May 31, 2023
FY23 got off to a strong start for Dollar Tree with comps up 3.4% at Dollar Tree and 6.6% at Family Dollar. Both comp gains were primarily driven by increased traffic. During the quarter the Company added 107 stores and closed 29. The Company is looking to add 600 to 650 stores this year, with most being back-loaded in the second half of the year.
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Albertsons named its Mid-Atlantic division president and executive VP Jim Perkins to lead SpinCo, a derivative company that was created in conjunction with the grocer’s efforts to merge with Kroger. To gain approval by the FTC, the two supermarket retailers indicated that they would create SpinCo to address any concerns about store overlap in certain markets. According to reports, management at Albertsons indicated that while the Company does not know if SpinCo will be needed, it is required by the merger agreement to begin preparing SpinCo to make sure that it can be set up smoothly and quickly. In total, it has been estimated that SpinCo could potentially consist of 100 – 375 divested stores.
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Walmart opened its second Market Fulfillment Center (MFC) as part of one of its stores based in the Company’s hometown of Bentonville, AR. The MFC is built within the store and is powered by a proprietary storage and retrieval system – named Alphabot, and, according to the Company, the MFC will significantly increase the number of orders the store is able to fulfill in a day, promising faster fulfillment with lower substitutions. The first MFC was opened in Salem, NH in late 2019 and there are plans to continue opening MFCs in select stores in the coming years, but Walmart has not provided any further details.
In other news, Walmart has expanded its alcohol delivery service to five more states, Arizona, Georgia, Iowa, Louisiana, and Ohio, primarily due to a change in the five states’ liquor laws. The Company’s alcohol delivery program began in 2019 and now encompasses nearly 2,500 stores across 23 states. Beer and wine are available from all participating locations, but delivery of spirits is dependent on local laws.
Meanwhile, Walmart inked a deal with veterinary telehealth provider Pawp to offer Walmart+ subscribers access to the startup’s membership for a year. Walmart+ subscribers will have until November 19 to opt in. Terms of the deal were not disclosed. Pawp’s annual membership starts at $99.
Qurate Retail sold online retailer Zulily to investment firm Regent, which owns retail and apparel brands including Club Monaco, DIM Paris, Escada, DryBar, Sassoon, and Wonderbra. Details of the transaction were not disclosed, though Qurate paid down Zulily’s outstanding debt of $80 million prior to closing, and Zulily will no longer be a coborrower on QVC’s bank credit facility. Qurate, formerly Liberty Interactive Corp, acquired Zulily in 2015 for about $2.40 billion. The sale is part of Qurate’s three-year transformation strategy, launched in June 2022, to optimize its brand portfolio and focus on the visual commerce segment of retail.
In the David’s Bridal, DIP case, reports indicate that a lawyer for the Creditors’ Committee cast doubt on the ability of David’s Bridal to survive bankruptcy as a going concern, due to a variety of challenges, including changing cultural norms and values. He said it is possible that secured lenders won’t be repaid in full, which raises concerns about whether there may be any recovery for general unsecured creditors. A lawyer for the Debtors stated that while there is continued interest from possible bidders for potential going concern sales for a subset of stores, David’s Bridal “doesn’t want to give any false sense of hope.”
Separately, the Debtors notified the Court that GOB sales will commence in 49 stores. The Company operated 294 stores on the petition date.
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In the Cineworld Group, DIP case, the Plan of Reorganization and the backstop commitment agreement have support of lenders holding and controlling 99% of the legacy credit facilities and at least 69% of the outstanding indebtedness under the DIP Facility. The Debtors previously noted that the proposed restructuring is expected to reduce debt by $4.53 billion, raise $800 million and provide $1.46 billion in new debt financing. Separately, the hearing to consider approval of the Plan of Reorganization was rescheduled to June 28 from June 12. The Court authorized the rejection of four additional leases: Littleton, CO, Bowie, MD, Rochester, NY, and Tigard, OR.
In addition to the news we shared last week about a pending Pennsylvania lawsuit, there have been further reports about unoccupied Amazon Fresh stores. A landlord for a space in Renton, WA sued Amazon for breach of contract earlier this month, alleging that the Company backed out of its lease. Although Amazon asserts that it was unable to get the necessary permits and approvals for the storefront, the landlord claims it is part of the Company’s recent decision to rescind its efforts on opening new brand locations. At the same time, Amazon has pulled out of two other real estate deals involving building new Amazon Fresh units in the Detroit, MI area, with efforts to sublease a space in Madison Heights and plans to terminate a lease in Dearborn. All of these developments coincide with the Company subleasing six sites previously set to be opened as Amazon Fresh locations in the Minneapolis, MN region
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Ulta Beauty’s 1Q23 sales increase was driven by strong new store performance and growth in Other revenue. Management revised its FY23 outlook, increasing its sales outlook but decreasing its operating margin projections. During the quarter the Company opened five new stores, closed one, relocated one, and remodeled two, ending with 1,359 locations. This year it plans to open 25 to 30 net new stores and remodel or relocate 20 to 30.
