November 9, 2022
Nordstrom plans to open a new 24,000 square-foot Nordstrom Rack in Fall 2023 in San Luis Obispo, CA. With the addition of this new location, the Company will operate 58 Nordstrom Rack stores, 23 Nordstrom stores, five Nordstrom Locals and one asos | Nordstrom location in California. Nordstrom opened a 30,000 square-foot asos I Nordstrom location in Los Angeles, CA in May 2022. See the map below for future Nordstrom and Nordstrom Rack store openings. Click here to request a sample list of future store openings.
A Washington State judge granted a temporary restraining order that prevents Albertsons from paying its $4 billion special dividend, which was scheduled for yesterday until a hearing on Thursday. Washington and several other states argued the special dividend would weaken the Company’s ability to compete during the antitrust review of the Kroger merger. Albertsons said it intends to seek to overturn the restraint as quickly as possible because the temporary order was based on the incorrect assertion that payment of the special dividend would impair its ability to pending the antitrust review. Albertsons has argued that the special dividend is independent of the merger and part of a plan to return capital to shareholders, and that it has a strong financial position with limited debt and significant free cash flow. After payment of the special dividend, Albertsons would have approximately $3 billion of liquidity, including $500 million in cash and $2.50 billion available under its $4 billion revolver, and expects to continue to generate strong revenues and positive free cash flow. Pro forma for the special dividend, debt to EBITDA would only increase to about 2x. Regardless of its legal right and financial condition before or after the special dividend, which we agree will not be significantly impaired, this is more bad news for the Company and its planned merger, which will continue to face considerable legal and regulatory challenges.
REI is planning to open a new 22,000 square-foot location in Fall 2023 in Bedford, NH, its second in the state. In addition to the standard merchandise, this store will also include a full-service bike shop staffed by bicycle mechanics and a ski and snowboard shop offering professional tuning, waxing and repairs. Last month, the Company opened a store in Tallahassee, FL, its first in the Panhandle and seventh in Florida. Next year, the Company is planning to open one new location in Laguna Hills, CA, (Fall 2023) and another on Long Island in Huntington, NY (Summer 2023). Click here to request a sample list of future store openings.
H-E-B opened three new stores in Texas last week. The 118,000 square-foot store in Plano features a restaurant, drive-thru pharmacy, and a home décor department. H-E-B operates six namesake and six Central Market stores in the greater Dallas areas, including one Central Market in Plano. The two 112,000 square-foot Houston area locations, in Magnolia and Willis, bring the Company’s store count in Houston to 93. Click here to request a sample list of future store openings.
A new Meijer store is slated to be built next year in Noblesville, IN. The 90,000 square-foot location is notably smaller than the Company’s typical 200,000 square-foot size and is the second Meijer location in the region. Meijer launched the supermarket concept, called Meijer Grocery, in September with the aim to provide more convenience and easier access to fresher foods; stores are expected to be 75,000 – 90,000 square feet, compared to the typical Meijer supercenter, which ranges between 155,000 and 200,000+ square feet. The Company expects to open the first two locations under this format near Detroit, MI next year. The Company is also developing a chain of urban-focused neighborhood markets that average about 40,000 square feet and are designed to appeal to convenience-focused customers. The first such location opened in Grand Rapids, MI in 2018, and the fifth is slated to open in Cleveland, OH in early 2023. Click here to request a sample list of future store openings.
In the Cineworld, DIP case, the Bankruptcy Court granted final approval of the $1.90 billion DIP Facility, under which the Debtors may access up to $664 million in working capital loans ($150 million more than was authorized under the interim order). As part of a settlement reached between the Committee and the DIP Lenders, the Facility provides for payment of stub rent to landlords at a minimum of $5 million per month for four months, beginning in November 2022, with a potential for increased payments if the Debtors exceed the budget. The balance of the stub rent will be paid on the effective date of a Plan. If stub rent is not paid in accordance with the agreed terms, the Committee and affected landlords will have the ability to assert a surcharge against the DIP Lenders’ collateral. The settlement also provides extended milestones for evaluating strategic alternatives (which may include a sale or a plan sponsorship transaction) to maximize the value of the estate.
The Debtors filed a motion seeking to reject an additional 20 unexpired leases, stating that these theaters “do not have a place in the Debtors’ go forward business,” and that rejecting the leases will save the estates $19.5 million annually. Click here to request a sample list of future store openings.
Lowe’s agreed to sell its Canadian retail business to Sycamore Partners, a private equity firm specializing in retail, consumer and distribution-related investments, for $400 million in cash, and undisclosed performance-based deferred consideration. The transaction is expected to be completed in early 2023, subject to customary closing conditions and regulatory approvals. In connection with the preparation of its financial statements for 3Q22, the Company expects to record a pre-tax non-cash impairment charge of approximately $2 billion related to its Canadian retail business.
