December 8, 2021
Dollar General managed a modest sales increase in 3Q21, generated primarily by new store growth, as comps fell for the third quarter in a row. The sales gain was aided by improvements in the seasonal and apparel categories, while consumables and home products declined. The 0.6% comp decrease was due to a continued decline in traffic, partially offset by gains in average ticket. In 3Q19, sales and comps were up 9% and 4.6%, respectively. The Company continued its store growth, adding 268 stores during the quarter, and in early 4Q announced it had opened its 18,000th store.
In connection with the release, Dollar General announced its first international stores, with plans to open up to 10 locations in Mexico. In the U.S., store plans include the acceleration of its Popshelf concept, as it looks to nearly triple the store count next year. Launched in fall 2021, Popshelf is targeted at wealthier, younger and suburban shoppers, with the vast majority of items priced at $5 or less. Looking further out, the retailer is targeting approximately 1,000 Popshelf locations by FY25. Dollar General is also testing an in-store Popshelf format. It has opened 14 Popshelf shops inside its larger format DG Markets, with more to come.
According to a recently published report, an activist investor is pressuring Kohl’s Corp. to consider selling itself or to split off its e-commerce business. The report stated, “New York-based hedge fund Engine Capital LP wants the retailer to examine the two alternatives to improve its lagging stock price, according to a letter sent to Kohl’s board Sunday … Engine said in the letter that assuming online sales revenue of around $6.2 billion, Kohl’s digital business alone would be worth $12.4 billion. Engine also said it believes there are private-equity firms that would pay at least $75 a share and that interactions with potential buyers suggest they could do so by monetizing Kohl’s real estate.” The Company has not responded.
This is the second time this year Kohl’s has faced pressure from an activist investor group. In February, Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital requested significant changes to the Company’s board, its areas of operation, and its merchandising assortment. In April, Kohl’s compromised by adding three new directors. Rival Macy’s announced last month that it had retained consulting firm Alix Partners to evaluate separating its e-commerce business amid pressure from activist investor Jana Partners, which sent a letter to the Macy’s board in October, demanding the Company “de-omnify.”
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After nearly a year Sportsman’s Warehouse and Bass Pro Group’s parent called off their merger, citing FTC regulatory concerns. The FTC commented that it was pleased the companies called off the merger, as the deal would have “harmed consumers through increased prices, reduced product offerings, and diminished quality and service,” noting the companies compete in “at least two dozen local markets throughout the U.S.” Bass Pro and Cabela’s operate 155 stores in the U.S. and 16 in Canada, while Sportsman’s Warehouse operates 112 stores, with a higher concentration on the West Coast, where Bass Pro has less exposure. The combined company would have had sales approaching $10 billion, compared to sector leader Dick’s Sporting Goods, which operates 866 stores and generates annual sales of $11.70 billion. The FTC’s stance appears to have been somewhat aggressive; our Store Overlap Analysis shows that there are only 10 Sportsman’s Warehouse locations within five miles of a Bass Pro / Cabela’s, and 26 stores within 10 miles. Click here to request a copy of this Analysis. Sportsman’s stores are much smaller, averaging about 40,000 square feet, and are more basic than Bass Pro / Cabela’s, which are highly experiential, and are typically over 100,000 square feet. Pursuant to the termination, Great Outdoors Group agreed to pay Sportsman’s Warehouse a $55 million termination fee.
Ollie’s Bargain Outlet faced another tough quarterly comparison in 3Q21, as sales fell almost 8%, and comps declined 16%, the second consecutive quarter of declines, despite the addition of 18 new stores. 3Q20 sales and comps were up 27% and 15%, respectively. Supply chain issues also contributed, delaying the arrival of imported seasonal products. Gross margin dropped 160 bps on higher wages, supply chain, and trucking costs. Ollie’s maintained its store growth during 3Q, opening 18 stores and finishing the period with 426 locations. Earlier in the year, the Company lowered its target number of store openings for FY21 to 46, from 50 – 55 previously, leaving another eight – 10 locations to be opened by FYE. Ollie’s disclosed some limited 4Q and full-year FY21 guidance. For 4Q, comps are projected to be down 2% to flat. For the full year, revenue is expected to be $1.76 billion – $1.77 billion, up about 2.5%; comps are expected to grow 3.5% – 4% compared to 15.6% last year. Click here for a list of future openings.
