October 14, 2020
Yesterday, Bed Bath & Beyond announced the sale of its Christmas Tree Shops banner, its Linen Holdings business, and a distribution center in Florence, NJ to Handil Holdings and The Linen Group, in separate agreements totaling $250.0 million. Handil will continue to operate all 80 Christmas Tree stores as a stand-alone brand and manage the distribution center. Click here to request our new Special Analysis Report on Bed Bath & Beyond, including a recap of key opportunities and the risks the Company will face moving forward.
Rite Aid and Bartell Drugs announced they have entered into a definitive agreement under which Rite Aid will acquire Bartell Drugs for $95.0 million. Founded in 1890, family-owned Bartell generates over $550.0 million in revenue and fills approximately 5.5 million prescriptions annually across its 67 stores in the Seattle, WA market. Bartell’s stores join Rite Aid’s existing 69 Seattle area stores and will continue to operate under the Bartell Drugs name. The transaction is expected to be accretive to Rite Aid’s adjusted EPS after the first 12 months following the closing of the transaction, which is expected by the end of Rite Aid’s FY21. The transaction is structured as a stock sale, meaning Rite Aid will assume all of Bartell Drugs’ liabilities.
On October 9, SpartanNash announced that it has entered into a newly amended commercial supply agreement with Amazon primarily supporting Amazon Prime Now fulfillment centers. As part of the deal, NV Investment Holdings LLC, a subsidiary of Amazon, will be granted up to 5.4 million stock warrants in SpartanNash over the next seven years. The agreement calls for the immediate vesting of 1.1 million warrants effective with the execution of the new agreement on October 7, 2020, with the balance to be earned in conjunction with unidentified milestones based on total purchases of up to $8.00 billion throughout the term of the contract (October 2027). The warrants include an exercise price of $17.73 per share, which would equate to an investment by Amazon of approximately $96.4 million over the term of the contract; this would represent 12.5% of the fully diluted outstanding shares of the Company’s common stock.
The two companies have reportedly been doing business together since 2016. This deal represents an investment and commitment to SpartanNash as Amazon begins to expand its new Amazon Fresh grocery stores, of which potentially hundreds may be in the planning. The deal would suggest average annual sales of over $1.14 billion, though that would be skewed toward growth in the latter years. Click here for a list of Amazon future openings.
Last week, Amazon’s Whole Foods opened its second Ideal Market store, in Denver, CO. The 22,500 square-foot unit replaces a Whole Foods that closed three years ago. It features a beauty and lifestyle boutique and a “bottle room” with a rotating selection of seasonal, local and limited beers. The Denver store complements two standard Whole Foods located nearby (each about three miles away), and emphasizes “organic, local and made-in-house artisanal and culinary offerings.” Click here to request a list of future openings and closings.
Southeastern Grocers’ (SEG) Hispanic grocery banner Fresco y Más is expanding into Southwest Florida, with the opening of a new store on October 21 in Lehigh Acres. The Company also announced plans to introduce four new Winn-Dixie stores throughout Florida on November 11, with the completed conversion of three former Earth Fare stores in Boynton Beach, Jacksonville and Lakewood Ranch, and one former Lucky’s Market in Gainesville. These store openings are the first of eight new Winn-Dixie stores throughout Florida; the Company will open new Winn-Dixie stores in Ft. Myers, Lake Mary and Melbourne later this year, and in Viera in early 2021. This expansion follows the February opening of a new Winn-Dixie in Jacksonville. It is no surprise that the news of this expansion comes as SEG seeks to execute an initial public offering. Click here to request a list of future openings and closings.
