June 1, 2022
Amazon opened its first department store in Glendale, CA, on May 25, 2022. The new format, Amazon Style, is about 30,000 square feet and reportedly offers more than twice the number of styles as traditional stores due to its unique format and integrated shopping experience, whereby only one unit of each style is on display while inventory stock is kept in the back room. Core to Amazon’s offering and unique to Amazon Style, customers can use Amazon’s shopping app to send items directly to the fitting room enabling a 'two-sided' closet experience.
Costco continues to be the bright star in the mass merch field. Comps and sales have been up double digits in all three quarters this year. 3Q22 sales jumped 16% with comps up almost 11%, very similar to 2Q22 results. Both traffic and average ticket were up. Canada led, gaining 12.8%, followed by the US at almost 11%. Lower gross margin pulled EBITDA margin down 50 bps. Membership revenue continued its upward trend, expanding 9% as shoppers are feeling the pinch of inflation and looking for the lower prices, especially fuel, that membership warehouses offer. Costco opened one new warehouse during the quarter and has opened 17 YTD, including three relocations. Another 10 are planned for the remainder of the fiscal year. Inflation ran at about 7% in 3Q. Inventory is up 26%, however most of that was inflation-driven versus unit growth.Click here to request a sample list of future openings.
Dozens of Sears Hometown stores are closing and holding liquidation sales, according to Facebook posts from the shuttering locations. Transformco did not provide a list of the closing locations or how many will remain, but stores around the country posted announcements. Click here to request a sample list of future closings.
Big Lots has been one of the biggest disappointments to the earnings season so far. Sales for 1Q22 were down 15% and comps declined 17% though it was lapping a healthy 11% comp in 1Q21. Management indicated it missed its sales mark by about $100 million. Margins were hit hard by inflation in both product and transportation costs. The Company is seeing a distinct slowdown in its higher ticket discretionary purchases such as furniture. This led to higher levels of promotional activity than originally planned, further hurting margins. Inventory was up nearly 50% at quarter-end, with units up modestly, but mostly the result of inflation and product mix. The Company is reducing planned capex to around $175 million, down from the previous estimate of $230 million. New store openings will also be reduced to a net new 30 stores from initial plans for 50. Click here to request a sample list of future openings.
Reports indicate that bidders for Kohl’s are now reevaluating and lowering their offers for the Company in the 10% to 15% range. Two weeks ago, Kohl’s reported disappointing 1Q22 results and lowered its FY22 outlook as a result of rising inflation and lower consumer spending. The Company’s stock has since fallen as much as 40%. Bidders who are lowering their offers include Sycamore Partners, Franchise Group, and Acacia Research. Earlier this year, Kohl’s rejected a $64 per share offer from Acacia. Reports indicate that some initial bids reached as high as $70 per share, while most were in the low-$60 range. Hudson’s Bay Co. was also reportedly one of the interested parties. When it released 1Q22 earnings on May 19, Kohl’s said it expected to receive final bids from 25 interested parties within the coming weeks, but the bid deadline may now be extended. Kohl’s share price closed at $41.87 last Friday, compared to a 52-week high of $64.38. Click here for more info.
Our report takes a closer look at the Company’s operational and competitive status, including market position, real estate and sales trends, and provides visual competitive analyses as well as key real estate metrics like store count, average sales per square foot, and the new Real Estate Intelligence analytics solution. Click here to request a copy of the full report.
Macy’s reported better than expected 1Q22 results, bucking the trend of disappointing performance from other retailers. Comps grew 12.4%, as management reported an accelerated shift in consumer demand from casual, active and soft home categories to occasion-based merchandise categories, which contributed to an increase in store traffic, while digital sales growth slowed.
While supply chain constraints have eased, management also pointed to Chinese port lockdowns, and labor negotiations at the Port of Los Angeles. May sales remained strong, although guidance assumes a slowdown, with total sales expected to be flat to up 1%. Margins are expected to come down due to rising fuel costs and markdowns; the deceleration in casual and active merchandise sales combined with relaxed supply chain constraints resulted in some excess inventory. Management also said an elevated promotional environment is possible. Macy’s ended the quarter with 787 stores, up two since FYE21, and opened its ninth freestanding Backstage location and 22 store-within-store locations in 1Q22. The 300th Backstage store-within-store location opened in May, as part of its plan to add 37 during 2Q22.
