April 20, 2022
In a memo to sellers, Amazon said it will impose U.S. third-party sellers with an inflation and fuel surcharge of 5%, effective April 28. The fee will be on top of existing fees that Amazon collects from U.S. third-party sellers who use Amazon’s fulfillment services. The temporary fee would apply to all merchandise. Rising fuel prices and inflation are “further challenges” for Amazon, just as it expected a “return to normalcy” from pandemic-related restrictions and other snags. Once it goes into effect, the added cost for inflation and fuel will come out to $0.24 per unit, making total fees to sellers (covering services such as storage and managing orders) $2.52 per unit. The Company said that as of March 21, UPS and FedEx’s fuel surcharges were $0.42 and $0.49 per unit, respectively.
Amazon has brought its checkout-free “Just Walk Out” technology to airports, grocery stores, and other shops, and now it has partnered with the Houston Astros to install it at two concession stores in Minute Maid Park.
The Amazon warehouse in Bayonne, NJ has qualified to hold a vote on whether to unionize. 200 workers at the small delivery facility are being organized by the Local 713 International Brotherhood of Trade Unions. The date for the vote has not yet been set. The Amazon Labor Union made history this month when thousands of workers at the JFK8 warehouse on Staten Island voted to join.
Publix Super Markets remains one of the 10 largest grocery chains (and the leading employee-owned supermarket chain) in the U.S., with nearly 1,300 retail stores throughout the southeastern states of Florida, Georgia, Tennessee, Virginia, Alabama, North Carolina and South Carolina. More than 800 of the grocery stores are in Florida, Georgia is home to nearly 200, and the other five states each have less than 100. 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.
In recent public comments, Wawa CEO Chris Gheysens said the Company is charting its “most aggressive growth” in history, with the aim to double its store count over the next decade. Wawa currently operates about 965 convenience stores in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Florida and Washington, DC and has about 300 new sites in development. Recent reports claim the Company has been scouting sites in North Carolina, which would be its first new state in about five years, and is eyeing additional new states to “fill in the market” between Virginia and Florida, including Mobile, AL, as well as the Florida panhandle region, Pensacola, Panama City and Tallahassee. Gheysens said Wawa wants to operate approximately 1,800 locations by 2030, eventually opening 100 stores per year; the Company plans to expand through a balance of “traditional” (typical neighborhood stores with accessibility from main roads) and “non-traditional” (travel center or rest-stop-style stores off I-95) sites. Wawa will continue to build new standalone drive-thru locations, with plans to open two in Pennsylvania this year and additional units in Florida next year. Wawa opened its first standalone drive-thru and curbside pickup location in Morrisville, PA in January 2021, one month after opening its first convenience store with a drive-thru in Westampton, NJ.
In FY21, Kwik Trip’s top-line bounced back from COVID-related mandates that generally led to decreased fuel sales and store traffic. Reflecting the addition of about 50 stores during the year and stronger gas prices, the Company’s top line was up roughly 15% to an estimated $7 billion. Kwik Trip has been adding about 40 new stores per year in Wisconsin, Illinois, Minnesota, and Iowa. The Company will enter its fifth state later this year, when it opens two units in Michigan’s Upper Peninsula.
Overall, Kwik Trip anticipates opening a total of 25 new locations in Wisconsin, nine in Minnesota, and nine in Iowa in 2022. Looking a bit further ahead, the Company said it would be targeting the I-29 corridor of North and South Dakota in 2023.
Grupo Comercial Chedraui is in integration mode after closing on its acquisition of Smart & Final from Apollo Global Management in July 2021; Smart & Final now operates as a division of Bodega Latina, the Company’s U.S. subsidiary, along with the El Super and Fiesta Mart chains. In late December 2021, Bodega Latina announced a name change to Chedraui USA to more closely align it with Grupo Comercial Chedraui. Altogether, Bodega now has 377 locations across California, Nevada, Arizona, New Mexico and Texas. 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.
Fast Retailing Co. (Uniqlo) plans to open about 400 to 500 stores annually worldwide, including 30 per year in North America. It plans to expand Uniqlo’s North American footprint to 200 locations over the next five years, up from its current 43 stores in the U.S. and 14 in Canada.
Champs Sports, a subsidiary of Foot Locker, opened a new retail concept called Champs Sports Homefield in Pembroke Pines, FL. The store is 35,000 square feet, the largest in Foot Locker’s portfolio, much larger than a typical Champs Sports, which is 5,700 square feet. It offers a range of in-store experiences and specialized services, including a full-sized basketball court, a multi-sport court, and a “Champs Combine” virtual reality digital screen that measures customers’ wing spans, height, jumping ability, and agility. Other features include classes taught by local athletes, a smoothie bar, and a 2,500 square-foot dedicated health and wellness area. The merchandise assortment includes a selection of apparel, sneakers, and equipment for running, training, yoga and team sports. Homefield is the second new store concept this year from Foot Locker. In January, Kids Foot Locker debuted a format focused on serving local communities with a full-family experience rooted in play. Foot Locker operates 3,000 retail stores in 28 countries across North America, Europe, Asia, Australia, and New Zealand. Champs Sports operates 512 units across the U.S. See the adjacent Store Trends map for the chain’s concentration.