In the J.C. Penney bankruptcy case, according to reports, the Court urged a group of first lien creditors, including Aurelius Capital Management, to submit a competing bid for assets of the Company by October 16. On September 10, Brookfield Property Group and Simon Property Group executed a letter of intent for a purchase of assets, but no formal agreement has been concluded. An ad hoc group of first lien lenders led by Aurelius Capital filed an objection to the Debtors’ motion seeking an order to set deadlines for proposed restructuring transactions (which could include the Company’s real estate and operations). In the objection, the first lien creditors assert that the DIP lenders’ proposed $1.00 billion credit bid for J.C. Penney’s real estate assets (Propco) undervalues the Company and benefits the DIP lenders at the expense of other creditors. However, the first lien lenders note that they do not oppose the proposed transaction in which Brookfield Property Group and Simon Property Group would acquire the operations (Opco), which could enable the Company to remain viable. The first lien lenders stated that they are working on a cash bid, solely for Propco, at an implied enterprise value “far in excess of the value implied by the credit bid.”
Separately, the Debtors filed a motion to extend the periods during which they have the exclusive right to file a Chapter 11 Plan and to solicit acceptances by 90 days, through and including January 10, 2021 and March 11, 2021, respectively. The exclusive period within which to file a Plan was scheduled to expire on September 14; it will be automatically extended through the date of the order. The date for a hearing on the motion has not yet been set. On October 9, the Debtors provided notification of the rejection of 144 additional unexpired leases. Click here to request a list of store closures.
Kroger is launching two onsite kitchens at stores in metro Indianapolis, IN and metro Columbus, OH. Developed in partnership with ClusterTruck, a technology startup that operates delivery-only restaurants, the kitchens will provide a variety of freshly prepared meals on demand, with no service or delivery fees. The new concept will repurpose approximately 1,000 square feet at each store. The move reflects Kroger’s ongoing investments in prepared fresh food options and a seamless customer experience. Click here to request a list of future openings and closings.
Price Chopper is closing a store in Des Moines, IA on November 14. Price Chopper blames the closure on increased competition and “numerous and extended nearby road infrastructure and repair projects ... which have negatively impacted the viability of the store.” The Company said the other three Price Choppers in the Des Moines metro area will remain open.
Dollar General is launching a new format called Popshelf, which sells home decor, beauty, cleaning and party supplies, among other things, for $5 or less. The 9,000 square-foot store will be independent of the Dollar General banner, though it will offer many of Dollar General’s new private labels along with Popshelf branded merchandise in a treasure hunt environment that will rotate on shelves. As the Company’s traditional Dollar General stores continue to focus on perishables, frozen and even produce, they are slowly transforming into mini discount grocery stores (consumables are now 77% of sales), while its higher-margin non-discretionary offering has also been improved. The new Popshelf format will be aimed at suburban women with family incomes of $50,000 to $125,000, in an attempt to emphasize its higher margin, non-food sales, attract a higher income demographic and to potentially provide another growth platform beyond the dollar store. The first two Popshelf stores are set to open in the coming weeks in its hometown of Nashville, TN. The Company says that it could have another 30 open next year if the first two go well.Click here to request a list of future openings and closings.
Arhaus, a family-owned and operated home furnishings retailer, opened Arhaus Studio in Carmel, CA. The new concept specializes in interior design and customization services, offering a service-first approach to the same handmade furniture and décor at typical Arhaus locations, but in a smaller-size store and more intimate setting. The Company has experienced a significant increase in demand for personalized design services, both in stores and online, since the start of the pandemic. Arhaus operates more than 70 stores nationwide. Additional Arhaus Studio locations are slated to open in 2021.
Today, Stater Bros. will open a new 45,200 square-foot supermarket in Ontario, CA, its fourth unit in the city.
Sportsman’s Warehouse is opening a new store in Brentwood, CA on October 15. The Company currently operates 106 locations across the U.S., including nine in California.
Last week, Earth Fare quietly opened a 25,000 square-foot store, returning to the Charlotte, NC market. Hulsing Enterprises, which bought the Earth Fare brand after it filed for bankruptcy and sold its assets earlier this year, is resurrecting many former Earth Fare locations. Each store opening has been “quick and fast,” as Earth Fare has opened 13 stores in six states in about 15 weeks. Click here to request a list of future openings.