Kroger recently opened a new “spoke facility," just outside Columbus in Lockbourne, that provides grocery delivery service in central Ohio. Assembled orders arrive at the 61,000 square-foot facility from Kroger’s robotic customer fulfillment center (CFC) in Monroe, OH, and are then transferred to refrigerated vans for delivery to customers. At full capacity, customers in more than 250 Central Ohio ZIP codes will be able to use Kroger Delivery. The addition of the facility reflects a push by Kroger to strengthen its position in grocery e-commerce by relying on both specialized order-processing infrastructure and the Company’s supermarkets to fill orders. Kroger currently operates customer fulfillment centers in Monroe, OH, Groveland, FL, Forest Park, GA and Dallas, TX with additional customer fulfillment centers slated for California, Frederick, MD, Phoenix, AZ, Pleasant Prairie, WI, Romulus, MI (Detroit), Cleveland, OH, Charlotte, NC as well as South Florida and a still unannounced market in the Northeast.
Alimentation Couche-Tarde placed more than 100 Circle K stores up for sale, as part of its network optimization effort. The Company has retained NRC Realty & Capital Advisors LLC to coordinate and manage the sale, which includes 31 sites across three provinces in Canada and 78 sites across 19 states in the U.S., with an average store size of 2,209 square feet. Of the 109 sites, 42 are fee-owned and 65 are leased, and two are fee and leased, additionally 61 properties sell fuel and 48 are convenience only.
Dollar Tree made a strong showing in 1Q22 with revenue growing 6.5% and comps up 4.4%. Dollar Tree stores led the comp increase, up 11.2%, however Family Dollar stores declined 2.8%. Both banners were affected by a fall off in traffic and the Family Dollar comps were additionally affected by the 400 store closings due to the FDA recall. In February 2022, the Company completed the roll-out of the new $1.25 price point. The new pricing strategy helped push gross margin up by 360 bps. Management commented, "Shoppers are responding favorably as the new, greater value products hit the shelves." The increased price point continues to offset the decline in number of units sold. The Company plans to continue the expansion of its $3 and $5 assortment to an additional 1,500 Dollar Tree stores in FY22. Dollar Tree also raised guidance for FY22: full year sales are projected to be $27.76 billion to $28.14 billion, up from $27.22 billion to $27.85 billion; and mid single-digit comp improvement with Dollar Tree up high single-digits and Family Dollar flat. For 2Q22, the Company expects sales of $6.65 billion to $6.78 billion, up 5% to 7%; and comps up low single-digits. During the quarter, the Company opened 112 new stores and closed 30, finishing the period with 16,162 stores. Click here to request a sample list of future store openings.
BrandX plans to relaunch several department store brands that were shuttered in recent years, starting with the online site for Bon-Ton. In addition, a 125,000 square-foot brick-and-mortar store under the Carson’s banner is slated to open in Joliet, IL in Spring 2023. As background, Bon-Ton and its affiliate brands, Carson’s, Bergner’s, Boston Store, Elder-Beerman, Herberger’s, and Younkers, filed Chapter 11 in 2018 and liquidated their stores. Intellectual property was purchased by CSC Generation, which had planned to relaunch Bon-Ton online and open Carson’s stores in the Midwest. However, in early 2021, CSC sold the assets for an undisclosed sum to BrandX, which was formed by Deepak Ramani, owner of the real estate development and property management firm Ramani Group. BrandX also purchased the intellectual property of Goody’s, Gordmans, Palais Royal, Peebles, and Stage Stores. Altogether, BrandX now owns 12 brands that previously operated more than 1,000 stores in 45 states, as well as 22 private label brands and data on 13.1 million customers. The plan is to start with Bon-Ton online, then the Carson’s store, followed by a Younkers store in a yet-to-be-decided location; eventually BrandX plans to relaunch all banners. The Company retained Tom Ott, the former head of men’s wear for Saks Fifth Avenue, to help with the relaunch. Mr. Ramani and Mr. Ott believe there is a demand for these department store brands, many of which have roots that date back to the mid-1800s.
FY22 got off to a rocky start for Burlington Stores, as 1Q22 sales declined 12% year-over-year and comps fell 18% due to less than optimal inventory levels and the lapping of federal stimulus checks in the prior-year period. On a two-year stack, comps were up just 2%. During the quarter, the Company opened 26 net new stores bringing its store count to 866 stores. Looking forward, the Company expects 2Q22 comps to decline 13% to 15% and FY22 comps to decline 6% to 9%. For 2H22, this outlook anticipates comp store sales of -2% to 3%, with an expectation that 4Q comp sales will be stronger than 3Q. The Company also expects FY22 capital expenditures of roughly $730 million, with plans to open 120 new stores, and relocate or close 30 stores. Click here to request a sample list of future store openings.