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Lids is on track to enter Mexico, with four locations expected to open in the coming months. Three of the new stores are slated for Mexico City (Parque Toreo, Galerias Toluca, and Premium Outlet Punta Norte), and one is opening in Queretaro. The merchandise assortment includes a variety of products from major U.S. teams, including MLB, NFL, and NBA, as well as brands such as Adidas, Nike, New Era Cap, ’47, Mitchell & Ness, Hurley, and Oakley. The Punta Norte store will feature Lids’ exclusive custom embroidery section. The Company currently has a presence in nearly 2,000 stores in the U.S. and Canada, including through its partnerships with Macy’s and Designer Brands. In December 2021, Lids opened its first standalone stores in Europe, with four locations in the U.K.
AMC Theatres finalized a deal with Bow Tie Cinemas to purchase and operate seven locations in Connecticut (5), Saratoga Springs, NY and Annapolis, MD. Terms of the deal were not disclosed. The acquisition bolsters AMC’s Connecticut presence, where it currently operates just three locations in Plainville, Danbury and Southington. The Company has 26 locations in New York and 12 in Maryland, though none in upstate New York or Annapolis. Three of the acquired Connecticut locations and the Annapolis theatre will open this weekend, while the other three theatres are expected to open by the end of April. AMC remains in active discussions with other property owners regarding additional locations. AMC operates 950 theatres with 10,500 screens worldwide.
Meijer will open two new 155,000 square-foot supercenters on May 12 in West Branch, MI and Fort Wayne, IN. Meijer Express gas stations opened adjacent to both sites last week. The two stores will offer grocery, fresh produce, bakery, meat and deli, pet, electronics, toys, sports and apparel departments, pharmacies, floral sections, and garden centers. The Company previously announced two new supercenters in northeastern Ohio, in Brunswick and Canton, slated to open on April 28.
In a recent interview, Bashas’ President and CEO Edward Basha discussed the Company’s future expansion and other strategic moves following its merger with Raley’s in December. Mr. Basha commented, “On the digital side, we’re going to be working very diligently to really raise our digital presence and do a better job. We’re expanding curbside; we will be expanding into our own delivery. Raley’s in Northern California is doing some of their own delivery; right now, we rely solely on Instacart. So we’ll be working to expand that. I think that you’re going to see we’ve identified a couple of new store sites, but we’re also on a massive remodel program right now. We’re in the process of finishing plans to remodel two of our stores on the Navajo Nation. Prior to the Raley’s acquisition, we did acquire another store on the Navajo Nation in Shiprock, NM. That was a former City Market. So I think you’re going to see greater expansion of the formats: Bashas’, Food City, and AJ’s. Possibly see on the Raley’s side, future acquisitions. So we’re excited for what the future holds for the combined company.”
Skogen’s Festival Foods is reportedly opening a new store in Chippewa Falls, WI, slated to open in late 2023. Currently, Festival Foods operates 39 grocery stores in Wisconsin. The Company recently added to its portfolio with the purchase of former Trig’s locations in the towns of Wausau, Weston and Stevens Point.
The Fresh Market recently opened a new 24,000 square-foot store in Palm Beach Gardens, FL, its 47th location in Florida and 160th overall.
Asian grocery operator 99 Ranch Market entered its 11th state with the opening of a 45,602 square-foot store in Westbury, NY, on Long Island, in the space of a former Circuit City store. The location stocks more than 10,000 items, including Asian dry goods, produce, meat and poultry, seafood, deli items, baked goods, dim sum, barbecue, noodles, and confections. The Company operates 56 stores in California, Washington, Oregon, Arizona, Nevada, Texas, Virginia, Maryland, New Jersey, New York, and Massachusetts.
Kohl’s top-line and bottom-line momentum continued in 4Q21, with sales up 5.8%, driven by double-digit in-store sales growth (no comps provided). However, sales were still down 5% compared to 4Q19. Online sales increased 21% compared to 4Q19 and represented 39% of total sales. For the year, digital sales were up 30% relative to 2019, representing 32% of total sales. In addition to strong sales growth, gross margin expanded 120 bps, primarily due to fewer markdowns and tight inventory control, slightly offset by higher transportation costs due to ongoing global supply chain challenges. Overall, EBITDA increased 22% compared to 4Q20 (down 5% compared to 4Q19). Turning to the balance sheet, as of January 29, the Company had ample cash of $1.59 billion. Liquidity was further supported by positive FY21 free cash flow generation of $1.67 billion, including $605 million in capital expenditures. Given the strong results, the Company repurchased $548 million of shares during the quarter (about $1.40 billion in FY21). The Company also increased the quarterly dividend by 100% and plans to repurchase at least $1 billion of shares in 2022. Management continues to review options regarding a sale of the Company given ongoing activist pressure and has hired Goldman Sachs and PJT Partners as advisors.
