October 16, 2019
Yesterday, Hamilton Beach Brands Holding Company announced the wind down of the retail operations of its subsidiary, The Kitchen Collection, LLC (KC), and the closure of all of its 160 stores by the end of 2019 (click here to request a list); liquidation sales will commence at all KC stores in the next few days and continue through the holiday selling season.
Olympia Sports announced it would sell 75 of its 151 stores to JackRabbit. Private equity firm CriticalPoint Capital acquired JackRabbit from Finish Line in 2017. Finish Line disclosed at the time it did not receive any proceeds from the transfer of the struggling business after it made an $8.0 million cash contribution in JackRabbit. At the time, JackRabbit operated 65 stores under various banners, and generated sales of $90.0 million and an operating loss of $9.2 million during the fiscal year ended in February 2017. The Olympia deal will increase JackRabbit’s store count to 135, plus various online platforms including Clever Training, an online retailer of fitness gear and technology acquired in 2018. JackRabbit will continue to operate the Olympia banner. Olympia, which had already been closing a significant number of stores in recent years (its count is down from over 230 in 2015), will wind down its remaining operations. Click here to request a list of closings.
On October 8, Gordon Brothers and Hilco Global began operating liquidation sales at all 43 Forever 21, DIP stores in Canada, with sales expected to be concluded by November 30. The stores are located in Alberta, British Columbia, Manitoba, Ontario, Quebec, and Nova Scotia. The announcement came after Forever XXI ULC (“Forever 21 Canada”) obtained an order from the Ontario Superior Court of Justice on October 7 approving the liquidation process. Forever 21 provided a list of U.S. stores that are under consideration for closing (click here to request the latest list of closures), depending on rent concessions and other operational improvements, which will be negotiated with landlords. On October 14, the U.S. Trustee provided notice of the appointment of the Committee of Unsecured Creditors, whose members include: KNF International Co. LTD, Intec, Ltd., Eroglu Giyim Sanayi Ticaret, A.S., Simon Property Group, Inc., Brookfield Property REIT, Inc., The Macerich Company, and AT&T Services, Inc.
Published reports indicate Hudson’s Bay Company is partnering with Authentic Brands Group on a nearly $270.0 million bid for Barneys New York, DIP. According to the sources, Hudson’s subsidiary, Saks Fifth Avenue, would take over Barneys’ website, launch Barneys departments in 41 of its stores, and potentially take over some Barneys’ locations. Reports also say Barneys has been evaluating a separate offer of approximately $220.0 million from a consortium that includes Sam Ben-Avraham (the backer of fashion-forward retailer Kith) and Gary Wassner (CEO of Hildun Factors). In a court hearing on Friday, Barneys said it needed more time to firm up a tentative deal with a lead bidder that could potentially avert a liquidation. The new deadline for bids was set for October 15. For the latest list of future closings, please click here.
Ross Stores opened 30 new Dress for Less and 12 dd’s Discounts stores across 19 states in September and October, completing its fiscal 2019 growth plans to open 75 Ross and 25 dd’s stores (click here to request a list of future openings). The 42 newest locations include nine Ross stores in newer Midwest markets of Illinois, Indiana, Kentucky, Nebraska, and Ohio. In addition, dd’s Discounts entered the state of Virginia, opening one new store. The Company remains confident it can grow to 2,400 Dress for Less and 600 dd’s Discounts stores over time. Currently, there are 1,523 Ross locations and 249 dd’s stores.
According to sources, Topgolf International Inc. is in talks with investment banks for an IPO planned for next year. Topgolf is looking to raise capital to support new venue growth in the U.S. and international markets. The Company currently operates 52 U.S. locations, three in Britain and one in Australia. Callaway has a minority investment in Topgolf, and in December 2017 valued its 14% stake at $290.0 million, but that value has likely increased since then. Click here to request a list of Topgolf future openings.
The new Toys “R” Us website was launched on October 8, with product reviews, new toy lists, do-it-yourself activity ideas, and other features. To buy toys, shoppers are directed to product pages on Target’s website, where transactions can be fulfilled. Associates in the new Toys “R” Us stores, which will open in November in Houston, TX and Paramus, NJ, will also direct customers to Target’s website to purchase products not available in store. The arrangement is expected to benefit both companies, as Target gains exposure to core Toys “R” Us shoppers and Toys “R” Us heads into the holiday season with access to a full scale e-commerce platform, with same-day delivery and in-store pickup options. Toys “R” Us plans to open 10 stores by the end of 2020.
