January 18, 2023
Albertsons reported favorable 3Q22 results, with comps up 7.9% fueled by inflation. Gross margins eroded due to higher product, shrink and supply chain costs, and lower COVID-related revenue. However, this was more than offset by the stronger sales and productivity initiatives, which drove a 10% increase in Company reported EBITDA. Albertsons still faces an uphill battle convincing regulators, not to mention legislators and unions, regarding the merits of its proposed merger with Kroger. At this point, a successful merger will likely not occur until at least early 2024. Today, the Company has an expedited court review scheduled for its near $4 billion special dividend, which the State of Washington is attempting to block. While it fights for the merger, management will be challenged in FY23 staying focused on continuing to expand its digital business, which grew 33% in 3Q22, and improving its merchandising and pricing. There has been little store activity, with a net eight closures YOY.
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Bed, Bath & Beyond recently released the list of the next 150 Bed, Bath format store closures, following over 200 closures completed over the previous two years. This represents over 35% of the chain during this time. The Company says it is exploring “multiple paths,” but the excessive debt and dark store leases certainly suggest a formal restructuring.
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Publix has expanded its partnership with Green Life Farms to offer its products at more than 550 locations in Florida. Green Life, a controlled-environment agriculture company, added 280 Publix stores in Tampa and Fort Myers to the 270 locations it already serves in South Florida. Green Life Farms operates hydroponic greenhouses in Lake Worth and Punta Gorda, FL, and it has another 11 facilities in construction or under development, for a total of 5.2 million square feet of greenhouses planned.
In other news, Publix Pharmacy has opened its fourth telehealth site at Beaufort Memorial Hospital in Beaufort, SC. Telehealth centers offer a private room with teleconferencing and medical diagnostic equipment such as stethoscopes, blood pressure cuffs, high-definition cameras, and other tools to make common diagnoses. Publix’s other telehealth kiosks, operated in partnership with Beaufort Memorial, are located in Bluffton and Beaufort, SC. Publix also offers telehealth services in Tampa and St. Johns County, FL.
Urban Outfitters reported sales for the two month holiday period ended December 31, 2022 increased 2.3%. Total retail sales increased 1%, and retail comps were up 2%, partially offset by a 1% negative impact of foreign currency translation. Comp growth was driven by low single-digit positive growth in digital channel sales and low single-digit positive growth in retail store sales. By brand, retail comps were up 15% at Free People and 7% at Anthropologie, partly offset by a decreased 10% at Urban Outfitters. Wholesale segment sales fell 22%, primarily due to lower sales to department stores. Nuuly segment had a 153% increase in subscribers.
For the 11-month period ended December 31, 2022, sales increased 5.1%. Retail comps were up 4%, driven by high single-digit positive growth in retail store sales due to higher store traffic and low single-digit positive growth in digital channel sales. Wholesale segment sales decreased 3%, partially offset by an increase in sales to specialty accounts. Nuuly segment sales increased 176% on subscriber growth. The Company opened 33 new stores year-to-date, including 19 Free People stores, seven Urban Outfitters locations, six Anthropologie units, and one restaurant; it also closed seven locations, including three Urban Outfitters, three Anthropologie, and one Free People store.
Academy Sports + Outdoors announced new locations as it continues to pursue its goal of adding a total of 80 to 100 new units by the end of 2026. The Company will open a 60,000 square-foot store in Lafayette, IN in Spring 2023 that will offer services including free assembly on grills and bikes, scope mounting, bore sighting, line winding/spooling, propane exchange and the ability to purchase hunting and fishing licenses in addition to its merchandise. Last week, it was also reported that Academy signed a lease for a 55,000 square-foot store in Christiansburg, VA, outside of Roanoke, which is expected to be fully constructed by the second half of Summer 2023. The map below highlights the Company’s recent store openings/closings.