Jack in the Box announced a partnership with The Cypress Group, a restaurant and franchise investment banking firm, to manage the sale of certain Company-owned Del Taco restaurants, which currently make up roughly half of the brand’s total restaurant count, to existing and new franchisees. There are approximately 600 Del Taco restaurants in operation, with more than 60% located in California. The sale process has already begun and represents the next step toward its asset light portfolio optimization. Jack in the Box completed its acquisition of Del Taco in March and plans to refranchise the brand to new or existing franchisees.
Metro banner Super C opened its 100th store in Saint-Jerome, Quebec, Canada. The 40,000 square-foot store, which represented a C$13 million investment, is its 11th location in the Laurentians region.
Kroger expanded its operations to Oklahoma, its 36th state, with the opening of a new Ocado-automated spoke facility. The 50,000 square-foot site is located in Oklahoma City and will support a 350,000 square foot Customer Distribution Center in Dallas, TX. Kroger also opened another spoke facility, a 67,000 square-foot space northeast of San Antonio, TX.
David’s Bridal will unveil a new in-store personalization experience in about 30 stores next year, including 12 new locations. The one-on-one shopping experience features a trained stylist and/or in-house alterations expert, as well as new offerings such as a customization lounge and try-on bar for veils and jewelry. This follows the test launch of the concept in select locations including Torrance, CA; West Chester Township, OH; Lexington, KY; and Cool Springs, TN. Moving forward, a majority of David’s Bridal’s remodeled stores will include these enhanced one-on-one customer experiences.
Camping World continues to sell record numbers of used vehicles amid near-term pressure on new vehicles. Nevertheless, sales fell 3% to $1.86 billion, due to a 4.8% decrease in comps, partially offset by the opening of six new units. Comps fell for both new and used vehicles (used vehicles fell due to lower prices despite record unit sales). Lower sales also reflected a reduction in product revenue from categories which were exited in 2021, including fishing, hunting, and apparel. Gross margin was 32%, a decrease of 408 bps, although it remained higher for used vehicles than new vehicles. EBITDA and EBITDA margin fell 37% and 530 bps, respectively. Inventory increased 40%, which management attributed to restocking to normalized levels of new vehicles, growth of the used vehicle business, and additional dealership locations. Net debt increased 47% to $2.26 billion. Click here to request a sample list of future store openings.
Cinemark’s 3Q22 sales grew 50%, driven by a 58% increase in theater attendance to 48.4 million. However, attendance is still well short of pre-COVID levels (73.3 million in 3Q19). U.S. sales alone grew 36% and attendance was up 37%. While average ticket price slipped 4% to $8.73, concession revenue per patron improved 3% to $6.81, reflecting price increases to offset rising costs. 3Q adjusted EBITDA more than doubled to $99.5 million. YTD capex only reached $65.3 million at quarter-end, and management does not expect to reach its previous guidance of $125 million for the full year, but rather get to about $100 million to $115 million by the end of the year, with two new theaters expected to open in 4Q.
Dollar General’s Popshelf concept opened its 100th store in Chattanooga, TN on November 5. The Company unveiled the concept two years ago with two locations in the Nashville, TN area, and now operates the format in nine states. Of the 100 locations, more than 30 are in-store concepts that combine Popshelf and DG Market offerings. Popshelf is on track to operate about 150 standalone locations and 40 combination formats by FYE22; it has set a goal of about 1,000 stores by FYE25. Click here to request a sample list of future store openings and closings.
Brinker International’s 1Q23 sales increased 9% to $955.5 million. The Company’s comparable restaurant sales increased 5.3%, including 3.8% at Chili’s and 18.2% at Maggiano’s. Chili’s sales increased primarily due to increased menu pricing, favorable menu item mix, and the acquisition of 68 restaurants during FY22, partially offset by lower traffic. Maggiani’s sales increased due to higher dining room and banquet traffic and increased menu pricing. However, operating margin dropped to 6% from 11% due to commodity price inflation of 24%, and as a result, adjusted EBITDA fell 61% to $27.1 million.
The Cheesecake Factory’s 3Q22 sales increased 4% to $784 million. Comparable restaurant sales increased 1.1% year-over-year, or 9.5% since FY19. The Company recorded an operating loss of $2.2 million on higher than anticipated operating expenses, particularly in utilities and building maintenance. During the quarter, the Company opened a Cheesecake Factory in Katy, TX, a North Italia in Dunwoody, GA, and a Fly Bye in Phoenix, AZ. It expects to open up to 13 new restaurants in FY22 (five have opened year-to-date), including three Cheesecake Factory restaurants (one already opened), four North Italia (two already opened), and six Fox Restaurant Concepts (FRC) restaurants (two already opened). The Company owns and operates 311 restaurants, including 209 Cheesecake Factory locations, 31 North Italia units, 32 FRC locations, and 39 other units.