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Genesco’s 1Q24 revenue fell 7% to $483.3 million, on a 13% decline at Journeys that was only partially offset by 6% growth at Schuh and 16% at Johnston & Murphy. Overall comparable sales were down 5%, including an 8% drop at brick-and-mortar stores and a 7% increase in direct sales. Management indicated that demand atJourneys dropped sharply after the holidays and did not improve even after winter shifted to spring. Genesco opened 12 and closed 26 stores during 1Q24, ending the period with 1,396 total stores. The Company now anticipates closing more than 100 Journeysstores in FY24, compared to a previous estimate of about 60 closures.
Dick’s Sporting Goods reported 1Q23 comps increased 3.4%, driven by a 2.7% increase in transactions as well as higher average ticket. The Company acquired 12 stores during the quarter as part of the Moosejaw acquisition, and closed two specialty stores. At quarter end, the Company operated 728 legacy stores and 135 specialty stores, as well as 39 temporary Warehouse Sale stores. Dick’s is expanding its House of Sports concept, with nine more locations planned to open before the back-to-school season in the fall, and an additional 10 set to open next year.
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Build-A-Bear’s sales increase reflected continued growth in store revenues, partially offset by a decline in e-commerce demand and the negative impact of currency exchange. The Company ended the quarter with 349 corporately-managed stores, with one net closure during 1Q23. Through its third-party retail model, there were 70 locations, unchanged from the beginning of the quarter. International franchisees operated 63 locations as of April 29, reflecting four net closures during the quarter.
Williams-Sonoma’s 1Q23 comp decline was driven by a 15.8% drop at West Elm and a 4.4% decline at Williams Sonoma, while comps at Pottery Barn and Pottery Barn Kids and Teen were down 0.4% and 3.3%, respectively. During the quarter, the Company opened three stores and closed two; two Williams Sonoma stores and one West Elm were opened, while two Williams Sonoma stores were closed.
Red Robin’s comps increased 8.6% during 1Q23, its ninth consecutive quarter of positive comp growth. Restaurant traffic rose 0.6%, and dine-in sales increased 16.4%. Subsequent to quarter end, the Company acquired five Red Robin restaurants in the Northeast from a long-term franchisee who retired, for $3.3 million. In addition, the Company announced it was evaluating a sale-leaseback transaction, in consultation with its advisor CBRE Group. During 1Q23, the Company marketed an initial tranche of 10 owned properties to investors, through which it selected a winning bid and is currently progressing through the final stages of documentation and due diligence. The transaction is expected to close in 2Q23 and generate gross proceeds of $30 million.
Publix has decided to shelve its GreenWise Market banner, opting to convert the stores into traditional Publix supermarkets. Each of the eight GreenWise stores will be assessed on an individual basis to determine how the store will be remodeled so there is no end date as to when the transition will be completed. There are seven GreenWise Market stores located in Florida, in Tampa, Tallahassee, Odessa, Lakeland, Boca Raton, Fort Lauderdale, and Nocatee, and one in Mountain Brook, AL.
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HBC, the holding company that owns Hudson’s Bay, Saks Fifth Avenue, and Saks Off Fifth, and a majority equity interest in the Saks and Saks Off Fifth e-commerce operations, announced the further expansion of its discount retail banner Zellers and that it has raised C$240 million for investment in its operating businesses. The announcement follows the initial launch of the first 25 in-store shop Zellers at Hudson’s Bay stores and an e-commerce site announced in January. Following this initial launch, Zellers is now setting its sights on adding more locations. Initially, Zellers intends to open larger footprint stores in some or all of those same locations. The first pop-up will launch at Hudson's Bay's flagship Queen Street store in June, with up to an additional 20 pop-ups expected to open in August.
Express’ 1Q23 sales decline reflected strategic missteps in the women’s department, and a deceleration in its men’s and outlet businesses. Retail comps declined 18% and e-commerce sales were down 7%; Outlet sales fell 17%. The Company closed eight locations (five retail stores and three outlets), bringing its total store count to 545. It now expects to open five locations for the year (one Outlet, one Express Edit, and three UpWest), while closing 18 (nine Retail, five Outlets, and four UpWest), for a projected store count of 540 at year-end.
Destination XL’s stores outperformed the direct business with store comps up 1.5% while direct business comps fell 1.6%. Increased costs on private-label merchandise and higher direct shipping costs pushed gross margin down 140 bps. No stores were opened or closed. By year end, the Company expects to open three new DXL stores and 10 Casual Male to DXL conversions, while five stores are expected to close. Over the next three to five years, up to 50 new DXL stores are anticipated to open across the country.