Chico’s reported 3Q21 sales growth of 29%, with comps up 27.9%, following a 24.1% comp decline in the prior-year period. The top line was still 6% lower than pre-pandemic 3Q19. By banner, Soma reported 30.2% comp growth (up 43.5% compared to 3Q19), White House Black Market reported 33.4% comp growth (down 4.9% compared to 3Q19), and Chico’s reported 23.3% comp growth (down 16.2% compared to 3Q19). Chico’s closed five locations in 3Q, bringing total store closures to 23 in YTD21; as of October 30, the Company operated 1,279 locations. Chico’s plans to close over 10% of its store base by 2023. Looking forward, the Comapny expects 4Q net sales of $495 million - $510 million, with gross margin at 33% - 34.5%.
Shoe Carnival announced it acquired substantially all the assets of privately held Shoe Station, Inc. for $67 million, funded via cash on hand. The acquisition is expected to be accretive to earnings in FY22. The Company had more than $100 million in cash on hand after the acquisition. Shoe Carnival operates 377 stores in 35 states and Puerto Rico, while Shoe Station operates 21 locations in five Southeastern states and an e-commerce site.
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Tru Kids, Inc., trading as Toys “R” Us, plans to open a 20,000 square-foot flagship location in the American Dream mall in East Rutherford, NJ, within the Meadowlands/MetLife sports complex and adjacent to the Nickelodeon Universe Theme Park and DreamWorks Water Park, in mid-December. This will be the first physical Toys “R” Us store to open since before the pandemic began.
This comes after Macy’s announced it would begin selling Toys “R” Us products at more than 400 stores and online through a partnership with WHP Global, the management company that acquired a controlling interest in Tru Kids in March 2021. Tru Kids had acquired the brands and intellectual property of Toys “R” Us out of bankruptcy in 2017. It then opened two physical locations in 2019 in Houston, TX and Paramus, NJ. Both of those locations were permanently closed due to the impact of the pandemic.
Wayfair announced it will open three new brick-and-mortar retail stores in Massachusetts next year, under two of its specialty banners. The Company will add a new AllModern location in Lynnfield, followed by another in Dedham, and finally a Joss & Main store in the Burlington Mall. These units will be the first in a series of openings, as Wayfair plans to launch additional stores across all five brands (the other two are Birch Lane and Perigold) in varying formats, sizes and geographies over the next two years, including larger formats for the namesake and Perigold brands. The Company began launching pop-up shops in 2018 and opened a Wayfair store in a mall in Natick, MA in August 2019, but closed the location in December 2020. Click here to request updates on new Wayfair locations.
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Discount Tire announced its acquisition of Tire Rack. Financial terms were not released; the transaction is expected to close on December 31. Tire Rack will become a wholly owned subsidiary; Discount Tire plans to continue to use the brand as TireRack.com online, TR Wholesale Solutions in car dealer and wholesale channels, and Tire Rack Mobile Installation in the mobile installation capability. Tire Rack’s headquarters will remain in South Bend, IN and its employees will join Discount Tire. Dean Muglia will continue as CEO of Discount Tire, and Mike Joines, with 42 years leading Tire Rack, will join the combined organization as CEO of Tire Rack. Scottsdale, AZ-based Discount Tire, legally named The Reinalt-Thomas Corporation, operates 1,100 stores in 37 states under Discount Tire in most of the U.S. and under America’s Tire in parts of California. Family-owned Tire Rack is an independent tire tester and consumer-direct source for tires, wheels and performance accessories, with 10 distribution centers nationwide. Discount Tire has recently been expanding its omnichannel offerings to compete with the digital tire shopping apps already launched by Walmart, Advance Auto Parts and eBay Motors.
