February 2, 2022
Amazon is launching a new Amazon Go format for the suburbs, with plans to open a 6,150 square-location in Mill Creek, WA, followed by another in Los Angeles, CA. The first new-concept Amazon Go will have front-of-store selling space of just over 3,200 square feet, which is notably bigger than the current Amazon Go stores that are situated in more urban areas and range in size from 1,200 to 2,700 square feet. The new Go stores will also feature Amazon’s “Just Walk Out” technology to monitor merchandise that shoppers take from or return to shelves and track items in a virtual cart.
In other news, the Company is ending its “Sold by Amazon” program, under which it set prices with third-party sellers, following a price-fixing investigation and consent decree from the Washington state attorney general. As part of the legally enforceable decree, the Company must also provide annual updates on its compliance with antitrust laws as well as pay $2.25 million to the Attorney General’s office, which will be used to support antitrust enforcement. The Attorney General’s Office simultaneously filed a lawsuit and a legally binding resolution in King County (Wash.) Superior Court, asserting that the program violated antitrust laws and that Amazon unreasonably restrained competition in order to maximize its own profits off third-party sales. This isn’t the Company’s first antitrust investigation; in May 2021, Washington, D.C. Attorney General Karl A. Racine accused Amazon of anticompetitive practices in a civil complaint filed in D.C. Superior Court, alleging that Amazon fixed online retail prices through contract provisions and policies it applies to third-party sellers on its platform. Click here to request a sample list of recent and future openings.
Brookshire Grocery Co. completed its previously announced acquisition of 17 stores in Oklahoma from Reasor’s LLC. Terms of the deal were not disclosed. Reasor’s will be the newest banner for Brookshire (about $3 billion in annual sales); it also operates more than 200 stores under the Brookshire’s, Super 1 Foods, FRESH by Brookshire’s, and Spring Market banners in Texas, Louisiana and Arkansas. Click here to request more info.
In this second white paper on the supply chain, we discuss the current state of the supply chain, how retail has responded, and the longer-term impact and outlook. Click here to request this report.
Walmart released the next phase of its redesign effort at its in incubator store in Springdale, AR. The Company is aiming to enhance its stores’ physical and digital design elements. The new features include a store within a store experience in certain retail sections, dynamic displays, QR codes and digital screens to convey the range of products and services Walmart offers online. In fall 2020, Walmart introduced the first phase of its store redesign, which was focused on helping shoppers navigate more quickly through the store, and since then nearly 1,000 stores have been renovated with that design. Click here to request a list of future openings.
Kroger announced plans to open a 50,000 square-foot facility in Louisville, KY, a “delivery spoke facility” that will collaborate with its Monroe, OH customer fulfillment center (CFC), to process online orders of fresh food. The facility is expected to become operational later this year. The Company’s model centrally locates its larger CFCs as hubs that can work in concert with smaller automated facilities, and spoke locations like Louisville to reach additional customers. The Monroe fulfillment center, Kroger’s first, came online in April 2021, followed by Groveland, FL and Forest Park, GA (Atlanta). Last month, Kroger opened a spoke facility in Indianapolis, IN, also connected to the Monroe CFC. Additional sites are planned for Dallas, TX; Atlanta, GA; Frederick, MD; Phoenix, AZ; Pleasant Prairie, WI; Romulus, MI (Detroit); as well as California, South Florida and the Northeast. Introduced under its partnership with U.K.-based online grocer Ocado in May 2018, Kroger’s CFC model combines vertical integration, machine learning, and robotics, and allows the Company to serve customers in areas where it does not operate brick-and-mortar stores, such as Florida.
Last week, we reported that thousands of striking workers at Kroger’s King Soopers and City Market supermarket chains in Colorado officially voted to end their strike and go back to work, after the grocer struck a tentative agreement for a new contract with the UFCW Local 7 Friday morning. Union members ratified the deal on January 24. According to representatives, the contract includes a record pay increase and the addition of more stringent safety measures in stores.
Academy Sports + Outdoors will open at least eight new stores in 2022 that will fill in certain existing markets in Florida, Georgia, Indiana, Kentucky and Texas, and enter Virginia and West Virginia, growing the store count by 3% to 267 units in 18 states. Academy is evaluating additional locations for stores that could also open in 2022. In order to conserve capital, the Company did not open any new stores during the pandemic. Prior to the pandemic it had opened between eight and 10 stores annually. We note that additional store opening costs could lead to higher SG&A margin during the ramp-up period, especially if sales at new units (or throughout the chain) lag expectations, due to supply chain disruptions or pressure on consumer spending from inflation and higher interest rates. Furthermore, additional inventory to stock the stores could pressure cash flow. Nevertheless, the balance sheet remained strong, and liquidity of $1.40 billion at the end of 3Q21 should be more than adequate to fund capital requirements. Click here to request a list of future openings.
