October 18, 2023
RITE AID CORPORATION, DIP filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of New Jersey. The proceedings have been designated as case number 23-18993.
The Debtors said that they are burdened by $80 million in annual “dead rent” costs because of an inability to exit the underlying leases outside of Chapter 11. The Debtors filed motions to initially reject 347 leases (including previously closed stores) and authorize store closing sales. Rite Aid identified 154 Initial Closing Stores and sought authority to identify and conduct store closings at additional locations at a later date. The Debtors estimate store closings will take four to six weeks to complete.
The Company named Jeffrey Stein, head of financial advisory firm, as CEO and chief restructuring officer. Current interim CEO Elizabeth Burr will remain on the board.
The Debtors list assets of $1 billion to $10 billion and liabilities of $10 billion to $50 billion.
The Company has reached an agreement in principle with certain of its senior secured noteholders on the terms of a financial restructuring that would significantly reduce the Company’s debt. Rite Aid has approximately $4 billion in funded debt obligations, including $3.81 billion in secured debt and $188 million in unsecured debt.
Rite Aid intends to use the court-supervised process to finalize the agreement in principle, build additional consensus for the financial restructuring plan it contemplates and implement it as quickly and efficiently as possible.
The Debtors received a commitment for $3.45 billion in DIP financing, which will be used to refinance revolver and term debt and fund working capital and other funding needs, including a $2.85 billion DIP ABL facility and $400 million DIP FILO facility provided by its prepetition lenders, led by Bank of America, and $200 million new money DIP Term Loan, provided by a subset of its prepetition ABL/FILO lenders to fund operating expenses, Chapter 11 administrative costs and other obligations.
ROSS STORES opened 43 Ross Dress for Less stores and eight DD's Discounts stores across 22 states in September and October. These openings complete the Company's growth plans for FY23, with the addition of 97 new locations and bringing its store count to 2,112. The openings included the chain's first Ross Dress for Less stores in New York and Minnesota and grew its DD's footprint in California, Maryland, Tennessee, and Texas. Looking ahead, Ross remains confident in its plans to grow to at least 2,900 Ross Dress for Less and 700 DD's Discounts locations over time.
In other news, Ross Stores named Stephen Brinkley to the newly-created position of president, operations, effective October 30. Most recently, Brinkley served as president of SportChek, a subsidiary of Canadian Tire Corporation.
Live Ventures proposed to acquire LL FLOORING HOLDINGS for $5.85 per share, or $180 million in cash. The deal represents a 100% premium to stock's closing price of $2.93 as of October 11.
This follows the August 13 announcement by the board that it had initiated an exploration of strategic alternatives in response to multiple inbound expressions of interest regarding a potential transaction with the Company.
Previously, on June 26, the board rejected an unsolicited proposal from Cabinets To Go LLC, a subsidiary of F9 Brands, to acquire all of the Company's outstanding shares at $5.76 per share.
Live Ventures, which owns Flooring Liquidators and Marquis Industries, reported $290 million in sales and roughly $40 million in adjusted earnings last year. Its stock price is up more than 273% over the past five years.
DOLLAR TREE is reopening an 850,000 square-foot Family Dollar distribution center in West Memphis, AR in Fall 2024. The Company's more than $100 million investment in the area includes a full interior demolition and remodel, creating more than 300 new jobs initially. The facility will have the capacity to serve up to 1,000 Family Dollar stores; currently there are more than 200 Family Dollar and Dollar Tree stores in the state, combined. Through 2026, the Company aims to open dozens of stores under both banners in the state.
SPROUTS FARMERS MARKET recently unveiled its new 337,000 square-foot southern California distribution center in Fullerton, CA. The new facility delivers to over 95 Sprouts stores within a 250-mile radius and has ample capacity to support future growth. In addition the new Fullerton facility, Sprouts currently operates DCs in Aurora, CO; Union City, Ca; Glendale, AZ; Orlando, FL; Wilmer, TX; and East Point, GA.
WALMART will open its fifth next-generation fulfillment center in Stockton, CA in 2026. The new 900,000 square-foot facility will fulfill online orders throughout the West Coast with greater speed and efficiency. The first fulfillment center opened in the summer of 2022 in Joliet, IL, and the second opened in McCordsville, IN; other facilities will open in Lancaster, TX and Greencastle, PA. The Company said the initial planned four centers could provide 75% of the U.S. population with next or two day shipping; combined with its traditional fulfillment centers it would be able to reach 95% of Americans, with same-day delivery to 80% using its stores.
Meanwhile, Walmart is breaking ground later this year on a milk processing facility in Valdosta, GA. The new plant will increase the Company's supply chain resiliency while building more transparency around sourcing. Products will serve more than 750 Walmart stores and Sam's Club locations in the Southeast.
In other news, Walmart announced Rina Hurst as VP of Walmart GoLocal, its delivery service platform. Hurst joins Walmart from Shipt, where she served as chief business officer.
In the PARTY CITY, DIP case, the Debtors provided notice that the Plan of Reorganization, originally approved on September 6, 2023, became effective on October 12. Commenting on the emergence from Chapter 11, management said, "the Company eliminated nearly $1 billion in debt, enhanced its liquidity and optimized its store portfolio after negotiations resulted in improved lease terms. The Company also exited less productive store leases, and it plans to move forward with about 800 locations nationwide." The Company emerges with a new $562 million ABL exit facility, consisting of a $545 million ABL revolving credit facility and $17.1 million FILO facility, $232.4 million of 12% Second Lien PIK Toggle Notes, and a $75 million 'new money investment' to fund go-forward operations and distributions. The ABL and FILO loans mature on October 12, 2028, while the PIK Notes mature on January 11, 2029. In connection with the completed restructuring, CEO Brad Weston intends to step down on November 3. Sean Thompson, currently president and chief commercial officer, will transition to interim CEO.