Lidl plans to open a new 31,000 square-foot store in East Brunswick, NJ, pending city board approval. Lidl has submitted another application for a New Jersey location in Edison Township and currently operates stores in North Brunswick and Woodbridge.
JOANN’s 3Q22 net sales fell 14.4% to $611 million compared to 3Q21, while comps fell 14.2% but were up 8% on a two-year stack basis. Omnichannel net sales reached $66.4 million, up 137% on a two-year basis and representing 10.9% of 3Q22 sales, down from its peak of 16% during 4Q21 but essentially the same as the 10.8% last quarter. The Company closed 5 stores in the last 12 months and plans to remodel or “refresh” approximately 50 stores next year. More than 80% of its existing locations are refresh project targets over the next seven to ten years.
Signet Jewelers’ reported sales of $1.50 billion, an increase of more than $235 million, in 3Q22 and nearly $350 million compared to 3Q20. Sales increased across all categories. 3Q22 comps were up 18.9% and up 37.2% compared to 3Q20. E-commerce sales were $273.1 million, up 14.4% and up 96.1% from 3Q20. Brick-and-mortar comps increased 20.3% and were up 28.8% compared to 3Q20. During 3Q22, its store count increased by 14, and square feet of selling space remained flat. Compared to year-end FY21, store count increased by 18 stores, and square feet of selling space decreased 0.4%. The Company now expects to close approximately 75 stores in FY22 and open approximately 85, primarily in the Banter by Piercing Pagoda formats. Signet expects some shift of consumer discretionary spending away from the jewelry category toward experience-oriented categories during the fourth quarter. The Company was able to mitigate supply chain and retail labor pool disruption thus far, and its guidance assumes no material disruptions for FY22.
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According to reports, Walgreens Boots Alliance (WBA) is considering divesting its Boots UK retail business. The Company has hired Goldman Sachs to advise it on options. Boots operates 2,276 stores in the U.K., although it announced plans to close 150 stores over the next few years, after recently closing 200. Boots UK’s operations have been impaired in recent years by online competition, while the pandemic and lockdowns had a significant negative impact. The Company also operates Boots branded stores in Thailand (253) and the Republic of Ireland (90), the Benavides brand in Mexico (1,110), and Ahumada brand in Chile (302).
Earlier this year, WBA sold its Alliance European distribution business to AmerisourceBergen (Walgreens owns about 30% of AmerisourceBergen’s equity). However, more recently WBA agreed to acquire the remaining 30% share of a German wholesale joint venture from McKesson.
Jack in the Box announced an agreement to acquire Del Taco Restaurants, a Mexican QSR chain with 603 restaurants across 16 states as of 3Q21. Jack in the Box will pay $12.51 per share, valuing the transaction at approximately $575 million including debt, and representing an adjusted EBITDA multiple of 7.6x. The deal, which requires approval from the majority of Del Taco’s shareholders, is expected to close in the first calendar quarter of 2022. As of 3Q, Jack in the Box had $73.6 million in cash and $110.5 million in revolver availability, meaning it will likely have to issue new debt to fund the acquisition. Management has not yet detailed any such plans but expects the Company will maintain an investment grade credit rating and 4x to 5.5x leverage ratio.