As the Company continues to evaluate bids, the latest reports indicate that Franchise Group, which owns Vitamin Shoppe and Buddy’s Home Furnishing, made a $69 per share, or a roughly $9 billion offer. This offer is in line with previous reported bids, including from Hudson’s Bay. The Company is engaged in a proxy battle with investor Macellum Capital and has adopted a “poison pill” shareholder plan to prevent any unwanted investors acquiring more than 10% of the Company without board approval or shareholder vote. Last week, CEO Michelle Gass sent Kohl’s employees a video discussing the proxy fight with Macellum and the prospect of a sale. Ms. Gass stated the board has “engaged with over 25 parties and we’ve now moved onto the next phase where we’ve asked selected bidders to further refine their offers and to secure financing. They are doing a lot of diligence and homework, and we have provided access to thousands of documents and lots of data to help facilitate this process, all of which is a very normal part of vetting.” Ms. Gass added it does not necessarily mean Kohl’s would be sold and no decisions have been made. Ms. Gass said, “The board is doing its job in representing our shareholders to evaluate alternatives and other options and all of those explorations are being held up against the current strategy that we’re executing. The plan we’re executing is very powerful and it will deliver substantial value to our shareholders, so that’s a high bar that the board is looking at when evaluating these alternatives.”
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In an effort to expand its third-party distribution, Lands’ End made its first appearance on the QVC television channel on April 15, selling women’s swimwear, following a successful test on QVC’s online channel. In addition, Lands’ End is expanding its partnership with Kohl’s, where it already has a presence in roughly 300 locations and a full assortment available online. This year, the Company plans to expand to an additional 500 Kohl’s locations. Lands’ End also sells merchandise on Amazon, and sources claim it is working on a deal with Target.
REI’s FY21 sales rose 36% to $3.74 billion, while operating income was $324 million, compared to a loss of $51 million in FY20. The swing to profitability reflected greater demand for products associated with outdoor activities, as well as favorable comparisons to FY20, which included a period of store closures during the pandemic. The Company opened eight new stores in FY21, ending the year with 174 locations in 41 states. Management did not provide comps or reasons for changes in operating items. Operating margin in FY21 was 9%. The return to profitability enabled the Company to resume paying its customary member dividend, after pausing the program in 2020 when it issued a promotional award to members. The dividend in FY21 was $187 million, compared to a $112 million promotional award in FY20. Free cash flow totaled $162 million in FY21, compared to cash burn of $42 million in FY20, due to improved operations and favorable changes in working capital items. There was no debt at the end of FY21 and the net cash position improved to $1 billion. During FY21, the Company entered into a new $400 revolving credit agreement, which matures September 14, 2026, replacing the previous $125 million facility which was scheduled to mature in 2025. No amounts were outstanding under the new facility, and the Company was in compliance with all covenants as of January 1, 2022.
Walmart Canada opened its “most advanced” grocery distribution center, located in Surrey, British Columbia. The 300,000 square-foot, $175 million facility is part of Walmart Canada’s $3.50 billion investment to generate significant growth and speed up the supply chain across Canada. The Surrey DC will serve about 45 Walmart stores in British Columbia.
FAT Brands’ quick-service division signed 20 new development deals, totaling over 50 additional units, following the Company’s acquisition of Global Franchise Group in June 2021. The acquisition marked FAT Brands’ foray into both the snack and pizza categories, adding the Round Table Pizza, Great American Cookies, Marble Slab Creamery, Hot Dog on a Stick and Pretzelmaker brands.
Famous Dave’s parent company, BBQ Holdings, Inc., completed its $28 million acquisition of Barrio Queen Restaurant Group. The deal represents BBQ Holdings’ largest purchase to date, and the third acquisition over the past year. Based in Phoenix, AZ, Barrio Queen is a Mexican fine-dining restaurant group with seven locations in Arizona. The Company has a lease signed for an eighth restaurant, with a target opening date of December 2022.
Panera Bread is piloting Miso Robotics’ new automated coffee brewing system, in line with the restaurant industry’s continued shift to automation as the worker shortage and labor cost increases persist. The pilot will involve two Panera locations, which will advise the Company in the coming weeks of if and how to scale it across its store network. The move supports Panera’s coffee and tea subscription program, launched more than two years ago. Miso’s CookRight Coffee system uses AI to monitor coffee volume and temperature, and to provide predictive analytics about customer consumption. The startup charges “a few hundred dollars” a month for the CookRight technology. Last month, Chipotle announced it is testing a Miso robot that makes tortilla chips, and White Castle and Arby’s owner Inspire Brands have also partnered with the robotics firm. McDonald’s is working to automate taking drive-thru orders, while California Pizza Kitchen has been testing a robot to help bus tables.
