 160 owned and ground-leased store properties and six distribution centers. At those locations, PropCo will be the landlord to OpCo under terms of a master lease agreement, which will govern the relationship between OpCo and PropCo. Following the sale transaction and consummation of the Plan, the Debtors’ estates will be liquidated. Reports state that the sale may close today. Holders of allowed administrative and 503(b)(9) claims are projected to be paid in full, while allowed general unsecured claims are expected to receive a recovery of less than 1% of their claims. Purchasers of the Opco assets will acquire avoidance / preference actions, but they have agreed not to pursue them. The Plan is supported by the Debtors, the First Lien Lenders, and the Creditors’ Committee. Click here for a list of store closures.
7-Eleven has opened the fifth location of its new “evolution” store concept, located in the Lake Highlands neighborhood in northeast Dallas. It first unveiled the concept in March 2019 in Dallas, and subsequently opened locations in New York, San Diego and Washington, D.C. The evolution format is designed to serve as a lab store and real-time experiential testing ground, where customers can try the Company’s latest innovations. The store houses the second Laredo Taco Company restaurant in Dallas. 7-Eleven acquired the Mexican concept along with Stripes convenience stores in South Texas as part of a 1,000-store acquisition from Sunoco in 2018.
The Company is also opening its first Laredo Taco restaurant in Florida, in Inverness. It is the first of more than 15 locations planned for the state. Two additional Laredo Taco restaurants are scheduled to open later this year in Palmetto and Parrish, TX, with the remaining sites expected to open throughout Texas by the end of 2021. Click here to request a list of future store openings.
Last Thursday, a 25,000 square-foot Amazon Fresh store opened in the North Hollywood neighborhood of Los Angeles, CA. The store includes the Amazon Dash Cart, which enables customers to skip the checkout line, as well as new Alexa features to help customers manage shopping lists and better navigate aisles. Prime members also have access to free, same-day pickup from the store. It is the Company’s fourth and smallest Amazon Fresh unit to open so far, following California openings in Woodland Hills in August (35,000 square feet), Irvine in October (40,000 square feet), and Northridge earlier in November (30,000 square feet). The stores are among eight Amazon Fresh locations identified by Amazon thus far; four others are expected in the Chicago, IL area.
Amazon has reportedly laid off dozens of R&D and manufacturing employees from its delivery drone project, Amazon Prime Air. The Company has reached tentative deals with two external manufacturers (Austria’s FACC Aerospace and Spain’s Aernnova Aerospace) to build component parts of its long-awaited drones; more deals with third parties could be finalized soon.
Meanwhile, ahead of the holiday season, Amazon customers will now be able to pick up online orders at Amazon 4-star or Amazon Books physical store locations. Amazon is adding these stores to its existing counter in-store pickup service (part of the Amazon Hub omnichannel pickup platform), which to this point has operated with third-party retail partners. Click here for a list of Amazon future openings.
On November 18, Ahold Delhaize and Centerbridge Partners announced that they have agreed to acquire NYC-based online grocer FreshDirect. Ahold Delhaize will acquire the majority share, funded by cash on hand, and Centerbridge Partners will be a minority equity investor, with a 20% stake. After the deal closes, FreshDirect will retain its brand name and continue to independently operate out of New York City. Financial terms of the deal were not disclosed. The transaction is expected to close in 1Q21, following the satisfaction of customary closing conditions, including regulatory clearance. Click here to request a list of future store openings and closings.
Kroger and Ocado are continuing to expand their partnership, with plans to construct an additional Customer Fulfillment Center (CFC) in the South region while also collaborating on in-store fulfilment (ISF) capabilities with a planned rollout across Kroger stores, beginning in 2021. The new facility will be 200,000 square feet; the exact location and construction dates have yet to be released. The location will complement the Company’s previously announced CFC sites in Monroe, OH; Groveland, FL; Frederick, MD; Atlanta, GA; Dallas, TX; Pleasant Prairie, WI; Romulus, MI; and the Pacific Northwest and West regions. Kroger plans to open the country’s first two CFC sites in Monroe, OH and Groveland, FL in early 2021. Click here to request a list of future store openings and closings.
