December 13, 2023
In the RITE AID CORPORATION, DIP case, A&G Real Estate Partners, in its capacity as real estate advisor to the Debtors announced plans to market for sale an additional tranche of pharmacy leases, pending Court approval. The latest group comprises 79 store leases that will be made available in private sales. This tranche follows the 92 store leases that became available on November 15, 2023. Including options, all leases being marketed by Rite Aid, have more than 10 years of remaining term. The newly available leases are located in the following 11 states:
California (11) Connecticut (5) Maryland (1) Michigan (11) New Jersey (6) New York (3) Ohio (9)
Oregon (4) Pennsylvania (11) Virginia (7) Washington (11)
Within this new grouping of available leases, the stores range from 5,500 to 31,500 square feet. The sites include 53 freestanding locations (41 of which offer attached one- or two-lane drive-throughs). Nineteen stores are located in strip or power centers, and seven are in central business districts. A&G said it continues to market previously announced Rite Aid leases and fee-owned properties. "The fee-owned properties have generated strong interest among investors and operators across the country," said Andy Graiser, Co-President of A&G. "We continue to entertain offers on these locations." As the Company's restructuring process moves forward, A&G may market additional leases, with the total number depending on the outcome of ongoing negotiations between A&G and Rite Aid landlords. A&G noted that Rite Aid continues to assess its property portfolio and may close additional stores to optimize its real estate footprint and improve its overall financial performance. A&G said, “To date, we have marketed 180 Rite Aid and Bartell Drugs leases, and 73 of which have been removed due to a sale or rejection of the lease.”
A&G also announced it received acceptable offers for seven stores for total proceeds of $13.5 million.
According to reports, an investor group that includes Arkhouse Management and Brigade Capital Management has made a $5.80 billion offer to buy MACY'S, in a bid to take the department-store chain private. On December 1, the group submitted a proposal to acquire Macy’s stock for $21 a share, a 17% premium from its $17.39 closing price last Friday. The shares were trading just over $20 per share in early trading on December 11.
The group, which already has a large position in Macy’s through Arkhouse-managed funds, has discussed the proposal with Macy’s, whose board subsequently met to discuss the offer. It isn’t clear how the retailer views the proposal.
The investor group, which believes Macy’s is undervalued in the public markets, has indicated that it would be willing to raise its offer subject to due diligence. An investment bank has provided a letter supporting the group’s ability to raise the necessary financing to get a deal across the finish line.
Macy’s stock peaked in 2015 at about $70 per share, as its growth was challenged by increasing online competition and manufacturers selling direct to consumer. Macy’s sales through its 3Q23 YTD period declined 7.5% and EBITDA eroded 31%.
In other news, Macy's named Tracy Preston as chief legal officer and corporate secretary, effective January 8, 2024. Prior to joining Macy's, Preston served as chief compliance officer, chief legal officer, and corporate secretary of HanesBrands. Before that, she held the same titles at Neiman Marcus.
In a recent public appearance, WALMART CEO Doug McMillon emphasized the difficulties in forecasting sales in the aftermath of the current holiday shopping period. The mixed signals from increasing consumer debt and dwindling savings pose a question mark on future spending patterns. He also acknowledged that the resilience displayed by consumers this year has exceeded initial expectations. McMillon confessed that he anticipated a more subdued market than what we’re currently experiencing. However, he expects that dynamic may change in 2024, saying the performance of general merchandise categories is something to watch closely.
MEIJER plans to open a 40,000 square-foot store on January 16 in the Fairfax neighborhood in Cleveland, OH. This is the first small-format neighborhood market for the Company outside of Michigan. Meijer's first neighborhood market opened in Detroit, MI in 2021, with locations following in Grand Rapids, Lansing, and Royal Oak.
ALDI opened 11 stores across 10 states on December 7, including in Michigan, Maryland, Ohio, Mississippi, Missouri, Florida, and New York.
According to a statement on its website on December 9, 2023, ZULILY confirmed that it is going-out-of-business. The Company announced that all sales are final during its going-out-of-business sale. Management has been unresponsive to multiple contact attempts. As we previously reported, the Company laid off 292 employees in Seattle with upcoming plans to close warehouses in McCarran, NV and Lockbourne, OH.
Our ARMS file indicates multiple late payments to suppliers, with the APS dropping significantly, to the mid-600's since the Regent acquisition.
Reports indicate that SEARS reopened a previously shuttered store in Burbank, CA two months ago, followed shortly thereafter by another in Union Gap, WA. It appears neither store underwent renovation. As of early December, Transformco, the parent of Sears and Kmart, operates fewer than 20 stores, including 13 Sears and two Kmarts in the U.S.; other Kmarts are located in Guam and the Virgin Islands.