PRIMARK will open 30,000 square-foot stores at Smith Haven Mall in Lake Grove, NY (November 9) and Concord Mills in Charlotte, NC (November 16). This is the chain's first store in North Carolina and ninth in New York. On October 12, Primark opened a store in Schaumburg, IL. These openings bring Primark to 436 stores globally and 24 in the U.S. across eight states, including eight opened this year in the U.S. The Company aims to reach 60 U.S. stores by 2026.
BIRKENSTOCK began trading on the NYSE on October 11 at $41 per share, below its IPO price of $46. It closed its first trading day at $40.20, 13% below the offering price, suggesting a more discerning and risk-averse market. It marks one of the poorest debuts for a company valued at over $1 billion in nearly two years.
REI laid off about 275 store workers as part of its broader plan to restructure its brick-and-mortar business model, affecting 2% of its national workforce. In a memo sent to employees, VP of Stores Mary-Farrell Tarbox stated, “There are many areas that are out of date and no longer serving our employees,” specifically mentioning sales lead positions. Meanwhile, the Company will add a new senior specialist role to support store management and senior shop mechanics, as well as staffing for the upcoming holiday season (1,300 seasonal positions will be added through 4Q23). It should be noted that in February 2023, REI laid off about 8% of its headquarters staff.
In other news, REI is opening a 400,000 square-foot distribution center in Lebanon, TX that will supply 60 stores in the Midwest and Southeast. The facility joins three DCs in Bedford, PA, Goodyear, AZ, and Sumner, WA.
AMAZON expanded its last-mile delivery infrastructure in New England with the opening of a 180,000 square-foot facility in South Windsor, CT and a 105,000 square-foot facility in Glastonbury, CT. Delivery stations serve as the last stop before Amazon packages arrive at customers' doorsteps. Packages are shipped to a delivery station from neighboring Amazon fulfillment and sortation Centers, loaded into delivery vehicles, and delivered to customers.
In other news, Whole Foods will open its first store in Jersey City, NJ, a 51,000 square-foot unit, on November 9. Earlier this month the Company opened a 50,000 square-foot store in Springfield, VA.
FREDDY'S FROZEN CUSTARD & STEAKBURGERS has added more than 70 commitments to store openings through franchise development agreements. The chain expects to open more than 60 new locations this year as part of its aim to grow to more than 800 sites by 2026, up from 500 currently. The Company is expanding in both traditional and non-traditional locations. In 2021, it opened its first airport location in Oklahoma City, OK, and second casino location in Friant, CA. Earlier this year it opened its first restaurant within an MLB stadium at St. Louis Cardinals' Busch Stadium. It also announced its expansion into Canada, with plans to open new restaurants across nine provinces over the next few years.
Emerging c-store player SQRL said it has acquired 210 stores throughout the U.S., though it did not disclose the seller. The acquisition brings SQRL's total count to more than 350 across 14 states: Alabama, Arkanasas, Florida, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, and Wisconsin. SQRL, which stands for Service, Quality, Relationships, and Loyalty, was established in 2013 to provide safe and efficient fuel and food offerings to customers across the nation.
Netflix Stores... According to reports, Netflix plans to open physical stores, called Netflix House, with the first two locations expected to debut in the U.S. in 2025. Global expansion is anticipated to follow. The stores will sell merchandise based on popular Netflix shows and offer curated in-store dining and live events. The restaurant will serve items from Netflix's food-based reality shows, with a wide range of options from fast casual to high-end dining. Netflix previously launched an online merchandise store in 2021, and last year announced it was opening in-store Netflix hubs in more than 2,400 Walmart stores nationwide. For the 2022 holiday season, Netflix opened a 10,000 square-foot pop-up at The Grove in Los Angeles, CA selling limited-edition merchandise based on popular Netflix shows. In July 2023, Netflix opened its first pop-up restaurant in the La Brea neighborhood of Los Angeles, CA, called Netflix Bites.
CPI Index... The September CPI Index rose 0.4%, after increasing 0.6% in August, according to the Bureau of Labor Statistics. Over the last 12 months, prices increased 3.7% before seasonal adjustment. Shelter was the largest contributor to the increase, accounting for over half of the increase. Gas prices were also a major contributor; the energy index rose 1.5% over the month. The food index increased 0.2%, unchanged in the past two months; all items less food and energy rose 0.3%, unchanged from the prior month. All items increased 3.7% YOY, unchanged from the prior month, with all items less food and energy index rose 4.1%. The energy index decreased 0.5%, and the food index increased 3.7%.
Three of the six major grocery store food group indexes increased over the month: meats, poultry, fish, and eggs (+0.5%), food at home (+3%), and dairy and related products (+0.1%). Cereals and bakery products prices decreased 0.4%, the first decline since June 2021. Fruits and vegetables prices were unchanged, as was the nonalcoholic beverages index.
Apparel prices were down 0.8%; prescription drug prices were down 0.7%; toy prices were down 0.5%; sporting goods prices were unchanged; pet food prices were up 0.3%; and footwear prices were up 0.4%.
The below retailers recently released their earnings reports. To request more information on these companies, or to discuss the financial performance with a retail industry expect, please click here.