On October 15, Grocery Outlet will open a new, 24,000 square-foot store in Pullman, WA. The Company is also opening a new store in a former Ralphs (closed in 2014) in La Quinta, CA. It will take over half of the 41,420 square-foot building and is expected to open next fall.Click here to request a list of future openings.
GameStop announced an agreement with Microsoft to employ its cloud-based enterprise software applications to support the Company’s back-end and in-store infrastructure. The Company said this “will enable store associates the ability to access omnichannel insights about customer preferences and purchasing history, real time information on product availability, subscriptions, pricing, and promotions in order to provide a differentiated and personalized in-store customer experience.” Additionally, associates will be equipped with new Microsoft Surface devices, and GameStop plans to roll out Microsoft 365 and Microsoft Teams to its stores.
Both Microsoft and Sony plan to launch their latest consoles later this year, ahead of the holiday season. As part of the agreement, GameStop would offer buyers an “Xbox All Access” bundle, for zero upfront cost, that includes an Xbox console and a two-year digital subscription to Xbox Game Pass Ultimate, Microsoft’s subscription service. Click here to request a list of future closings.
Last week, ShopRite opened a 70,000 square-foot store in Staten Island, NY. The store features enhanced in-store offerings, including specialty prepared foods, as well as access to an onsite registered dietitian and a beauty consultant. Click here to request a list of future openings and closings.
In the Town Sports International bankruptcy case, the Court issued a second interim DIP order authorizing the Debtors to access up to $20.0 million (up from $15.0 million, originally) under a $32.0 million DIP Facility, provided by Tacit Capital, LLC and an ad hoc group of lenders. A hearing on final approval is scheduled for October 16.
Separately, the Court authorized the Debtors to enter into a stalking horse Asset Purchase Agreement (APA) for a going concern sale of their assets to Tacit Capital, the DIP lender. The stalking horse bid is a credit bid of the amounts outstanding under the prepetition facility, which the ad hoc lender group has agreed to cap at $80.0 million. Additionally, the stalking horse bidder retains the right to credit bid amounts outstanding under the DIP Facility. The deadline for qualified bids is October 26, with an auction on October 28, and a sale hearing on November 2. Click here to request a list of future closures.
Demoulas continues to expand its Market Basket chain, having opened a new store in Lowell, MA on October 9. The 72,500 square-foot unit is the Company’s 51st in Massachusetts and fourth in the city. Demoulas now operates more than 80 stores in three states.Click here to request a list of future openings.
Costco’s September sales increased 16.9% to $16.84 billion, positively impacted by two holiday shifts, Labor Day in the U.S., and Chuseok/Moon Festival in Asia. The estimated positive impact was slightly less than 100 bps worldwide. Comps (excluding the impacts from change in gas prices and foreign exchange) rose 16.9%, consisting of growth of 16.7% in the U.S., 18% in Canada, and 17.5% in Other International. E-commerce sales rose 90.1%.Click here to request a list of future openings and closings.
AMC Entertainment announced that as of October 9, it had resumed operations at 494 of its 598 U.S. locations, at 20% to 40% capacity. Unopened locations are primarily in California, Maryland, New York, North Carolina, and Washington State and represented approximately 23% of the Company’s 2019 annual U.S. revenue. The Company is working with officials to reopen locations in these markets and plans to reopen 25 theaters in North Carolina and Washington State this Friday (October 16). Since reopening, same theater attendance has declined approximately 85% over the prior-year period, attributed primarily to fewer highly anticipated releases.
Management noted that given the reduced movie slate for 4Q20, it anticipates liquidity would be largely depleted by the end of FY20 or early FY21. The Company is actively working to preserve cash and secure new liquidity, including additional debt and equity financing (to date, the Company has raised $37.8 million through the offering of about 9.0 million shares of its common stock), continuing negotiations with landlords to defer lease obligations, and potential asset sales.
