October 21, 2020
In a filing with the SEC related to the J.C. Penney bankruptcy case, the Debtors stated that they plan to file a draft version of an asset purchase agreement (APA) later today. The APA was prepared with the other parties to a previously filed letter of intent (LOI), including an ad hoc group of lenders and noteholders, and Simon Property Group and Brookfield Property Group. The parties are working to conclude negotiations and enter into a final asset purchase agreement. Key terms of the draft APA are as follows: (i) Simon and Brookfield will acquire substantially all of the Company’s retail and operating assets (OpCo) through a combination of cash and new term loan debt; (ii) separate newly formed property holding companies (PropCo) will be formed and will hold 160 of the Company’s real estate assets and all of their owned distribution centers, PropCo will be owned by the lenders under the DIP Facility, and the other holders of the Debtors’ first lien debt; and (iii) OpCo and PropCo will enter into master leases with respect to the PropCo assets. The draft APA is non-binding and provides no guarantee that a transaction will be completed. The terms of any potential transaction are subject to definitive documentation that must be agreed upon by all parties and subsequently approved by the Bankruptcy Court.
Separately, the Debtors notified the Court that they intend to reject certain additional leases. The leases are deemed to be rejected as of the later of: (a) October 31, or (ii) the date the Debtors surrender the premises to the landlord.Click here to request a list of store closures.
Macy’s closed two stores, in Dover, DE and Littleton, CO, to use the buildings as fulfillment centers during the upcoming holiday shopping season. The stores will still facilitate in-store and curbside pickup orders, returns, bill payment, and other customer services, while acting primarily as fulfillment centers for online orders. Macy’s reported a 53% increase in online sales in its most recent quarter ended August 1. Click here to request a list of store closures.
In other news, Macy’s announced that Adrian V. Mitchell has been appointed CFO, effective November 2. Mr. Mitchell most recently served as a managing director and partner with Boston Consulting Group, and he served as CEO of home furnishings retailer Arhaus from 2016 to 2017. Macy’s interim CFO Felicia Williams will be joining the CEO Action for Racial Equity as a Macy’s fellow. Macy’s revenue and earnings have been negatively impacted by the pandemic, but the Company ended 2Q20 with liquidity of $4.25 billion.
Last Tuesday, Amazon opened its first brick-and-mortar 4-star store in New Jersey, located in the Willowbrook Mall in Wayne. The unit replaced a closed Microsoft store. According to Amazon, 4-star carries a highly curated selection of items from the top categories across Amazon’s website, including devices, consumer electronics, toys, games, books, kitchen, and home. Every product in the store is either rated 4 stars or above, is a top seller, or is new and trending on Amazon’s website.
Separately, Amazon workers at a warehouse in Staten Island, NY have filed a lawsuit against the Company, saying it resumed tracking productivity rates in its facilities, which they claim puts them at greater risk of exposure to the coronavirus. In July, Amazon said it would not take disciplinary action if workers fell short of productivity quotas, saying it knew they needed the extra time to wash hands, sanitize workstations, and practice social distancing.
On October 15, Amazon disclosed that it sold more than $3.50 billion worth of goods by third-party sellers during Prime Day, up 60% from the prior year and faster than sales of the Company’s own products. This year’s Prime Day was delayed to October 13 and 14 due to the pandemic; it is typically held in July. The Company did not disclose total revenues during the two-day event.
Finally, Amazon plans to open two new fulfillment centers in Kansas next year, which will create a total of more than 1,000 new jobs. The one-million square-foot fulfillment centers will be located in Kansas City and Park City. The Company also plans to open a new delivery station in Wichita later this year.Click here for a list of Amazon future openings.
On October 14, ACME Markets, a division of Albertsons Companies, announced that it was the successful bidder in a bankruptcy auction for 27 Kings Food Market and Balducci’s Food Lover’s Market locations. The transaction, which is still subject to customary regulatory and court approvals, including FTC approval, is expected to close later this fiscal year. The stores will become part of the Mid-Atlantic division of Albertsons, which operates ACME and Safeway stores on the East Coast. The expected purchase price is $96.4 million.
Albertsons also reported 2Q results yesterday. Identical sales grew 13.8%, including digital sales growth of 243%. EBITDA increased 67% to $948.0 million, resulting in a 6% EBITDA margin, compared a 4% margin in the prior-year period. The Company also provided guidance for FY20, which includes identical sales growth of at least 15.5% and EBITDA of $4.15 billion – $4.25 billion.
Albertsons is also piloting PickUp lockers that will first be available in select Jewel-Osco locations in Chicago and select Safeway locations in the San Francisco Bay Area later in the year. The Company already offers delivery and Drive Up & Go options through its websites and apps and has partnerships with third-party operators to provide delivery options. The PickUp lockers are modular, temperature-controlled, and suitable for both indoor and outdoor environments.