CITI TRENDS has adopted a "poison pill" in response to one of its shareholders accumulating a "significant" number of shares in the open market. The plan was not adopted in response to any specific takeover bid or other proposal to acquire control of the Company, and it isn't intended to deter offers that are fair and otherwise in the best interests of the Company and its stockholders. The poison pill plan goes into effect if any person or group acquires 16%, or 20% for certain passive investors, of Citi Trends' outstanding common stock. The plan is set to expire on December 4, 2024.
CLAIRE'S opened a 1,200 square-foot flagship store in Mexico City, Mexico. The expansion follows the summer announcement that the Company was planning to open 50 stores within the European Union in 2023. Claire's operates over 2,750 retail stores globally in 17 countries throughout North America and Europe, along with franchised store in the Middle East and South Africa.
SAKS.COM CEO Mark Metrick provided an update of 3Q23 results. Gross merchandising value fell 19% in 3Q23. Top-performing categories included women’s apparel, jewelry, and accessories. Metrick commented, “The current softness across the U.S. luxury market has created a turbulent environment, and Saks is working to be nimble while staying true to our strategy.”
At a recent investor conference, DICK’S SPORTING GOODS emphasized its House of Sports format as an experiential destination format, that allows it to expand with different and innovative brands. The Company said it is “very happy” with the financial performance of the 12 House of Sports currently operating; nine opened in the past six months. Dick’s plans to open 75-100 House of Sports stores by 2027.
LVMH announced a deal to sell a majority position in Starboard Cruise Services (which caters specifically to international travelers) to a group of four investors led by Jim Gissy, the EVP of Florida-based Westgate Resorts. Terms of the deal, which is expected to close in upcoming days, were not disclosed. LVMH will remain “an important minority shareholder.” Following the closing of the transaction, a new entity will be formed, knows as Global Travel Retail Holdings.
CVS HEALTH announced plans to revamp is pharmacy reimbursement model, called CostVantage. Under this new model, CVS will move to fixed rates for reimbursements from pharmacy benefit managers and insurers as it aims to boost transparency and bring greater simplicity to the system. CostVantage will be launched with PBMS for commercial payors in 2025.
The Company said that following the launch of its Choice Formulary program earlier this year, last week it introduced TrueCost, a model innovation that offers client pricing reflecting the true net cost of prescription drugs, with visibility into administrative fees. CVS Caremark plans to launch TrueCost in 2025.
The Company also said CVS Healthspire will be the new branded name for its Health Services segment, including Caremark, Cordavis, Oak Street Health, Signify Health and MinuteClinic. The CVS Healthspire brand will begin to roll out publicly this month and advance throughout 2024.
CARIBOU COFFEE opened its first location in Florida, in St. Petersburg. The store is owned and operated by Wake Up 727, which has signed a multi-unit franchise agreement with Caribou. In addition, the Company signed development agreements with Kevin Ricci, owner of Covelli Family Partnership, and Sam Covelli, CEO of Covelli Enterprises, to further expand throughout Florida. Earlier this year, Caribou announced several multi-unit development agreements to franchise more than 300 new locations across the U.S.
MCDONALD'S plans to open 900 U.S. locations, 1,900 international restaurants, and 7,000 international franchised units by the end of 2027, marking the fastest period of growth in McDonald's history. For 2024, the Company is projecting net new restaurant growth of 4%, with that projected to grow by 4% to 5% annually thereafter. The Company forecasts about $2.50 billion in capital expenditures for 2024, increasing by $300 million to $500 million sequentially through 2027.
KWIK TRiP plans to have double-digit growth in stores in Michigan's Upper Peninsula, according to CEO Scott Zietlow. The Company currently has about six Upper Peninsula locations, including two that opened in October. Plans call for 16 to 20 locations within that area. The chain opened its first Michigan location in September 2022.
Kwik Trip is also planning to enter North Dakota, which will be its seventh state, with two locations in Fargo.
General Interest
The "Organized Retail Crime" Mirage... The National Retail Federation retracted its estimate that “organized retail crime” was responsible for nearly half of the $94.50 billion in store merchandise that disappeared in 2021. Reports indicate that faulty data was used to arrive at the inaccurate figure. A more reliable figure is closer to 5%. Retail chains like Target continue to claim they are victims of large shoplifting operations that have cut into profits, forcing them to close stores or inconvenience customers by locking products away. The claims are fueled by videos of masked shoplifters smashing windows and grabbing high end products. However, the data shows that this impression of rampant criminality was a mirage. According to police data, retail theft has been lower this year than it was a few years ago; shoplifting incidents have fallen 7% since 2019.
Quarterly Earnings