WOWorks, the parent company of Saladworks, Frutta Bowls, Garbanzo Mediterranean Fresh, and The Simple Greek, announced that it has finalized 12 co-branded franchise agreements for restaurant openings in 10 states by the end of 2021. This month, a Saladworks and Frutta Bowls co-branded restaurant will open in West Bloomfield, MI, a first for both brands in the state. Another co-branded location will open in Middletown, DE, where an existing Saladworks will add Frutta Bowls. For the first time, a Frutta Bowls unit coming to Hermitage, PA will add on Saladworks to become a co-branded restaurant. Store-within-a-store co-branded restaurants are also part of the Company’s recent growth, e.g., Saladworks and Frutta Bowls co-branded restaurants opening in grocery stores in and around the Philadelphia, PA metro area. A Saladworks restaurant inside a ShopRite on Staten Island, NY is adding Frutta Bowls to create a co-branded unit. WOWorks has signed two additional co-branding agreements for locations in Reno, NV and San Juan Capistrano, CA. Both are slated to open in spring 2022. An existing Saladworks restaurant in Morgantown, WV also signed an agreement to add on Frutta Bowls in 2022. Other Saladworks / Frutta Bowls co-brand agreements include a location in Norfolk, VA and three locations in Draper, UT, of which one will open in 2022.
Southeastern Grocers opened two new Fresco y Más Supermarkets in November in Tampa and Deltona, FL. The Tampa store is the third Fresco y Más in the greater Tampa Bay area and the Deltona store is the first for that market. Fresco y Más now operates 28 grocery stores that serve Hispanic and Caribbean communities throughout South and Central Florida.
Canadian Asian food retailer T&T Supermarkets (owned by Loblaw companies) plans to open its first store in Quebec in the next 12 to 24 months. The new store will be located in Montreal, with the exact site still being finalized. T&T also plans to open a new 36,000 square foot store in Toronto in winter 2022. T&T currently operates 29 stores in British Columbia, Alberta, and Ontario.
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Chuck E. Cheese signed development agreements in three new countries in South America and the Middle East. The latest deals are for Qatar, Suriname and Guyana. The brand is aiming to have more than 100 international locations by 2022.
In its biggest retail acquisition ever, Federated Co-operatives Ltd. (FCL) agreed to acquire 181 Husky retail fuel sites (a mix of gas stations and convenience stores) from Cenovus Energy Inc. for $264 million. Once the deal is complete, FCL will transfer the sites to several independent local Co-ops across Western Canada. The purchase includes both corporate-owned and dealer-owned sites, as well as onsite car washes in some locations. Some sites will be operated by local Co-ops with others operated by dealers under FCL’s Tempo brand. FCL plans to renovate certain sites. Local Co-ops may begin operations immediately after the companies complete the deal; however, the rebranding process from Husky to Co-op is expected to take about 18 months to complete. The purchase is expected to close in mid-2022.
Hy-Vee announced plans to close two grocery stores and repurpose two others during January 2022. The Company will close its Englewood, MO; Sioux Falls, SD; Moline, IL and Cedar Rapids, IA stores early next month.Hy-Vee Aisles Online pickup services at these locations ceased on December 6.
Lids made its European debut with a store opening in London and will add three more locations this month in London, Essex, and Brighton. The stores will feature an assortment of licensed and branded merchandise, including major U.S. league team products from MLB, NFL, and NBA, among others, as well as items from brands such as Adidas, New Era Cap, ‘47 Mitchell & Ness, Oakley, Local Crowns, etc. Heading into 2022, the Company plans to open 100+ standalone Lids stores in new international markets. Lids currently operates nearly 2,000 stores throughout the U.S. and Canada, including through its ongoing partnerships with Macy’s and Designer Brands.
Express reported its second consecutive quarter of positive comps over the pre-pandemic period and generated a profit in 3Q21. Sales increased 46%, with comps up 46%, following a 33% comp decline in the prior-year period. Compared to 3Q19, comps rose 3%. Online sales advanced 26% and 21% over 3Q20 and 3Q19, respectively. The Company plans to open one new store and close 10 locations in 4Q21, bringing total FY21 store openings and closings to 15 and 24, respectively.
Pizza Pizza Ltd. announced on December 1 the establishment of a Master Franchise Agreement with Guadalajara-based Key Spot Group (KSG)/GrünCorp. The partnership will see the Canadian pizza chain enter the Mexican marketplace in 2022.