In this special analysis, our analyst team takes a look at industry trends to watch out for in 2022 along with predicted winners, losers, and question markets for each segment. Click here to request this report.
Lowe’s is partnering with Petco to open in-store pet shops at 15 Lowe’s locations in Texas and the Carolinas by the end of March. The pilot shops, which will sell pet products and offer onsite vet visits, will be staffed by both Petco and Lowe’s employees. Each store-in-store will vary in size, but the first unit in San Antonio, TX will be about 1,000 square feet and will be located at the front of the store. The partnership is just one of a few new initiatives Lowe’s has launched recently, including selling fitness equipment and offering installation services on a trial basis in some locations. Click here to request a sample list of future openings.
Hy-Vee revealed plans to open its first store in Indiana, in the Indianapolis suburb of Zionsville. The outlet, one of Hy-Vee’s first locations outside of its current market area, will be approximately 150,000 square feet and sit on more than 25 acres. In December 2021, the Company announced it would expand its presence in four new states, Indiana, Kentucky, Tennessee and Alabama, by 2023. Click here to request a sample list of future openings.
Leap, which finds, opens and operates brick-and-mortar locations for brands that want to expand in the physical space, has secured $50 million in Series B financing, led by BAM Elevate. The Company plans to use the new capital “to make significant investments into [its] technology for enabling omnichannel and to scale even more rapidly.” Leap claims its platform allows companies to rapidly open stores, integrated with the brand’s omnichannel capabilities, at significantly reduced cost and risk. The Company also works with retail landlords, developers, and brokers, and deploys stores in clusters for cost efficiencies and sales synergies. Last year, the number of stores operated by Leap quadrupled to more than 50 across eight markets. The Company currently works with about 30 brands, including maternity retailer A Pea in the Pod, which reestablished its brick-and-mortar presence through a partnership with Leap in December.
Checkers & Rally’s announced accelerated growth plans for 2022, having approved 60 new franchisee locations scheduled to open this year. As comparison, in 2021 the Company executed 90 total new commitments, including 14 multi-unit development deals. Checkers & Rally’s will continue to expand in California, Texas, Arizona, Massachusetts, Connecticut, and North and South Carolina, including a 15-store development agreement for Orange County, CA; a six-store development agreement for Maricopa County, CA; and franchise agreements in Texas, Arizona and other California markets, with a focus on San Diego. On the East Coast, Checkers & Rally’s announced a six-unit deal that marked its entry into Rhode Island as well as five-unit deals in Maryland, South Carolina and Georgia. Earlier this month, Checkers & Rally’s unveiled its “restaurant of the future” design, with the first location expected to open later this year in Lakeland, FL. The format incorporates a smaller footprint, modern building design, emphasis on technology, and a double drive-thru. The Company also plans to roll out automated voice ordering. Checkers and Rally’s currently has 850 locations. Click here to request a sample list of future openings.
Best Buy’s sales and margins improved during the COVID period, but sales momentum and profitability moderated in 3Q21 amid a reappearance of promotional activity, as COVID-period tailwinds subsided. Appliance purchases increased in 2021, as consumers remodeled and renovated homes, which correlated with the booming real estate market. Sales of computers, printers, cables, mobile phones and other consumer electronics increased to facilitate work at home. The pull-forward of sales in 2021 may hamper revenue generation in 2022; however, many appliance purchases are non-discretionary, while electronics tend to be more discretionary and seasonal. The moderate pace of store closures over the last decade will likely continue, averaging between 15 and 20 units per year, or approximately 2% of the store base. Management continues reducing the average footprint of its stores, currently at 36,000 square feet, and evaluating smaller prototypes, including 15,000 and 25,000 square foot units, as well as 5,000 square-foot stores.
H&M ended FY21 on a solid note, with positive top and bottom-line momentum in 4Q. Revenue rose 8% to SEK 56.81 billion (approximately US$6.30 billion) but still 8% shy of pre-pandemic levels. Sales increased in all markets (a notable 31.4% increase in North and South America), with the exception of Asia and Oceania, which saw revenue slip 15.3% as a result of pandemic-related store closures. Online continued to perform well, increasing 10% despite the return to in-person shopping. The Company recorded a 49% increase in operating income. H&M opened 104 stores and closed 321 in FY21, ending the year with 4,801 locations. In FY22, the Company plans to open 120 new stores, primarily in growth markets, and close 240 as it plans to more than triple capex in FY22. H&M also expects sales for the period spanning December 1, 2021, to January 31, 2022, to increase 20% year-over-year, although this period was negatively impacted by the rapid spread of the Omicron variant. Longer term, the Company is looking to double sales by 2030.