Giant Eagle is expanding its WetGo car wash in the Pittsburgh market with the launch of WetGo Pro, a car wash that uses a longer wash tunnel with new cleaning equipment. The first planned WetGo Pro locations will be in Bridgeville and North Versailles, PA, with the Company exploring the development of 10 additional Pittsburgh-area sites thereafter.
In the GNC Holdings bankruptcy case, the Court entered an order approving a settlement between the Debtors, Harbin Pharmaceutical Group Holding Co. Ltd., an ad hoc group of crossover lenders, the Creditors’ Committee, and an ad hoc group of convertible note holders. The settlement resolved disputes over the sale of the Company’s assets as a going concern to Harbin.
Concurrently, the sale transaction has closed, and Harbin has taken control of the Company’s approximately 1,400 retail locations. Consideration for the transaction totaled approximately $770.0 million, including a $550.0 million cash payment, $210.0 million in second-lien loans, and $10.0 million in convertible notes.
Today, Cardenas Markets will open a new 41,650 square-foot store in Montclair, CA, marking its 60th location.
Yesterday, affiliates of private investment firm CriticalPoint Capital, LLC (CPC) completed the acquisition of Shoes.com from Walmart. Terms of the deal were not disclosed. Walmart had acquired Shoes.com in 2017 for $9.0 million. Shoes.com is an online retailer of footwear, apparel and accessories, in the U.S. and internationally, offering a broad assortment of brands spanning athletic to casual for women, men and children. CPC previously completed transactions with Olympia Sports (acquired in 2019), Clever Training (acquired in 2018), and JackRabbit (acquired in 2017).
PriceSmart’s September net merchandise sales increased 4.6% to $258.1 million, negatively impacted by 3.5%, or $8.6 million due to foreign currency exchange. Comps rose 0.3%. The Company added three new warehouse clubs over the past year, bringing its total count to 46. The Company’s Click & Go service, including curbside pickup and delivery, contributed approximately 3.3% of total net merchandise sales during the month. Curbside pickup is available in all of its clubs in all markets, and delivery options have expanded to nine markets, up from six last month. The Company commented that it saw improvement in net merchandise sales in its Colombian market and experienced negative comparable net merchandise sales in some markets in Central America. It is “pleased” with the performance of it new clubs in Guatemala and Panama, but opening new clubs in existing markets adversely affects comparable net merchandise sales due to sales transfers from existing clubs.
Famous Dave’s of America recently signed a 25-unit development agreement to grow the brand in select locations across the U.S. over the next two years. The Company is partnering with Bluestone Hospitality Group to open both Famous Dave’s ghost kitchens and dual restaurant concepts with Bluestone’s Italian brand, Johnny Carino’s. As of June 28, Famous Dave’s had 30 Company-owned restaurants and 94 franchise-operated locations.
Batteries Plus announced it signed five new franchise agreements, resulting in 10 new stores in development. Altogether this year, the Company has signed 20 franchise agreements and is on track to sign an additional 20 by year end. The latest franchise agreements are for locations in Arizona, California, Minnesota, and Florida. Founded in 1988 and headquartered in Hartland, WI, Batteries Plus sells batteries, specialty light bulbs, and phone repair services to the direct-to-consumer and commercial segments, from over 720 stores throughout the U.S. and Puerto Rico.
On October 7, Blain’s Farm & Fleet opened a new 106,000 square-foot store in Standale, MI, its fifth location in the state. The Company’s stores are modern general stores that sell a variety of products, including lawn and garden, pet, clothing and footwear, home basics, food and beverages, automotive, farming and livestock, and toys and sporting goods. The building includes an automotive center and a full drive-thru area. Blain’s operates 43 locations throughout Illinois, Iowa, Michigan, and Wisconsin.