While most of the retail sector was hit by weaker than expected 1Q results, Nordstrom posted stronger results, including a 19% increase in sales. Nordstrom, which caters to higher income consumers and offers more upscale apparel, underperformed relative to many peers in 2021, but is now seeing a rebound in demand as more customers are shopping for in-person occasions, including social events, travel and return to office. Management also noted improved urban store traffic, with the Nordstrom Manhattan flagship store posting the highest quarterly growth. Both Nordstrom and Nordstrom Rack banners posted double-digit sales growth, with the Nordstrom banner up 23.5% and Nordstrom Rack up 10.3%. Click here to request a sample list of future openings.
Express reported 1Q22 sales jumped 30%, with comps up a better than expected 31%. Gross margin expanded 640 bps despite incurring $6 million of expenses related to supply chain challenges in the quarter, reflecting fewer promotions and increased full-price selling. In 1Q22, the Company opened four and closed four locations, leaving total store count unchanged at 561. For FY22, the Company anticipates 15 store openings and 17 closures, for a projected store count of 559 at FYE.
The Buckle’s 1Q22 sales increased 3.3% to $309.1 million, and comps were up 3.7%. Online sales inched up 1.1% and represented 17.6%, roughly unchanged from the prior year. The Company plans to open five new stores and complete 10 to 15 remodels during the year. Buckle ended the quarter with 439 stores in 42 states, down from 442 stores at the end of 1Q21.
Our Hot Market Report takes a closer look at the Minneapolis, MN 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. Click here to request a copy of the full report.
Williams-Sonoma reported solid results in 1Q22, as comp store sales grew 9.5%. While in-store comps at West Elm rose 14.6% and Pottery Barn accelerated to 12.8%, growth at Williams Sonoma and Pottery Barn Kids and Teen turned negative, with comps down 2.2% and 3.1%, respectively. Over the last 12 months, the Company closed net 33 stores (6% of its store base), predominantly made up of Williams Sonoma (20) and Pottery Barn (7) closures. In 2021, the Company said it would renegotiate rents and close about 25% of its less profitable stores over the next five years as leases come up for renewal; mall-based stores and markets with too high of a store concentration are areas of focus. Click here to request a sample list of future openings.
Rite Aid announced a partnership with Homeward, which seeks to provide access to comprehensive care for those living in rural areas across the U.S. While both CVS Health and Walgreens Boots Alliance have expanded their role in providing primary care services, in recent years Rite Aid has closed its own clinic business. Today’s announcement is the Company’s first step in expanding its health care services beyond the pharmacy, with an initial focus on serving seniors in rural communities. Earlier this year, the Company also announced it was testing a new smaller format to serve rural markets. However, at this early stage, it is unclear how a big a sales and potential profit generator this new partnership may become. Click here to request a sample list of future openings.
Jack in the Box’s 2Q22 comps slipped 0.8% (after 20.6% growth in 2Q21), while the recently acquired Del Taco was still positive at 2.5% comp growth (after 19.8% in 2Q21). Both banners saw higher average ticket, in part due to inflation increasing menu prices, partially offset by decreases in traffic. Jack in the Box’s franchisee-driven store development plan is still in the early stages, with just 12 new restaurants opened since mid-2021 and another 206 still in development. Click here to request a sample list of future openings.
Giant Eagle announced that its stores in Columbus, Hilliard and Powell, OH will be converted to its Market District format. The three locations will remain open throughout the renovation. The Company currently has five Market District locations throughout 21 stores in Central Ohio, with the New Albany location recently converted to the concept.
Giant Eagle also announced that myPerks members will have access to savings of up to 20% on more than 1,000 items throughout the store, including meat, dairy and produce. The latest additions come in response to rising inflation and supply chain issues.
The Gap's 1Q22 consolidated sales and comps decelerated 13% and 14%, respectively, from the lapping of government stimulus and 417 store closures since last year. Comps at the largest banners were the worst performers, Old Navy (52% of sales) and Gap (23% of sales), fell 22% and 11%, respectively, due to merchandise imbalances, poor product acceptance, and ongoing delays from supply chain disruptions and Covid-19 lockdowns in China. Of the two smaller brands, Athleta (9% of sales) grew 4% and Banana Republic (12% of sales) was up a surprising 27%, due to the brand’s merchandise repositioning. During the quarter, the Company closed 10 stores, ending with 2,825 Company-owned locations.