The Children’s Place’s 1Q23 top line decline was primarily attributed to the slowdown in consumer demand and permanent store closures. Digital represented 46% of retail sales, up from 45% last year. The Company ended the period with 599 stores, down 9.9% from 665 a year earlier. Since the Company’s fleet optimization initiative was announced in 2013, it has permanently closed 600 stores. It plans to close 80 to 100 stores this year.
Big Y Foods is debuting a new banner this week with the opening of Big Y Express Fresh Market, a smaller format store concept. The 10,000 square-foot location will be located in downtown Springfield, MA. The format size is larger than the Company’s c-store banner, Big Y Express, which is typically under 2,000 square feet, but significantly smaller than the Company’s average supermarket size of 55,000 square feet. Big Y currently has no plans to expand this new concept.
Cava Group filed registration statements for an IPO after a confidential filing in February. The Company, which plans to list on the NYSE under the symbol CAVA, did not indicate how much money it hopes to raise or how many shares it intends to sell. As of April 16, 2023, Cava had 263 restaurants operating in 22 states and Washington D.C., with more than 80% of its restaurants in suburban locations and the remainder in high-traffic city centers. The Company has indicated it anticipates 34 to 44 net new openings during the remainder of FY23. FY22 revenue totaled $564 million, up from $500 million in the prior year. However, losses widened to $59 million from $37.4 million.
Last week, Aldi opened its first store in Hempstead, NY and two stores in the Philadelphia area. On June 15, a new store will open in Orchard Park, a suburb of Buffalo, NY, as well as St. Marys and Wyomissing, PA. As we reported earlier this month, Aldi plans to add 120 new stores this year, bringing its store count nationwide to more than 2,400. Last year it opened and remodeled 139 stores, just short of its goal to open 150 new stores.
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Lowe’s is launching a one-stop-shop concept designed to offer customers in rural areas a wider offering of farm, ranch, and outdoor products. The Company had piloted the concept last year and is now expanding to select Lowe’s stores, primarily in the South, Midwest, and Northeast throughout the summer, with the aim to be in 300 Lowe’s stores by year end. The in-store concept features broader product offerings in categories that include pet, livestock, trailers, fencing, utility vehicles, and specialized hardware. New Carhartt apparel will be offered in select stores, with the expansion of Wrangler offerings in all rural stores. The Company also plans to add more national apparel brands to its rural assortment in coming months.
Primark is ramping up its expansion efforts with three additional stores slated to open this summer on Long Island, NY and in Albany, NY and Elizabeth, NJ. Each of the three new locations will be at shopping malls and will include more than 33,000 square feet of retail selling space. With the addition of these three units, Primark will have 20 locations in the U.S. and more than 400 worldwide. The Company aims to grow to 60 stores by 2026 and recently announced plans to further expand into the southern U.S., with the goal of opening in Texas in the future.
Urban Outfitters’ 1Q24 retail comps increased 5%, driven by low single-digit growth in store traffic and high single-digit increases in the digital channel. By banner, comps were strongest at Free People and Anthropologie, up 17% and 13%, respectively, while the namesake banner continued to struggle, dropping 13%, following a 10% decline in 4Q23. The Company added six new stores during the quarter, and also closed five locations, ending with 709 locations.
Von Maur is set to open its first location in North Dakota, at Fargo’s West Acres Mall. Earlier this month, we reported Dry Goods, the young women’s fashion specialty banner owned by Von Maur, plans to open 11 locations this year, including its first stores in Alabama, Arkansas, and New York. Dry Goods currently operates 70 stores in 19 states, while Von Maur operates 37 department stores across 15 states.
H-E-B will soon begin construction on its second store in Frisco, TX, continuing its expansion in the Dallas-Fort Worth metro area. In 2022, the Company opened locations in the region in Frisco and Plano, and there are plans for additional units in Allen, Alliance, Mansfield, and McKinney. The second Frisco store is tentatively slated to open in late 2024.
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The Fresh Market opened its 160th store, in its already established market area of Carmel, IN. The new location marks the grocery retailer’s second location in the Indianapolis suburb and its fifth in the state.
AutoZone’s 3Q23 sales were up 5.8% and comps were up 1.9%. During the quarter the Company opened 22 new stores in the U.S., six in Mexico, and two in Brazil. As of May 6, the Company had 6,248 stores in the U.S., 713 in Mexico, and 83 in Brazil.
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Burlington’s 1Q23 sales rose 10.8%, aided by an 8% increase in store count, while comps rose 4%, below management’s guidance which called for a 5% – 7% increase. During the quarter, the Company opened 13 new stores and relocated or closed seven, bringing its store count to 933. The Company expects to open 90 to 100 new stores, offset by relocations and closures, yielding about 70 to 80 net new stores for the year.
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Abercrombie & Fitch delivered decade-high 1Q23 sales led by 14% growth from the Abercrombie brand, partially offset by a 7% decline at Hollister. FY23 sales are now expected to be up 2% – 4%, up from its previous outlook of 1% – 3%. The Company opened six new stores during the quarter, including four international, and permanently closed 10 units, including four international.
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