The Children’s Place announced that the Gymboree brand will relaunch in early 2020 online and in-store shops in over 200 The Children’s Place stores in the U.S. and Canada. Online purchases will now include free shipping and free returns, with no minimum purchase. Gymboree will also launch a new loyalty program to provide members with special offers on their children’s birthdays, exclusive access to bonus events and opportunities to earn extra points. As previously reported in March 2019, The Children’s Place acquired the intellectual property and related assets of Gymboree and Crazy 8 from Gymboree, DIP for $76.0 million in cash.
Next week, Ahold Delhaize’s Food Lion plans to launch its online grocery pickup service at 50 more stores in Delaware, the Carolinas, Virginia, and West Virginia. With the new pickup sites, Food Lion will have 200 stores offering the To-Go service. The chain initially tested the program at three stores in 2017 before expanding it to another 50 stores last year. Most recently, in August, pickup service was rolled out to 25 stores in North Carolina and Virginia. In other news, next month Ahold Delhaize plans to reopen Giant Food stores in Pennsylvania from its acquisition of Musser’s Market. Under the deal, announced in August and closing this month, Giant purchased Musser’s three supermarkets in Quarryville, Columbia, and Lebanon, PA. Each location shut for about a week to be converted to a Giant. Including the re-bannered stores, Giant will have 161 stores in Pennsylvania, where it has been focusing on expansion. Most recently, the Company opened a Giant Heirloom Market in Philadelphia, the second of four urban-format stores slated to open in the city this year. It also plans to open a new Giant supermarket in East Stroudsburg soon. In fall 2020, Giant is slated to open a 65,000 square-foot flagship store in downtown Philadelphia, its first two-story unit and its second full supermarket in the city.
Schnuck Markets will close three underperforming stores in metro St. Louis, MO on November 10. Combined, about 190 employees will be affected. Prescriptions will transfer to nearby Schnucks pharmacies. The Company cited poor sales at the three stores, in part due to cannibalization from nearby Schnucks locations. The St. Peters store is within three miles of two other Schnucks supermarkets, and the O’Fallon and Edwardsville stores are each less than a mile away from another Schnucks. The Company is looking for a tenant for Edwardsville, which it owns; St. Peters and O’Fallon are leased. After the three closures, Schnucks will operate 18 stores in the city of St. Louis, 82 stores in metro St. Louis, and 112 overall in Missouri, Illinois, Indiana, Wisconsin and Iowa. This year, Schnucks has already closed four stores, three of which were underperforming and the fourth as part of an ongoing effort to optimize its brick-and-mortar locations.
Walmart’s Sam’s Club will reopen a portion of its South Tampa, FL location this Thursday. The store was closed suddenly in January 2018 and converted to an ecommerce fulfillment center. Sam’s Club members will also be able to shop from a limited assortment of products at the fulfillment center using the Scan & Go app. It will be the only Sam’s Club in the country to operate as a Scan & Go store and a fulfillment center; Walmart has no current plans to expand the concept. According to a published report, Walmart is subsidizing third-party vendors listing products on its marketplace site as part of its continuing price war with Amazon. The story notes that Walmart “introduced a program to temporarily lower the price consumers pay for some items on its marketplace site, where third-party vendors pay Walmart a fee to list their goods. The merchants selling on the site, however, will still be paid the same amount that was listed before the cuts, with Walmart subsidizing the difference. The move appears to be a response to a program Amazon rolled out over the summer where the e-commerce giant has full control to set prices of third-party products sold on its marketplace -- in return for a minimum payout. Amazon has also come under scrutiny for increasingly leaning on vendors to ensure that their products aren’t offered for a lower price on Walmart.com or any other rival website.”
Walmart is rethinking its e-commerce strategy, having recently announced layoffs at its Bonobos operations and having agreed to sell its online women’s fashion site, Modcloth. Walmart has indicated that the red ink in its online operations will be bigger than last year. Other rumors swirling include finding a partner for its Jetblack personal shopping service and Jet.com being absorbed into Walmart.com eventually. Finally, Walmart announced that John Furner will become president and CEO of Walmart U.S., effective November 1. Mr. Furner has been CEO of Sam’s Club since 2017 and prior to that CMO of Walmart China. He will replace Greg Foran, who is taking the position of CEO at Air New Zealand. Mr. Foran will stay on with Walmart through January 31.
Allbirds, an e-commerce footwear brand, plans to open 20 stores in 2020, bringing its total store count to about 35 by year-end (click here to request a list of future locations). The expansion will bring Allbirds into new markets such as Atlanta, GA; Dallas, TX; and Denver, CO. Allbirds was launched in 2014 and opened its first physical stores in 2018, in San Francisco and New York City. It currently operates seven stores in the U.S. (three in California, and one each in New York, NY; Chicago, IL; Seattle, WA; and Boston, MA) and six international locations (three in China and one each in Auckland, NZ; London, U.K., and Berlin, Germany).