Boot Barn’s rapid growth continued in the 3Q22 period ended December 25, 2021. Sales were up 61% and 71% compared to 3Q21 and 3Q20, respectively. Compared to 3Q20, comps were up 61%, driven by 59.1% in-store comp growth and 69.3% online growth. The online channel represented 18% of total sales, down slightly from 20% in the prior year period. Looking forward, 4Q22 quarter-to-date sales are up 51% and 89% compared to 4Q21 and 4Q20, respectively. For FY22, management expects unit growth of 10%; the Company plans to continue its 10% unit growth rate through the foreseeable future. As of January 2022, the Company operated 293 stores in 37 states. Click here to request a sample list of future openings.
Our Hot Market Report takes a closer look at the Miami, FL real estate landscape, and provides visual competitive analyses as well as key real estate metrics such as future openings, store count, market share, digital insights, and demographics. Click here to request a copy of the full report.
Kwik Trip has launched a new brand called Kwik Spirits. The format features a variety of products such as wine, liquor, beer and tobacco. Kwik Spirits stores are located in Cloquet, Rush City, Byron and Owatonna, MN; Cumberland, Janesville (2) and Baraboo, WI; and Fort Dodge, IA. Click here to request a sample list of future openings.
The Sherwin-Williams Company’s 4Q21 sales increased 6.1% to $4.76 billion. Sales in the Americas Group (55.7% of total sales) rose 3% to $2.65 billion, and same-store sales were up 1%; selling price increases partially offset lower sales volume of paint products as a result of raw material availability and COVID-related labor headwinds. Performance Coatings Group sales (32.4% of total sales) rose 18.7% to $1.54 billion due to higher sales and selling price increases. Consumer Brands Group sales (11.9% of total sales) declined 7.8% to $565.3 million due to raw material availability issues. During the year, the Company opened 79 paint stores in the U.S. and Canada. Click here to request a sample list of future openings.
Burlington Stores is opening a new location in El Paso, TX in March, in a former Kmart location. This will be the Company’s 91st location in Texas. Meanwhile, Burlington is also opening a new store in Granada Hills, CA in March, bringing the number of locations to 88 statewide. The Company currently operates 837 stores nationwide, including nearly 11% of its store base in Texas and 10.5% in California. Click here to request a sample list of future openings.
Fort Worth, TX-based Fuzzy’s Taco Shop plans to expand throughout the Southeast, signing a 50-store agreement to extend into new markets in Alabama, North Carolina and Tennessee. The agreement, with QSR multi-brand franchisee Richard Maddox, also calls for expansion in Florida, Georgia and South Carolina, existing markets for the brand. The fast-casual chain serves Mexican food. All 50 new locations included in the agreement will feature a drive-thru, a first for the Company. Fuzzy’s currently operates nearly 150 franchised and corporate-owned restaurants in 17 states.
Tractor Supply Company announced its 4Q21 and full-year results. For the quarter, sales rose 15%, while comps improved 12.7%. The double-digit comp growth is impressive considering 4Q20’s comps were up an impressive 27%. 4Q21 comps were propelled by both average ticket and traffic growth. E-commerce sales experienced strong double-digit growth for the 38th consecutive quarter. Full-year results were equally impressive, as sales grew 20%, and comps were up almost 17%. The Company is sticking to its typical number of planned openings, calling for 75-80 Tractor Supply stores and 10 Petsense locations for FY22. Click here to request a list of future openings.
Dine Brands International plans to open multiple Applebee’s Neighborhood Grill + Bar and IHOP restaurants in the United Arab Emirates (UAE). The first location is scheduled to open in Dubai later this year through an agreement with established IHOP franchisee, Mohamed Makawi. Dine Brands International said it continues to place emphasis on growth in the North America, Middle East, Asia and Latin America markets.
GameStop plans to transform itself into a digital business, as its store-based model, which sells mostly hardware, is outdated. Sales recently rebounded following the launch of new consoles in late 2020 and demand increased during COVID, but sales remain below pre-COVID levels amid operating losses and recently negative cash flow. Last year, the Company assembled a new management team but has failed to provide details of its go-forward strategy for over a year, as operations continued to deteriorate. Recent reports indicate GameStop plans to develop an NFT and cryptocurrency marketplace, though there is a lack of clarity over how much of the business model this will represent and how effectively the Company can address competition.