Bed Bath & Beyond ended FY21 in retreat. Core sales were down 14%, excluding divestitures and store closures. Total Company comps were down 12%, which included -8% in store and -18% in the digital channel, as many of those previous-year transactions appear to be from one-time customers seeking a non-store option.
Comps at the namesake banner fell 15%, as the Company pointed to a $175 million sales hit, based on inventory shortages. Supply chain and skyrocketing shipping costs also hit gross margin to the tune of 360 bps; EBITDA came in at -$29.6 million for the quarter. The Company missed its targets of comps in the high single-digits and EBITDA of $80 million to $100 million by a mile. FY22 has not started off any better, with management commenting, “we’re seeing an emerging uncertainty related to consumer sentiment based on market and retail indicators that show a distinctive slowdown in consumer demand.” As such, YTD 1Q comps are trending at about -20%, and EBITDA is projected to be negative for the quarter once again. The buybuy BABY (BABY) division has continued to do well, with comps at its 133 stores increasing in the low single-digits. Sales reached $1.40 billion, but EBITDA margin reportedly only in the mid-single-digits. The Company is planning to open another 20-25 BABY stores this year, as it considers spinning off the unit to unlock shareholder value. Our analysts are reviewing the Company for a downgrade (currently D1) based on the poor results and outlook, though debt levels remained essentially the same as last quarter, with solid liquidity of about $1.36 billion. In addition, the Company completed its aggressive share buyback program and will not buy more shares until it reevaluates the program in the second half of the year.
IKEA plans to expand its “Plan and order point” network in Kitchener, ON, Canada later this year. Previously named Planning Studios, Plan and order points provide space for customers to connect with IKEA specialists to create custom home furnishing packages. It offers planning services by appointment only, and allows customers to try out a curated selection of home furnishing solutions. Customers can pick up orders from local IKEA pick-up locations or have them delivered. The Company has more than 30 Plan and order points worldwide; this will be the second such location in Canada, joining one announced in February in Boisbriand, Quebec (slated to open this summer). More locations are anticipated to open in Canada.
Days after a Wall Street analyst suggested Rite Aid could go out of business, the Company once again found new life after reporting better-than-expected 4Q22 results and FY23 earnings outlook. Still, the FY23 guidance assumes sales and EBITDA will decline, reflecting the need to offset lost vaccine revenue with cost cuts and new business. The Company said in FY22 it administered more than 14 million COVID vaccines, which had a roughly $280 million EBITDA benefit, while it expects COVID vaccinations to fall 60% to 70% in FY23. Meanwhile, Rite Aid is targeting a rather modest $170 million in cost savings, mostly tied to its retail business, including a $60 million benefit from closing 145 stores (including the 63 previously disclosed). Pharmacy scripts are improving but remained below pre-pandemic levels; management expects volume to continue to improve now that there is less emphasis on COVID and masks. For the year, sales are expected to drop at least 4%, with EBITDA down 1% – 9%, and EBITDA margin at just around 2%. Free cash flow is expected to be positive, accounting for a $60 million working capital benefit mostly tied to lower inventory levels. Management tried to stress future growth potential, including plans to launch a new small-format store, focused on pharmacy in underserved markets.
Cardenas Markets has partnered with Instacart to roll out curbside pickup at all five of its Las Vegas, NV locations. Cardenas operates 52 stores in California, Nevada and Arizona.
Instacart has expanded its partnership with Grocery Outlet to offer same-day delivery from nearly 400 of its stores in California, Oregon, Washington, and Pennsylvania. This initial pilot ran for six months at 68 Grocery Outlet stores in California. Grocery Outlet CEO Eric Lindberg commented, “Following positive results from our pilot, we recently completed a rollout to nearly all stores. While it’s only been a few weeks since the rollout, we are pleased with the smooth execution and the favorable response from independent operators and customers so far.” Grocery Outlet operates approximately 415 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada, and New Jersey.
Genuine Parts Company announced that its European automotive business, Alliance Automotive Group, acquired Lausan Group in Bilbao, Spain. Lausan distributes automotive aftermarket parts in Spain and Portugal from its national distribution center, nine regional hubs, and 37 stores. The Company expects Lausan to generate annual revenue of €115 million (US$125 million). With the addition of Lausan, Alliance Automotive Group operates in nine European countries, including France, the U.K., Ireland, Germany, the Netherlands, Belgium, Poland, Spain, and Portugal.
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