Albertsons Co. recently introduced Albertsons Pay, a contactless checkout experience available through its ‘just for U’ (J4U) loyalty app. The program offers two new pay options: Albertsons Direct, where shoppers pay through their bank, and Albertsons Cash, a stored-value account that can be preloaded and used across all Albertsons stores. For both options, customers show the QR code in their J4U app at checkout to apply the discounts, earn rewards, and pay for groceries. The new technology is available in all Albertsons stores.
Lastly, Albertsons will open a new Acme store in the University City neighborhood of Philadelphia, PA on October 23. The store will be about 20,000 square feet, much smaller than typical Acmes, which are 45,000 – 50,000 square feet. Click here to request a list of future store openings.
On October 19, Southeastern Grocers, LLC announced that it has filed a registration statement with the SEC relating to a proposed IPO of its common stock by certain of its stockholders; the Company will not sell any shares in the IPO. The number of shares to be offered and the price range have not yet been determined. SEG intends to list its common stock on the NYSE under the ticker symbol “SEGR.” In the filing, the Company disclosed that for the March 2020 through July 2020 period, accounting for the planned disposition of the BI-LO business, certain stores and pharmacy assets (Planned Disposition), median comparable store sales growth was 26%. Accounting for the Planned Disposition, the Company will operate 420 stores.
Next month, Southeastern Grocers plans to reopen the first of eight acquired Earth Fare and Lucky’s Market stores in Florida, under the Winn-Dixie banner. Plans call for three former Earth Fare stores in Boynton Beach, Jacksonville and Lakewood Ranch and one former Lucky’s Market in Gainesville to open to customers on November 11.
The other Earth Fare store located in Viera, and three Lucky’s stores in Fort Myers, Lake Mary and Melbourne, are slated to open in early 2021. At the four new Winn-Dixie units, customers will find new signature categories plus a wider product selection and more specialty items in each department. Click here to request a list of future openings and closings.
Less than two weeks after SpartanNash entered into a newly amended commercial supply agreement with Amazon, which is presumed to primarily support Amazon Prime Now fulfillment centers, and issued warrants for Amazon to eventually buy up to 15% of the Company, SpartanNash revealed an investment of $25.8 million to finalize a seven-year distribution center lease agreement in Severn, MD. The 364,000 square-foot DC offers significant freezer, refrigerated, and storage space in a central location for food distribution, which could play a large role in its partnership with Amazon.
In other news, SpartanNash is looking to fill more than 1,000 job openings at its grocery stores and gas stations in Michigan. The openings are for cashiers, baristas, personal shoppers, deli clerks, pharmacy technicians, and butchers. According to the Company, a factor contributing to the demand for employees is a “significant” sales increase amid the coronavirus pandemic. Seasonal hiring needs and employee turnover also have played a role.
In addition, on October 7, SpartanNash opened a new Martin’s Super Market in Elkhart, IN. The store replaces a nearby Martin’s that opened in 1990 and features Martin’s Groceries to Go online ordering with curbside pickup, or delivery service and Rush Pick Up, offering curbside pickup of deli and Starbucks items.Click here to request a list of future openings.
REI opened two freestanding pop-up stores, in Manhattan Beach, CA and Conshohocken, PA, dedicated to used outdoor gear and apparel. The Company initially launched its online “re-commerce” business in 2018, and in October 2019 it piloted a used gear buy-back program for 5,000 of its members to receive REI gift cards when they traded in gently used outdoor items for resale. Beginning this month, REI members can trade in used gear through the Company’s online, member-only, trade-in program, for up to 50% of resale value.
Meijer has begun offering free curbside pickup for online orders. Under the new program, Meijer Pickup service carries no charge for orders of more than $50 and does not require membership. Product pricing is the same as in stores, as is access to weekly sales items. Free pickup is available for more than 100,000 items online, including grocery, general merchandise, toys, electronics, beauty care, and housewares.
Meanwhile, Meijer has opened its third small-format store in Michigan, located in Lansing, under its Capital City Market banner. The new Capital City Market is about 37,000 square feet and offers a mix of fresh, local and convenient foods including bakery items, fresh meat and deli, and an assortment of private-label products and national brands.Click here to request a list of future openings and closings.
Ruby Tuesday, Inc. filed a motion seeking to defer rent for the first 60 days of the Chapter 11 cases, until after December 6. A hearing is scheduled for November 5. The Company also filed a motion to set the bar date for filing proofs of claim based on prepetition claims, including requests for payment under section 503(b)(9), as the date that is 30 days after the later of: (i) the date the Debtors file their schedules with the Court, and (ii) the date of entry of the bar date order. A hearing on that is scheduled for October 22. To request a list of other retailers that have requested court approval to defer rent, click here.