Ace Hardware opened its first store in Mexico, in Monterrey. The 14,000 square-foot unit is the first under Ace’s franchise model for Mexico, which the chain announced in 2020. The program offers a variety of flexible formats ranging from 3,000 square feet to 32,000 square feet. The Monterrey store includes a 2,000 square-foot showroom featuring decorative tile, plumbing fixtures, and bath accessories. The cooperative plans to open 13 additional stores in the country by the end of 2022.
Five Below’s 3Q21 revenue grew 28% compared to 3Q20 and jumped 68% versus 3Q19. Comps improved 15%, outpacing the strong 13% comp growth last year and far surpassing the 3% comp growth in 3Q19. Year to date, comps were up 23% compared to 3Q19. The Company opened 52 new stores during the quarter and 153 in YTD21. Thus far in 4Q, Five Below has opened 17 additional stores, for 1,190 total locations, completing its planned openings for the year.
BJ’s Wholesale will open a new club in South Fayette Township, PA on December 10, its first in the Pittsburgh market. The opening will bring the Company’s U.S. store count to 223, including 18 in Pennsylvania. BJ’s recently opened a fueling facility in South Fayette, the Company’s 153rd gas station.
Ulta Beauty delivered robust performance in 3Q21, as sales and comps rose 28.6% and 25.8% from 3Q20, respectively. Comparable sales growth was driven by a 16.8% increase in transactions and a 7.7% increase in average ticket. During the quarter, Ulta opened seven new stores, relocated two, remodeled three, and closed one. The Company plans to open two net new stores in 4Q, bringing total store openings to 44 net new stores in FY21.
Kirkland’s 3Q21 sales fell 2% to $143.6 million, while comps decreased 0.7%, including an e-commerce increase of 7.3%. The Company ended the quarter with 369 stores, the same as the prior quarter but down 3.1% from 381 stores last year. Management believes its ideal store count should be 300 - 350 and expects that over the next two to three years there will be opportunities for more favorable rent terms with ongoing lease renewals.
H.E. Butt has plans to renovate its longest-standing store in Austin, TX starting early next year. The location originally opened in 1957 at 25,000 square feet, and currently stands at about 69,000 square feet. Completely rebuilt from the ground up, the updated store will measure more than 145,000 square feet and will feature three levels in total. H.E. Butt also recently opened another location in the Austin area, a 103,000 square-foot store in Leander.
Sprouts Farmers Market opened a new store in Smyrna, GA on December 1. The location is the first Georgia Sprouts to feature the specialty market’s updated design and layout.
Hibbett’s 3Q22 revenue increased 15% compared to 3Q21, and was up 39% compared to 3Q20, as last year’s COVID-induced momentum continued. The improved sales reflected a 13% increase in comps and the opening of 12 stores during the last 12 months. Management did not comment on expected store activity during 4Q22.
Last week, Tiffany & Co. opened a 4,000 square-foot store at the American Dream mall in the luxury wing. Adjacent tenants include New Jersey’s only Saks Fifth Avenue, Hermes, Dolce & Gabbana and Mulberry.
84 Lumber opened a new 33,000 square-foot retail location in Boise, ID, marking the Company’s first unit in the state and continuing its consistent expansion over the past year and a half. 84 Lumber opened truss plants in Mansfield, OH in August 2020, Richmond, VA in February 2021, and Statesville, NC in July 2021. The Company also opened a door and engineered wood products center in Greenville, SC in June 2020, a door shop in Dallas, TX in December 2020, and an Andersen Windows & Doors showroom in Rockville, MD in January 2021. Looking ahead, the Company plans to open an already-constructed store in Dayton, OH; expand into Stockton, CA and Detroit, MI; and open an additional truss plant in central Florida. 84 Lumber currently has nearly 250 stores, plants, shops and product centers in more than 30 states.
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