In the Stein Mart bankruptcy case, the Court approved the $6.0 million sale of the Company’s intellectual property to Stein Mart Online, Inc., a majority-owned subsidiary of Retail Ecommerce Ventures. The assets include the Stein Mart brand, various private label brands, domain names, social media assets, and customer data. Retail Ecommerce Ventures owns the intellectual property assets of Dressbarn, Franklin Mint, Linens ‘n Things, Pier 1 Imports, Modell’s Sporting Goods, and RadioShack.
Camping World inked a deal to acquire All RV Needs in Medford, OR. All RV Needs will be rebranded as Gander RV and will offer a wide range of new and used RVs from top manufacturers and brands. The acquisition brings the Company’s store count in Oregon to five. In addition, Camping World announced an agreement to acquire Paul Sherry RV located in Piqua, OH. This store will be rebranded as Camping World and brings the Company’s retail supercenters in the state of Ohio to four. Last week, we reported on Camping World’s acquisition of four RV dealerships from Noble RV in Owatonna, Madelia, Oronoco, and Jordan, MN, as well as its acquisition of the Outlet Recreation dealership in Fargo, ND. Camping World currently owns and operates more than 160 locations.
Southeastern Grocers’ 3Q20 (ended September 30) sales grew 15.9%, led by a 16.2% increase in comps. For the March through September period, median comps were up 22%. The 144% growth in Company-reported EBITDA was driven by the additional sales leverage, including shrink benefits, from COVID-19, and a lower promotional environment. These benefits offset additional payroll and other costs related to the COVID-19 pandemic. SEG operated 540 stores at the end of 3Q but plans to sell 121 of those, including all stores operating under the BI-LO brand. The Company did not provide any additional details on its pending IPO, including the price or number of shares it plans to issue. Click here to request a list of future store openings and closings.
Foot Locker reported a 9% increase in 3Q20 sales, as comps were up 7.7%, slightly offset by 128 net store closures in the TTM period. While the back-to-school selling season kicked in later than usual due to COVID-related delays, the Company experienced sequential top-line improvement throughout the quarter. Gross margin contracted 120 bps given increased online penetration (to be disclosed when 10Q is filed) during the pandemic and promotional activity, offset by a 120 bps decline in SG&A margin on higher sales. Overall, operating income was up 8.5%, and operating margin remained flat at 8.5%. The balance sheet remains robust, given a $1.26 billion net cash position and a fully available $600.0 million revolving credit facility. Additionally, the Company has no significant debt maturities until January 2022. Given its strong financial position, the Company repurchased $10.0 million of its common shares and paid $16.0 million in dividends in 3Q20. Looking forward, the Company expects to continue closing underperforming stores in order to enhance fleet performance. The Company opened 27 new stores and closed 95 existing locations in 3Q20, including 70 Runners Point stores. Given heightened uncertainty heading into the key holiday selling season, management has not provided financial guidance. Click here for a list of future store openings.
On November 21, Guitar Center Inc. filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Eastern District of Virginia. The proceedings have been designated as case number 20-34656. The Company’s prepackaged Chapter 11 filing includes a Plan of Reorganization which provides for the following:
- $800.0 million in debt reduction;
- $165.0 million in new equity investments from the Company’s equity sponsor, a fund managed by the private equity group of Ares Management Corporation and new equity investors, which include funds managed by The Carlyle Group and Brigade Capital Management;
- a $375.0 million DIP Facility, provided by certain existing noteholders and ABL lenders; and
- $335.0 million in new senior secured notes.
Management said the plan is “intended to allow Guitar Center and its related brands (including Music & Arts, Musician’s Friend, Woodwind Brasswind and AVDG) to continue to operate in the normal course while the transaction is implemented. Guitar Center will continue to meet its financial obligations to vendors, suppliers, and employees, and intends to make payments in full to these parties without interruption in the ordinary course of business.