Equinox Holdings had been facing operational deterioration due to the pandemic and that it negotiated a four-year $150.0 million first-lien Term Loan B in June to enhance liquidity. According to sources, the Company’s lenders have now hired Ducera Partners to assist with restructuring talks, as the pandemic continues to impact operations; up to $72.0 million in debt obligations will come due in February 2021. Lenders have also retained law firm Akin Gump Strauss Hauer & Feld. The Company’s debt consists of a $1.03 billion B-1 Term Loan, a $150.0 million first-lien B-2 Term Loan, and a $150.0 million revolver credit facility ($140.0 million drawn as of March 2020). However, a spokesperson noted that the Company is in full compliance with its debt agreements and is “very confident” in its current liquidity position.
The high-end gym operator has reopened 75 of its 105 gyms across the country. The Company also opened two large outdoor clubs in New York and Los Angeles. However, operations continue to be impacted by capacity constraints and customers canceling their memberships. Additionally, the Company’s concentration in New York (58% of its clubs) poses further concentration risk. Overall, the fitness industry has been one of the hardest hit by the pandemic; 24 Hour Fitness, Town Sports International, and Gold’s Gym have already filed for bankruptcy this year.
P.F. Chang’s is expanding its new format called P.F. Chang’s To Go, dedicated exclusively to take-out customers, with the opening of a 1,700 square-foot site in Manhattan. Two more locations will open in Manhattan in the coming weeks, with additional sites planned over the next few months. P.F. Chang’s is also planning an additional 12 To Go locations, in markets in Florida, Colorado and Texas. The concept launched earlier this year with the opening of three units in Chicago, IL.
In the GNC Holdings bankruptcy case, the Court issued an order confirming the Plan of Reorganization. Under the Plan, the Debtors sold substantially all of their assets to ZT Biopharmaceutical LLC, as designee of Harbin Pharmaceutical Group Co., Ltd., the stalking horse purchaser, in a transaction that closed on October 8. Proceeds of the sale will be distributed in accordance with the terms of the Plan. The Plan provides that holders of allowed administrative and 503(b)(9) claims will be paid in full, while holders of allowed general unsecured claims will receive a recovery of 3%. As part of an agreement, ZT Biopharmaceutical LLC acquired avoidance/preference actions, which were released and discharged at closing. The Plan has the support of the Creditors’ Committee, the Debtors, the Ad Hoc Group of Crossover Lenders, the FILO Ad Hoc Group, and the Ad Hoc Group of Convertible Notes. There is not yet an indication of the effective date of the Plan; in our experience it generally occurs between 10 days and two weeks following the confirmation order. Click here to request a list of store closures.
H&M Canada has partnered with Instacart to provide same-day delivery to customers living close to an H&M store in the provinces of Ontario, British Columbia, Alberta, and Saskatchewan. Although Instacart is best known for facilitating delivery of online grocery orders, in recent months retailers outside the grocery sector have been partnering with the platform, including Sephora, Staples, and Big Lots. H&M Canada is the first apparel business to publicly partner with Instacart.
ShopRite has opened three Fresh to Table store-within-a-store departments at its Greenwich and Burlington, NJ locations, as well as in Monroe, NY. The format offers a retail destination where customers can find fresh foods and meal solutions in a variety of flexible grab-and-go formats. It is expected that the Fresh-to-Table concept will be rolled out to additional stores in the coming months. Click here to request a list of future openings and closings.
Local Tennessee real estate businessman Jason Word has acquired four Save-A-Lot stores in Nashville. The purchase price was not disclosed. Mr. Word’s investment in Save-A-Lot comes as the Company aims to convert corporate-owned stores to local operations. Mr. Word said he plans to make improvements and add new programs to the stores.
In the ascena retail group bankruptcy case, the Debtors filed a motion to establish bidding procedures in connection with the auction of certain unexpired leases, IP assets, and customer data of its Justice unit (Tween Brands). The planned auction is in connection with a $35.0 million stalking horse asset purchase agreement with Premier Brands Justice LLC. Premier is an acquisition vehicle for IHL Group (a division of USA Apparel Group Inc., which has a portfolio of licensed brands including Aéropostale, BCBG, Rachel Roy, and Daisy Fuentes). The agreement, which we initially reported on October 13, includes a breakup fee of 3% of the purchase price. The deadline for qualified bids is November 2, with an auction on November 5, and a sale hearing on November 12. Click here to request a list of closures.