Hy-Vee continues to expand in the Twin Cities, even as other chains have stopped adding new stores or have downsized existing ones, opening its 12th store in Maple Grove today. The 92,000 square-foot unit includes expanded home decor, housewares, greeting cards, candy and value sections. In 2020, Hy-Vee will open another large store in Spring Lake Park and a Wahlburgers restaurant in Maple Grove. Management hinted at a third location opening next year in an existing building that would be similar in size to Hy-Vee’s 2018 remodeling of a 56,000 square-foot former Cub location in Plymouth. In 2016, Hy-Vee said it planned to open four to five locations a year in the Twin Cities but has since pared that number down to two to three a year. Click here for a list of the Company’s planned new locations.
H.E. Butt opened a new store in Houston, TX, its first store in a mixed-use development. The 96,000 square-foot unit offers a full-service pharmacy, expanded prepared food offerings, curbside pick-up, and delivery through partnerships with Favor, Shipt and Instacart.
Trader Joe’s will open a new store in Meridian, ID on October 17. The new 17,000 square-foot unit will be located in a former Rosauers that closed in December 2017. Click here to request a list of Trader Joe's future openings.
Hot Market Report- Baltimore, Maryland
The Baltimore Metro Area, which consists of seven counties in Maryland, is the 21st largest U.S. metropolitan area. With 2.8 million residents as of 2018, the area’s population grew 3.4% between 2010 and 2018. Traditional supermarkets, under the banners Giant, Food Lion, Safeway, Weis, Harris Teeter, Shoppers, and ShopRite, operate more than 150 stores and hold over 60% of Baltimore’s total market share. Our report takes a closer look at the Baltimore real estate landscape, and provides visual competitive analyses as well as key real estate metrics such as future openings, store count, market share, and demographics.
Starbucks announced the opening of its first store in Grand Turk, on the islands of Turks & Caicos. The store represents the Company’s 81st global market and its 20th in the Latin America and Caribbean region.
On October 11, Cracker Barrel Old Country Store announced its $36.0 million acquisition of Maple Street Biscuit Company, a fast-casual restaurant chain with 28 Company-owned and five franchised locations in seven states (18 in Florida, five in Tennessee, four in Georgia, three in South Carolina, and one each in Alabama, North Carolina and Texas). The locations sell made-from-scratch comfort food for breakfast and lunch. Scott Moore, Maple Street’s CEO, will remain in his position and report to Cracker Barrel President and CEO Sandra Cochran.
Five Below announced a partnership with Nerd Street Gamers, a developer of training and competition facilities for esports. Nerd Street completed a $12.0 million financing round led by Five Below to build esports facilities that house leagues, training camps, and tournaments, and showcase equipment. Other investors include Comcast, SeventySix Capital, Elevate Capital, and George Miller. As part of the deal, Five Below and Nerd Street will build 3,000 square-foot esports gaming centers connected to Five Below stores, beginning with a multi-store pilot in 2020. Future rollout plans will be based on the results of the pilot, but they could include 70 or more locations during the next several years. CEO Joel Anderson indicated that about 100 of Five Below’s more than 750 stores have excess space to accommodate the gaming centers. Click here to request a list of Five Below future openings.
Macy’s signed a multi-unit franchise deal with Potbelly Sandwich Shop to open restaurants inside its department stores. Per the agreement, Potbelly will place three restaurants in California Macy’s stores, and one in New York. It already has a location in the Macy’s at Mall of America (opened in 2018). Macy’s currently partners with The Cheesecake Factory and Wolfgang Puck Kitchen.
BW Gas & Convenience Holdings dba Yesway is acquiring Allsup’s Convenience Stores, which has a portfolio of 304 stores in Texas, New Mexico and Oklahoma. Over the past three and a half years, Yesway has acquired more than 150 convenience stores in Iowa, Texas, New Mexico, Oklahoma, Kansas, Missouri, Nebraska, South Dakota and Wyoming. Yesway is planning to grow its store base to more than 500 units over the next several years.
Yesterday, Rite Aid announced that it has commenced cash tender offer to purchase up to $100.0 million of its outstanding 7.7% Senior Notes due 2027 and 6.875% Senior Notes due 2028 at a discount. Separately, Rite Aid will be closing two distribution centers in Falls Township, PA, effective December 4, impacting 356 employees. The warehouses are located at 8 Queen Ann Court in the Langhorne section of the township and at 1 Geoffrey Drive in the Fairless Hills section. The Company owns the Queen Ann Court facility and rents the Geoffrey Drive location.