Guitar Center will continue to provide uninterrupted service to its customers through its existing channels, including its stores, websites, call centers and social media pages, and will continue to receive goods and ship customer orders as usual. While Guitar Center is pleased with its overall store footprint, the Company has engaged A&G Realty Partners to explore opportunities to optimize its real estate portfolio and other agreements to focus on investments that best position the Company to return to its growth trajectory prior to COVID-19.”
The Disclosure Statement provides that allowed claims of administrative, 503(b)(9), and general unsecured creditors will be paid in full. The Debtors intend to pursue avoidance/preference actions. A hearing to consider confirmation of the Plan is scheduled for December 17.
Yesterday, the Court entered an interim order authorizing the Debtors to: (i) use cash collateral, and (ii) access (a) up to $50.0 million under an ABL Revolving DIP Facility provided by Wells Fargo Bank, National Association, and (b) a $325.0 million DIP Term Loan, provided by Delaware Trust Company. A hearing is scheduled on December 17 to consider: (i) final approval of the DIP Facility, and (ii) confirmation of the Plan of Reorganization.
On November 23, HelloFresh SE announced that it has agreed to acquire Factor75, Inc., a provider of prepared meals in the U.S., for $277.0 million in cash. Of this, $177.0 million is payable upon the closing of the transaction and $100.0 million is structured as a performance-based earn-out and ongoing management incentives. Factor’s FY20 revenues are expected to be about $100.0 million. The transaction is subject to customary conditions and is currently expected to close in early 2021.
Caleres’ 3Q net sales declined 18.3% due to the ongoing impacts of COVID-19 on in-store traffic, slightly offset by e-commerce growth of 24.6% (25.4% of net sales). Famous Footwear, which represented more than 70% of net sales, experienced a 12.3% revenue decline, with comps down 9.1%. Gross margin contracted 70 bps on lower sales and higher e-commerce penetration. Overall, adjusted operating income declined 54.7% compared to the prior-year period, and operating margin deteriorated 250 bps. However, the Company generated $89.8 million in free cash flow, reflecting a 21% inventory reduction over the prior-year period and cost reductions. As a result, the Company has paid down nearly $140.0 million in debt since 1Q20 (including $50.0 million under the revolver in 3Q) and has paid $2.7 million in dividends. As of October 31, the Company had $124.3 million in cash and had drawn down $300.0 million under its $600.0 million revolver. Additionally, the Company has no significant debt maturities until 2023. Given its growing e-commerce penetration, the Company plans to permanently close approximately 133 underperforming Naturalizer stores by FYE20. Click here to request a list of store closures.
In the Century 21 Department Stores bankruptcy case, the Debtors notified the Court that a $9.0 million bid by Gindi C21 IP LLC is the successful bid for the Company’s intellectual property. Prior to the sale hearing, the Debtors intend to file an asset purchase agreement describing the terms of the bid. Documents in the case do not currently indicate the identity of “Gindi C21,” or the entity that may control it, but that information will likely appear in the asset purchase agreement when it is filed. The sale hearing is scheduled for December 1. Click here to request a list of store closures.
Walmart reportedly plans to acquire assets, including technology and intellectual property, from JoyRun, a startup that runs a peer-to-peer last-mile delivery service. The deal is set to close “in the coming weeks,” and JoyRun employees will be part of Walmart’s supply chain technology team. JoyRun facilitates the delivery of restaurant, grocery and other orders between community members, with users able to request items and have them filled by a friend or neighbor for free or for a set fee. The Company has 540 merchant partners, and more than 30,000 people have delivered orders since it launched in 2015.
Meanwhile, Walmart’s momentum continued in 3Q, as revenue grew 5% and comps were up 6%. Traffic was down, but average ticket increased significantly. Health and wellness, general merchandise, and grocery drove sales. Walmart exited several international markets, selling its Asda unit in the U.K., Seiyu in Japan, and its Argentinian operations.
Walmart Health debuted in Chicago, IL, with the opening of two centers alongside a pair of revamped Supercenters, on November 20. The locations partner with local health providers to deliver primary care, labs, x-ray and diagnostics, counseling, dental and hearing services in a single facility. The two latest Walmart Health centers are part of a recent Company commitment to rebuild and reopen four Chicago-area Supercenters with additional services. Click here to request a list of future openings and closings.