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At an investor conference last week, Neiman Marcus Group’s (NMG) CEO Geoffroy van Raemdonc argued that despite the volatile economy, the Company believes it can sustain profitability. The CEO commented, “We believe that in good economies, we’ve been able to demonstrate accelerated growth and profitability. And in economies that are more volatile, we can demonstrate continued growth and resilience. We are lucky to operate in the world of luxury. It’s a good place to be right now. It’s a market that has been growing and is forecasted to continue to grow. There are more high net worth individuals, and they’re richer and more affluent than pre-COVID.” CFO Katie Anderson said, “We have free cash flow that we can reinvest in our business, as well as generate more cash on a run rate basis. We also make our profit from our core assets. A lot of companies in our industry make money from credit cards or off price. That’s not us. We are profitable across our channels…we also have over a billion dollars of liquidity, which gives us a ton of flexibility." Anderson added that she believes the Company has a "sightline to profitable growth and margin expansion" saying, "leaning into relationships is a lot cheaper than chasing new customers. We have top brands that don’t discount. We have customers that pay full price and categories with high margins.” CEO van Raemdonck said NMG operates a “very clean, profitable and tight network of stores located where customers and high net worth individuals live. It’s 36 locations of Neiman Marcus and one for Bergdorf Goodman, and we exited off price, but for five liquidation stores. We are investing in our stores, and we are investing $200 million of strategic [capital expenditures], half of which is funded by landlords, and that will touch half of our stores — our top 10 stores — and a third of the total fleet.”
Shake Shack announced preliminary unaudited results for 4Q and FY23, ended December 28, 2022. FY23 revenue is expected to be $900.5 million, which would be an increase of 21.7% from FY21; 4Q22 sales are expected to be $238.5 million. Same-store sales are anticipated to be 7.8% in FY22 and 5.1% in 4Q22. Operating margin is expected to be 19% in 4Q22 and 17% in FY22. The Company opened 36 new domestic Company-operated Shacks in FY22, 22 of which opened in 4Q22. Another 33 new licensed Shacks were opened in FY22, of which 13 were opened in 4Q22.
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Whole Foods is rolling out two new locations at the start of 2023. Last week, the 42,000 square-foot store at One Wall Street in downtown Manhattan opened, marking the banner’s 17th grocery in New York City (there is also an online-only store that is closed to the general public in the Industry City section of Brooklyn). On February 1, Whole Foods will open its first location in Montana, with an approximately 38,000 square-foot unit in Bozeman. In 2022, the Company opened 11 new stores, and while it announced plans in May of 2022 to add roughly 40 more units it did not include expected debut dates and has no other openings currently listed in the pipeline.
Babies “R” Us, which went out of business in 2018, announced plans to debut a flagship store at the American Dream mall in Bergen County, NJ. The location, scheduled to open in Summer 2023, will offer a full range of products and services including interactive experiences such as a stroller test track. In 2021, New York-based WHP Global acquired Tru Kids Inc., parent company to the Toys “R” Us and Babies “R” Us banners, and more than 20 related consumer toy and baby brands.
In December 2021, Toys “R” Us opened a two-level, 20,000 square-foot location at American Dream. Earlier in 2021, WHP also partnered with Macy’s to bring in-store Toys “R” Us shops to the department store’s outlets. The Toys “R” Us store at American Dream remains the banner’s only standalone location in the U.S.
Aritzia reported 3Q23 sales increased 37.8% to $624.6 million, on comp growth of 22.8%, driven by the U.S. business, which represented 50.2% of total sales. Retail sales were up 38.6% to $423.2 million, and e-commerce sales increased 36.1% to $201.4 million. Strong U.S. retail sales growth was complemented by high single digit comp growth in Canada. Ongoing inflationary pressures led to gross margin erosion of 310 bps to 43.3%. Adjusted EBITDA increased 9.5% to $119.6 million.
Looking ahead, Aritzia’s healthy momentum continued into 4Q23 on robust demand through the holiday season. The Company is on track to deliver sales of $580 million to $600 million, up 31% to 35% from last year. FY23 sales are expected to be $2.14 billion to $2.16 billion, up from its prior outlook of $2 billion to $2.05 billion and representing an increase of 44% from FY22. The Company anticipates opening eight new locations, including seven in the U.S. and one in Canada, and expand/relocate five existing locations, including four in Canada and one in the U.S.
