December 6, 2023
In the RITE AID CORPORATION, DIP case, the Debtors notified the Court that they plan to close an additional 63 stores. The Debtors also notified the Court that they no longer plan to close store number 721, located at 304 Market Street, Harrisburg, PA (this store was previously identified as an additional closing store). To date, the Debtors have notified the Court of 300 store closures.
In other news, Rite Aid announced the expansion of its 266,000 square-foot distribution center in Des Moines, WA, which will serve 250 stores across Washington, Oregon, and Idaho beginning January 2024.
On December 1, the Debtors filed a motion seeking an order to extend the time to assume or reject unexpired leases for an additional 90 days through and including May 13, 2024. The Company also extended the asset auction date deadlines.
KROGER informed the FTC that it has met all the antitrust law requirements for its $24.60 billion merger with ALBERTSONS. The FTC now has until December 15 to make a decision on the deal and can do one of the following: close its investigation and let the deal proceed; ask for certain requirements before the merger is approved; or take legal action in the federal district court and block the deal. Kroger and Albertsons continue to believe the merger will be approved by the end of 1Q24.
Reports resurfaced that NEIMAN MARCUS and HBCx subsidiary Saks Fifth Avenue are in talks to merge. Specifically, last week Neiman Marcus rejected Saks' most recent takeover offer, which valued the chain at close to $3 billion, according to sources. Neiman objected to the deal's structure, a significant portion of which wasn't in cash. The negotiations, which have been on and off for months and date back more than a decade, are continuing, but a deal is not likely to come before early next year.
Sales at both companies have been declining in 2023. Last week we reported that Neiman's sales declined 8% to $948 million and EBITDA dropped 15% to $95 million in its 1Q23 ended October 28. In its 2Q23 ended July 29, HBCx sales dropped 14% and EBITDA was negative $24 million. Saks Fifth Avenue retail store comps decreased 8.9%.
In a letter to vendors, EASTERN MOUNTAIN SPORTS stated that in order to support growth “we need you to extend our payment terms to 90 days, bringing you in line with other vendor partners, and enabling us to maintain parity with our competitors. By extending payment terms, we aim to further strengthen our relationship and position ourselves for continued growth and success in the years to come. The change in terms will go into effect December 1, 2023.”
NORTHEAST GROCERY'S (NGI) Price Chopper/Market 32 subsidiary announced that it has finalized the purchase of the leases, store equipment and fixtures of five former ShopRite stores in the Capital Region of New York State from Wakefern Food Corp., with plans to expand its local fleet of Market 32 stores. While NGI did not specify how much it paid for these locations, the price is believed to be about $60 million. In October, Wakefern confirmed plans to close the region's five stores, located in Colonie (70,000 sq. ft.), Slingerlands (65,000 sq. ft.), Albany (66,000 sq. ft.), Niskayuna (55,000 sq. ft.), and North Greenbush (55,000 sq. ft.). Wakefern reported that the stores, which were shuttered in mid-November, were being closed due to underperformance. All the acquired stores have gas stations on the property, but NGI said it does not intend to operate them. Given the below average aspect of these locations, we estimate their total annual sales to be in the $175 million to $200 million range.
While the Company said it is still evaluating all its options, the plan is to convert the current ShopRite stores in Niskayuna and North Greenbush, into Market 32s. The Slingerlands location, which is located across the street from an existing Market 32 store, will be marketed for sublease, eliminating some competition in the region. Finally, NGI noted that as discussions with landlords in Albany and Colonie continue, decisions will be made about the future of those properties and the current Price Chopper/Market 32 stores, which are located nearby. We note that in October, the Company opened its 39th and 40th Market 32 locations in Rutland and W. Rutland, VT.
WALMART'S Sam's Club division announced plans to open two new distribution centers in early 2024 outside St. Louis and Minneapolis. The new facilities are part of a multi-year growth plan to transform the supply chain at Sam's Club and evolve network and end-to-end capabilities. The 370,000 square-foot St. Louis facility will open in January 2024. The 365,000 square-foot Minneapolis facility will open in March 2024. Sam's Club has also recently shared plans to open a new DC in Oklahoma City, OK and a new fulfillment center in Lithia Springs, GA.
PRICESMART opened its newest warehouse club in Escuintla, Guatemala, bringing its total store count to 53. This is the sixth club in Guatemala.
CARDENAS MARKETS is opening its 58th store in Las Vegas, NV this week, bringing its total store count to 115 locations across six states. The Company also operates 29 El Rancho stores, 21 Tony's Fresh Market units, and seven Los Altos Ranch Markets.
BROOKSHIRE GROCERY purchased land in Longview, TX to expand its Fresh by Brookshire's brand. The Company currently operates two stores under that format, which was introduced in 2011. Brookshire operates more than 200 stores in Texas, Louisiana, Arkansas, and Oklahoma under the banners Brookshire's, Super 1 Foods, Spring Market, Fresh by Brookshire's, and Reasor's.
SPROUTS FARMERS MARKET is planning to open a 21,000 square-foot store in York, PA in 2024, which will be its third location in the state, joining existing units in Philadelphia and Dresher. Sprouts opened 10 new stores during 3Q23, bringing its store count to 401 in 23 states as of October 1.