Destination XL's (DXL) 1Q22 revenue increased 14.5%, with comps up 19.5%. Top-line improvement was driven by strength in the Company’s stores and direct business, with comparable sales up 20.8% and 16.7% for each channel, respectively, partially offset by a decrease in wholesale revenues. Management noted it is planning on rebranding four of its Casual Male XL retail stores to DXL retail stores in FY22, and is reviewing white space opportunities in markets where its store footprint is under-penetrated; it believes it could potentially open 50 new and relocated stores over the next three to five years. Management reaffirmed its FY22 outlook of sales in the range of $510 million to $530 million, with an EBITDA margin of greater than 10%, and also guided for gross margin contraction of 100 bps and capital expenditures of $10 million to $12 million (up from $5.3 million in FY21).
Frasers Group plc announced that it has disposed of its U.S. retail businesses trading as Bob’s Stores (Bobs) and Eastern Mountain Sports (EMS) for a cash consideration of $70 million to GoDigital Media Group (GDMG). These funds will go into Frasers' general working capital pool. The acquisition included 42 stores, a warehouse and a fulfillment center. Frasers acquired both companies out of bankruptcy in 2017. Nike had discontinued its distribution to Bob’s in 2021, which prompted Frasers to begin a strategic review of the business. GDMG describes itself as “a diversified multinational conglomerate, focused on technology-enabled and vertically integrated IP rights management,” and says its operating subsidiaries “focus on music, video networks, and brands.”
Urban Outfitters reported record 1Q23 consolidated sales of $1.05 billion, up 13% YOY and 78% from 1Q21. Retail comps were up 11%, driven by increased store traffic as consumers returned to in-store shopping, partially offset by a mid-single-digit drop in digital sales. By banner, comps were strongest at Anthropologie and Free People, up 18% and 15%, respectively, while the namesake banner, Urban, was up only 1%. During 1Q, the Company opened five new stores, closed three, and added six franchises, ending with 690 locations. At quarter-end, Urban Outfitters had no debt and $259 million in cash.
Hibbett’s 1Q23 sales fell 16% compared to 1Q22, due to the absence of last year’s stimulus and reflecting an 18.9% decrease in comps, partially offset by the opening of 34 stores during the last 12 months. However, the top line was up 23% in relation to 1Q20, the most relevant comparable period prior to the pandemic. Footwear and apparel both declined in the teens, while team sports and licensed products grew mid-single digits. Looking ahead, management said full-year comps are expected to be down in the negative low-single digits, and it plans to open a total of 30 to 40 net new stores in underserved areas with little or no competition during FY23. We note that footwear and apparel are among the most competitive categories in retailing; together they constitute over 80% of the Company’s sales mix. When combined with the significant increase in inventory, we remain concerned about margin pressure in the current macroeconomic environment. Click here to request a sample list of future openings.
Camping World announced plans to open 11 new dealership locations in seven states this year. This is on top of the eight Richardson’s RV Centers acquired last week (seven in California and one in Indiana). See the chart on the right for the latest list of locations scheduled to open. Camping World currently owns and operates 190 units in 42 states. We note that sales and margins increased significantly during the pandemic period as consumers turned to the RV lifestyle to enable outdoor recreation. Operational improvement also benefited from supply and demand imbalances, especially in the market for used vehicles. However, currently high interest rates and inflation, and especially high gas prices are starting to impinge on consumer demand and have already caused margin pressure. In that regard, expansion carries risks of additional operational pressure, especially higher SG&A costs and margin compression. Click here to request a sample list of future openings.
Ulta 1Q22 sales rose 21% year-over-year, to $2.35 billion (2x higher than sales in 1Q20), as comps rose 18% on both an increase in transactions and average ticket. During the quarter, Ulta opened 10 new stores and relocated six, ending the quarter with 1,318 locations. For FY22, the Company plans to open 50 net new stores and remodel or relocate 35 stores. Click here to request a sample list of future openings.
Subway is shifting its franchisee strategy from working with mainly single-unit operators to targeting multi-unit franchisees. While the Company’s single-operator focus allowed it to become the largest restaurant chain by units, Subway oversaturated the market and began reporting lackluster sales starting in 2014. It has closed thousands of locations and faced discontent among franchisees in recent years.
H.E. Butt has begun construction on a new, 117,000 square-foot store in Allen, TX, set to open in late summer 2023. It will be its first location in North Texas to include an H-E-B Wellness Primary Care clinic as a part of the format. The Allen store will be the Company’s fourth location currently under construction in Collin County, which also includes stores in Frisco, Plano and McKinney. Click here to request a sample list of future openings.
Convenience store operator Stewart's Shops has remodeled 10 of its stores, which included new countertops, patios, layouts and additional food bars. The Company operates more than 345 c-stores in 31 counties across upstate New York and southern Vermont.
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