The Wendy’s Company reported preliminary 4Q22 sales increased 13.4% to $536.5 million, and comps were up 6.4%. U.S. comps were up 5.9% and international comps rose 9.9%. Restaurant margins expanded by nearly 300 bps, and adjusted EBITDA rose 20.3% to $123.5 million. The Company opened 276 restaurants across the globe during the year, while it closed 146 underperforming locations.
The Company intends to redesign its organizational structure in an effort to better support its long-term growth strategy by maximizing efficiency. As a result, Wendy’s anticipates 2023 and 2024 general and administrative expenses will be relatively flat versus 2022, despite elevated inflationary pressures.
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Grocery start-up JackBe opened its first store in Oklahoma City, OK on January 10, and construction is underway on a second store in Edmond, OK. Calling itself a “curbside drive-thru grocer,” the JackBe business model involves customers ordering groceries from a mobile app and using a drive-thru for pickup (the store has 13 drive-thru lanes, including three designed for over-sized vehicles). Jennifer Neef and Alex Ruhter launched JackBe last year to compete with the growing number of grocers in Oklahoma Citry that offer grocery delivery or pickup; Aldi, Crest, and Homeland partner with Instacart, while Walmart, Whole Foods, and Kroger require scheduled orders and either require a minimum purchase or charge a delivery fee. In contrast, JackBe’s service is free and does not require a minimum purchase or a scheduled pickup time. Customers are instructed to check in on the app when they arrive at a drive-thru lane. In April 2022, JackBe secured $3.75 million in SEED funding led by Oklahoma-based RCC Ventures, with participation from Purpose Equity.
HEB plans to open a 97,000 square-foot store in Austin, TX on February 15. The store will include a True Texas BBQ restaurant and a SouthFlo Pizza eatery. In addition, it will offer a full-service pharmacy with drive-thru, sushi made in-store, a large seafood section, a meat market, an extensive craft beer and wine section, deli department, and healthy living department. HEB operates 52 locations in the Austin MSA, as well as two Central Markets. See our Retail Openings & Closings map below for additional future openings across Texas.
Family-owned and operated In-N-Out Burger is expanding east, with plans to open new restaurants in Tennessee as well as a 100,000 square-foot corporate office in Franklin, TN. The Company currently operates 385 locations throughout California, Nevada, Arizona, Utah, Texas, Oregon, and Colorado. The Tennessee office and restaurants are expected to debut in 2026.
Dave & Buster’s is opening a second Puerto Rico location on January 30. The 42,000 square-foot venue will be in San Juan and will feature arcade games, a restaurant, and a 40-foot wall of television screens in its sports bar. The Company opened its first Puerto Rico site in Plaza del Sol in Bayamón in January 2018.
Plum Market Kitchen, a privately owned multi-channel grocery chain based in Detroit MI, opened its first Florida location, a 24,000 square-foot store in Aventura. The Company focuses on selling natural and organic products in three different formats, full-service stores, small-format units (mostly in airports), and foodservice cafeterias on corporate and education campuses. In total, there are more than 25 Plum Market locations, mostly in Michigan, but also in Texas, Indiana, Ohio, and California. The Company, which offers franchising opportunities, plans to open two more full-service stores in Hollywood, CA and Washington DC and two small-format locations in the Dallas-Ft. Worth, TX and Oakland, CA airports.
PetMed Express inked a deal to acquire PetCareRx, a supplier of pet medications, food, and supplies. Terms of the deal, which is expected to close in 1Q23, were not disclosed. PetMeds indicated that the combination is expected to expand its existing base and add about 10,000 incremental wellness products. The acquisition will be immediately accretive to revenue. Both brands will continue to operate separately.
For the first time in five years, the number of convenience stores in the U.S. grew in 2022, edging up slightly with 1.5% more locations than the prior year, according to the 2023 NACS/NielsenIQ Convenience Industry Store Count. There are currently 150,174 convenience stores nationwide, with 79% offering gas stations. Store count grew in 39 states plus Washington D.C., with Georgia posting the highest number of additions (271), while California’s count shrunk the most (-53). California has the second highest number of c-stores nationwide, behind Texas which has 116,018 stores statewide. Overall, the industry growth was fueled by a rise in single-store operators, which increased 1,087 units, and now make up 60% of all convenience stores.
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