On October 10, Camping World extended the maturity date of its Floor Plan Financing Facility from December 12, 2020 to March 15, 2023. Over the three years ended December 31, 2018, the Company has used the facility to acquire 34 dealership / retail locations. The facility includes three elements, allowing the Company to borrow up to: (i) $1.42 billion under a floor plan facility, (ii) $15.0 million under a letter of credit facility, and (iii) $60.0 million under an associated revolving line of credit. As of June 30, there was $343.3 million in unencumbered borrowing capacity under the floor plan facility. Camping World uses a separate $35.0 million revolving credit facility to fund its working capital requirements. As of June 30, there was only $9.4 million in remaining availability under the working capital revolver, net of outstanding letters of credit and an availability block. The Company has experienced operational, financial, and liquidity challenges due to the underperformance of its Gander Outdoors locations, and a concurrent industry-wide downturn in demand for recreational vehicles. It has been recently reported that management is considering the sale, repurposing, relocation, or closing of 27 of its 37 Gander Outdoors retail locations that do not sell and/or service RVs. Second quarter 2019 sales increased 2.3%; however, EBITDA and EBITDA margin fell 25.3% and 280 basis points, respectively. Click here to request a list of future closings.
As we have previously speculated and according to recent reports, FreshDirect is seeking a buyer, as its largest investor, JPMorgan, is looking to divest. Amazon and Walmart are among the companies reported to have examined the Company’s financials. The competitive front has changed significantly for FreshDirect since its founding in early 2000, when its food delivery option was one of the only games in town. The speculation regarding a sale intensified after the Company began to experience operational problems after its 2018 move to the Bronx, which appeared to tarnish its reputation and limit its growth. Despite its operating issues, a sale of the Company may be timely, as a buyer with more capital and a more extensive distribution network could enable it to achieve scale and leverage its brand much more rapidly than it could as a standalone entity.
Dollar General is reportedly planning to begin testing a new click-and-collect option. According to CEO Todd Vasos, the Company will take its time with the pilot, which will be scheduled for “the back half” of 2020. Although many grocers and big-box stores feature grocery pickup services, the feature is less common at discount chains.
REI is broadening its online assortment by enabling select suppliers to ship orders directly to customers. As a result, REI intends to offer customers online access to a wider variety of products, colors, and sizes. So far, a limited number of brands, including Danner, ECCO, and Salomon, will have access to this capability, and additional products will be added to the program over the next year. Orders fulfilled directly from brand partners can only be shipped to home addresses. REI is working with DSCO, a drop-ship distributed inventory platform, to support the program. Click here to request a list of REI future openings.
Costco’s September sales increased 5.6% to $14.41 billion. Comps (excluding impacts from gas prices and foreign exchange) rose 5.6%, consisting of growth of 5.7% in the U.S., 4.5% in Canada, and 5.9% in Other International. E-commerce sales increased 18.5%.
During Wendy’s 2019 Investor Day, the Company announced preliminary third quarter results. Global system-wide sales increased 5.7% in the quarter and 4.1% year-to date. For fiscal 2019, the Company now expects to be at the high end of its previously announced system-wide sales guidance range of 3% – 4%. North America same-restaurant sales rose 4.4% in the quarter and 2.4% year-to date. Global restaurants grew 40 on a gross basis and 24 on a net basis in the quarter and 111 on a gross basis and 32 on a net basis year-to-date. Wendy’s also announced plans to debut its new breakfast daypart nationwide in 1Q20, which will include croissant and biscuit sandwiches, burritos and coffee drinks. The new platform, which has been tested in 300 of its restaurants from 6:30 a.m. to 10:30 a.m., represents a $20.0 million investment in 2019; breakfast is expected to contribute 6% to 8% of sales in the partial 2020 fiscal year and eventually contribute a 10% growth in sales. In 2020, Wendy’s expects breakfast sales to be $600.0 million to $800.0 million, according to CFO Gunther Plosch. Laura Titas, Wendy’s chief digital experience officer, said the Company would be expanding its third-party delivery beyond DoorDash, which Wendy’s has worked with since December 2017, to Grubhub and Uber Eats. Delivery orders will interface directly through Wendy’s point-of-sale system. Ms. Titas also said the Company will be introducing a points-based loyalty platform in 2020. Looking ahead, Chief Development Officer Abigail Pringle indicated that the Company is looking to refranchise the New York area market, which is expected to cost $5.0 million – $10.0 million in 2020. Ms. Pringle also said Wendy’s is looking to double its 950 international restaurants across 32 countries with an entry first into the U.K., where it pulled its brand in 2000, and then more generally across Europe. By 2024, she said Wendy’s expects to double international sales to $2.00 billion.