Retail Ecommerce Ventures (REV) has acquired the brands and related assets of RadioShack from General Wireless Operations. The former owners will retain a minority stake in RadioShack. Terms of the deal were not disclosed. According to its website, RadioShack is currently closed for the next week for an inventory restructure, but it “will soon relaunch an exciting, modern RadioShack website … that will also support the existing stores carrying RadioShack products.” Over the last year, REV has acquired the intellectual property of dressbarn (from Ascena Retail Group), Pier 1 Imports, Modell’s Sporting Goods, and Stein Mart. RadioShack operates primarily as an online retailer but also has a network of about 400 stores owned by independent dealers. It also operates “express” shops in HobbyTown nationwide.
ShopRite opened an automated micro-fulfillment center, located beside the ShopRite of Flemington, NJ. According to the Company, the facility comes in response to an extraordinary growth in online shopping and the ShopRite from Home services over the past several months. The center will employ 50 people when fully operational, and support ShopRite from Home operations at the ShopRite of Flemington and ShopRite of Clinton. Over time, the center will also support other ShopRite stores located in Phillipsburg, NJ, as well as Yardley and Bethlehem in eastern Pennsylvania. The center was created in partnership with Wakefern Food Corp. and Takeoff Technologies, which has already launched other micro-fulfillment centers in Clifton and Egg Harbor to service ShopRite stores across New Jersey.
The Children’s Place’s 3Q revenue fell nearly 19% to $425.0 million, driven by a weaker back-to-school selling season and 151 permanent store closures over the last 12 months. Digital sales (44% of 3Q20 sales) growth decelerated as stores reopened. The Company’s cost reductions helped deliver profitability for the first time this year. At quarter end, there was $64.5 million in cash and $255.7 million in debt. The Company remains on track to close 200 stores in FY20 and expects to close an additional 100 stores in FY21. Management expects 4Q20 sales and profitability to remain under pressure due to the pandemic. Click here to request a list of store closures.
Love’s Travel Stops & Country Stores opened its first two Bojangles restaurants inside locations in Marion, IL and Blytheville, AR. The restaurants are the first of a planned 40 to open as part of a national franchise development agreement formed in late 2019. Under the terms of the agreement, Bojangles restaurants will open inside Love’s locations in Illinois, Oklahoma, Arkansas and Mississippi, marking the brand’s entrance into those states. Love’s operates more than 530 locations in 41 states. Click here to request a list of future store openings.
In the Tuesday Morning bankruptcy case, the Court approved the Disclosure Statement. This clears the way for the Debtors to solicit acceptances of the Plan of Reorganization. The Plan provides that the Debtors will continue to exist after the effective date as a separate corporate entity, with a new board, newly authorized common stock, and a new credit facility. Sources of funding for the Plan include: (i) cash from operations; (ii) proceeds of $60.0 million from a sale/ leaseback of the Debtors’ owned real property; (iii) $25.0 million in proceeds from the Debtors’ issuance of Senior Subordinated Notes; and (iv) proceeds of a $40.0 million rights offering. Upon emergence from bankruptcy, the reorganized Debtors will have access to a new $110.0 million secured ABL Credit Facility provided by the DIP Facility lenders. The Disclosure Statement provides that administrative, 503(b)(9), and general unsecured creditors will all receive an estimated recovery of 100% of their allowed claims. The Debtors will not pursue avoidance / preference claims. The Company has already closed approximately 200 of the 687 stores it operated on the petition date, and there are no expectations for any more closings before the Plan becomes effective. The confirmation hearing is scheduled for December 22. Click here for a list of store closures.
Papa John’s International announced its new headquarters in Atlanta, GA will be located in Three Ballpark Center at The Battery Atlanta. The 60,000 square-foot space will be designed to drive continued menu innovation and optimized integration. The new location is expected to be completed by summer 2021. The Company’s information technology (IT), supply chain, accounting and legal teams will remain at its current headquarters in Louisville, KY. Papa John’s also maintains an international headquarters outside of London.