Ultimately, it appears GameStop will need to accelerate the recent pace of about 340 store closings annually, or 6% of the base, to have a meaningful beneficial impact on margins. Reinventing a troubled business in a volatile and changing new market is risky, and management’s ongoing lack of transparency has heightened skepticism.
IKEA has signed a nine-year lease for retail space in a suburb of Mumbai, India, with the intention of opening its second city-center store in that country’s commercial capital. The store is expected to open in mid-2022. The location is approximately 100,000 square feet, which is less than a quarter of the size of typical IKEA stores. The Company already operates large-format stores in other locations in India, but the smaller format will allow IKEA to adapt to more urban spaces.
Mattress Firm has delivered stellar top and bottom-line results over the past two years, taking advantage of shifts in consumer demand during the pandemic. The Company’s vast brick-and-mortar network of over 2,300 stores and 70 distribution centers has helped it handle the higher demand and manage rising transportation costs that have more acutely impacted its smaller and online-only competitors. Mattress Firm is the largest operator in the brick-and-mortar mattress space with a 26% share, though it only has about 5% share in the smaller but growing online market. After closing more than 100 stores per year for the past several years, the Company has shifted back to expansion, with plans to open 300 new stores over the next three years. Going into FY22, there is a risk that demand will cool off as the pandemic impact wanes and consumer spending shifts back to other avenues, all while rising inflation potentially reduces spending as a whole. Seeking to strike while the iron is hot, Mattress Firm’s owners, Steinhoff International Holdings (50.1%) and the previous creditors that received equity stakes following the 2018 bankruptcy, are planning an IPO and have already given themselves a $1.20 billion special dividend ahead of the offering. Click here to request a sample list of future openings.
David’s Bridal is planning to open two stores by the end of this week in West Chester Township, OH and Torrance, CA. The new locations follow store openings in Naperville, IL and Clive, IA in 2H21.
According to published reports, Walgreens Boots Alliance has begun the sale process for its Boots UK Limited as fresh buyout firms, including Sycamore Partners, consider bids. The Company is reportedly sending out preliminary information to potential suitors ahead of first-round bids due in the coming weeks. Sources have indicated that Boots could be valued as much as £7 billion (US$9.6 billion) in a sale. The business could also attract interest from TDR Capital and the Issa brothers, as well as Bain Capital and CVC Capital Partners, who have partnered to make a bid and are considered early favorites. Advent International and KKR & Co. are also potential suitors. The reports claim Walgreens is considering a potential IPO of Boots if buyout interest is muted. Click here to request more info.
Patagonia has opened a store in Williamsburg, Brooklyn, its first location in the New York City borough. The outdoor apparel chain leased a 12,000 square-foot space in a two-story building, occupying a majority of the ground level and all of the second floor. To design the new space, the Company commissioned local artists and craftspeople. The retail outlet will regularly feature local events and workshops, and one section of the store has been designated as a “shop-in-shop,” which will turn over about twice a year.
Over the next few weeks, Läderach Chocolatier Suisse, the largest chocolate retailer in Switzerland, will add new locations at Topanga & The Village in Canoga Park, CA; Town Center in Boca Raton, FL; and Westfield Valley Fair in Santa Clara, CA; and Yorkdale Shopping Centre, in Toronto, Canada. The Company first opened retail outlets in North America in 2019, and with these additions will now operate 37 stores including locations in New York, Massachusetts, Texas and Washington D.C.
Metro, Inc.'s 1Q22 sales were up 0.9%, to C$4.32 billion, as the Company cycled strong pandemic sales. Food comps were down 1.4% year to year but increased 8.6% on a two-year stacked basis. Food basket inflation was 3.5%, up from 2% in 4Q21, with meat and dairy products as the main drivers. Online food sales were flat versus last year (up about 170% in 1Q21). Pharmacy comps were up 7.7%, with a 7.1% increase in prescription drugs due to an uptick in physician visits and an 8.9% increase in front-store sales supported by strong OTC growth, particularly in cough and cold products. Metro continues to experience inflationary pressures, particularly in cost of goods, and labor shortages, which have increased with the latest strain of COVID. During 1Q22, the Company opened three stores, expanded and/or renovated three, and relocated one, resulting in a net increase of 76,000 square feet, or 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 expert, please click here.