The Container Store’s 2Q22 sales were down 1.2%, as the 0.2% retail sales increase was more than offset by the nearly 23% decrease in Elfa third-party sales. Comps decreased 0.8%, though Custom Spaces sales comps were up 7.1%, contributing an increase of 230 bps to comps. Gross margin decreased 270 bps, and adjusted EBITDA declined 25%. During the quarter, the Company opened one new store, ending with 95 stores compared to 94 last year. This was its first smaller format store, in Colorado Springs, CO; a second smaller format store is slated to open in Salem, NH this winter.
Kroger announced plans to open ghost kitchens at three of its supermarkets in the Columbus, OH area later this year in partnership with Kitchen United. The new take-out food halls will each offer selections from at least six of the 10 restaurant brands Kitchen United is working with, which include Nékter Juice Bar, Saladworks, Hardee’s, Capriotti’s Sandwich Shop and Pei Wei Asian Kitchen. Customers will be able to place orders using digital kiosks found in the grocery stores or online through the Mix Food Hall app or website The two companies opened their first joint location at a Ralphs store in Los Angeles, CA in 2021, and they also operate food halls together at Kroger supermarkets in Houston and Dallas, TX.
Texas Roadhouse saw 14.3% sales growth to $993 million in 3Q22 based on 8.2% comp growth at Company-operated restaurants and the opening of 31 net new restaurants over the past year (seven in 3Q alone). Both commodity and labor inflation remained elevated at 8.8% and 7.7% in 3Q, but a 2.9% menu price increase in October, as well as a previous price increase in April mitigated the negative impact on restaurant-level margin to just 26 bps. The Company expects commodity inflation and wage inflation to both slow to 5% to 6% in FY23, after an estimated 10.5% and 8% in FY22.
Potbelly delivered 15% comp growth in 3Q, driven by recovering volumes at its business district and airport locations and successful LTO (Limited Time Offering) promotions. Menu price increases improved shop-level margins 190 bps to 10.6%. The Company also made progress in its re-franchising initiative, signing two new development agreements that include 25 new stores in Florida and Illinois. A third agreement was signed after quarter-end. Management expects to sustain the comp and margin improvements through 4Q and provided guidance for full year comp growth of 16% to 18% and a 10% shop-level margin.
In other news, Potbelly inked a multi-unit development deal to bring six new restaurants to Orlando, FL over the next seven years. As part of the Franchise Growth Acceleration Initiative announced in March 2022, the Company plans to reach 2,000 units, with at least 85% of those being franchised shops over the next 10 years. It also plans to refranchise approximately 25% of its corporate stores.
Fresh Thyme’s revenue is estimated to have remained flat in 2021 at around $700 million, as sector-wide gains primarily due to inflation and the opening of one store were offset by the Company closing three underperforming locations at the end of 2020. Broadly speaking, the Company has been pruning underperforming locations likely due to overexpansion from 2015-2018 during which time it opened the bulk of its 70 stores; it has now closed 10 stores over the last four years. The Company is also contending with a challenging and growing competitive field, which has led to market share erosion in almost all of its major markets. Additionally, Fresh Thyme will also face new competition as Iowa-based Hy-Vee and Florida-based Publix enter its markets in the upcoming years, with Hy-Vee planning to expand to four new states, including Indiana and Kentucky, and Publix breaking ground on its first store in Kentucky in June 2022. To somewhat respond to market changes, the Company opened a new concept store in St. Louis, MO, in November 2021. The concept focuses on local artisans and their products, almost like a farmers market. Fresh Thyme was originally backed by Meijer, however, details of the relationship today remain scarce, and it is unclear what steps Meijer would be willing to take to preserve its investment if needed.
Demoulas' sales rose for the seventh straight year, reaching $6 billion in 2021, an increase of about 3.5% over 2020, driven by inflation, lingering pandemic benefits and two new stores in operation. The Company opened its most recent store in August 2022. The Company currently has three new locations in its pipeline. Competitively, Demoulas has lost market share in some markets, including the key Boston market, despite having three additional stores in the region. Walmart was the primary beneficiary of the market share shift, likely due to its more robust e-commerce capability during the pandemic.
Meanwhile, Aldi, a significant low-priced threat to Demoulas long-term, has yet to grow a significant presence in Massachusetts (17 stores) or New Hampshire (nine stores), although it does continue to expand throughout the U.S. Using our StoreTrends technology to examine the competition within the Company’s full operating region, we analyzed the three-mile radius overlap between the Company’s Market Basket stores, and two other low-price players, Walmart and Aldi, and found 55 instances with Walmart and 28 with Aldi, indicating some competitive encroachment. We would expect the Company’s strong reputation as a price leader combined with a fiercely loyal customer base to offer some protection from the growing competition, especially during the current inflationary environment. By the same token, however, the scale advantage held by Walmart and Aldi suggests they will be able to continue to exert pricing pressure in the Company’s markets for the foreseeable future.