Online fast-fashion company, SHEIN has reportedly filed with the SEC to go public in the U.S. The Company, which is based in Singapore, and sources merchandise in China, is larger than other fast fashion retailers like Inditex (Zara) and H&M. Shein could launch the IPO in 2024, with Goldman Sachs, JPMorgan Chase and Morgan Stanley as lead underwriters. In August 2023, Shein announced a joint venture with Forever 21, in which Shein will acquire about one-third interest in Sparc Group (Sparc), Forever 21's parent, and Sparc will also take a minority shareholder in Shein. Sparc is a joint venture between the Authentic Brands Group and the country's largest shopping mall owner, Simon Property Group. Recent reports indicate Shein's value is about $66 billion, or a third less than a year earlier, while Authentic Brands' value is over $20 billion.
MACY'S is debuting its luxury beauty concept in its Dadeland, FL store, which will include revamped shop designs, virtual try-on technologies, three relaxation rooms, and three branded treatment rooms offering a range of services. Luxury has been a growing focus for retailers as Gen Z gains purchasing power. According to Circana data, prestige beauty grew 14% in 3Q23; at Macy's, beauty was a top-performing category.
ACADEMY SPORTS + OUTDOORS opened seven new stores across five states during November, completing its FY23 store opening plan. Academy opened 14 new stores in FY23 and plans to continue its expansion goal of opening 120 to 140 new stores by the end of 2027. The most recent openings were in Tampa Bay and West Palm Beach, FL; Indianapolis, IN; Austin and Harlingen, TX; Christiansburg, VA; and Springfield, IL.
BACKCOUNTRY, a premium specialty retailer of outdoor gear and apparel, entered into a definitive agreement to sell its European subsidiary, Bergfreunde, to Decathlon, a sporting goods retailer based in France. The acquisition is in line with Decathlon's commitment to expanding its presence and offering diverse outdoor solutions to customers across the region. The Company said this strategic decision will allow Backcountry to reduce leverage and focus on amplifying its core business in the North American market.
Backcountry, which was acquired by TSG Consumer Partners in 2015 for $350 million, had reportedly abandoned a sale of the entire company earlier this year. There were also reports of slow payments to vendors; our October ARMS Payment Score for Backcountry was 776. Backcountry generates approximately $1 billion in annual revenue.
The bankruptcy estate of BED BATH & BEYOND has filed the largest ever lawsuit with the Federal Maritime Commission (FMC), seeking $300 million from Mediterranean Shipping Co. (MSC) for allegedly overcharging to move the Company’s cargo during the pandemic. The bankruptcy estate wants Geneva-based MSC, the world's largest boxship operator in terms of capacity, to pay $150 million for damages and an equal sum for what it described as “exploitative and coercive behavior.” Complaints by American companies are handled by the FMC, the U.S. maritime regulator.
WALGREENS took a significant step toward its goal of selling the Boots pharmacy chain. Ithas secured a £4.80 billion ($6 billion) buy-in policy which will insure all 53,000 members in the Boots Pension Scheme. The sale of the pension plan could clear a stumbling block to disposing of the Boots pharmacy chain.
PANERA BRANDS reportedly filed confidential paperwork for an IPO next calendar year. The move follows other preparations in recent months, including executive board changes in September and 17% corporate staff layoffs in November. The JAB Holding group, comprised of Panera Bread, Einstein Bros. Coffee, and Caribou Coffee, first announced that it was preparing to go public in May of this year, after a previous failed attempt in 2022. Panera was publicly traded for 25 years until being taken private by JAB Holding in 2017 via a $7.50 billion deal.
QDOBA closed its inaugural $305 million securitization a year after its acquisition by private equity firm Butterfly for an undisclosed amount. The Company plans to use the capital structure to refinance its existing debt and invest in remodeling initiatives. It also aims to double its current store count of 750 restaurants to about 1,500. Since its acquisition, Qdoba has refranchised over 120 locations, shifting its mix to nearly 80% franchised.
7-ELEVEN entered into an agreement to acquire 7-Eleven Australia, the largest independent convenience store chain in Australia. As part of the agreement, 7-Eleven International will acquire 100% of the shares of 7-Eleven Australia for A$1.71 billion in cash. 7-Eleven Australia operates 751 local stores and is a long-standing licensee of 7-Eleven. The transaction is subject to customary regulatory approvals and closing conditions and is expected to be completed in 2Q24.
CASEY'S GENERAL STORES acquired 11 EZ GO convenience stores from Love's Travel Stops, expanding its store count in Nebraska and Oklahoma. Seven stores are scheduled for immediate rebranding in Lawton, OK and are reopening this week. The latest acquired stores are part of a 22-store portfolio that Love's acquired from Carey Johnson Oil Co. in April. In addition to 11 c-stores, Love's purchased six travel stops in Oklahoma and five in Kansas.
General Interest
Holiday Weekend Recap... Retailers have been cautious in anticipation of the holiday shopping season as consumer budgets have been squeezed by high inflation and rising interest rates. However, all indications point to a strong Thanksgiving holiday shopping weekend (Thanksgiving–Cyber Monday). According to the National Retail Federation (NRF), a record 200.4 million shoppers participated in the five-day shopping event online and in-store, up 2% from last year and surpassing original expectations of 182 million. Online shoppers ticked up slightly, totaling 134.2 million compared to 130.2 million last year, up 3%.
The Week's Earnings
