February 22, 2023
According to reports, Lidl laid off about 200 corporate employees at its U.S. headquarters in Arlington, VA, in an ongoing effort to course correct after its corporate headcount growth had outpaced its store expansion. No store-level workers were eliminated, and the Company continues to employ about 800 workers in Arlington.
In other news, property records indicate that Lidl is investing $144.6 million in its newest planned warehouse. The facility will be located at the Keystone Trade Center in Bucks County of Fairless Hills, PA (north-east Philadelphia). Lidl is reportedly in the “early planning phase” for this site and did not specify a timeline for opening.
Amazon debuted a new Amazon Go in Puyallup, WA, in the suburbs outside of Tacoma. The total square footage of the store is 5,250 square feet, with the customer space just under 2,500 square feet; the location features the Company’s Just Walk Out technology. The news of the opening arrives on the heels of Company management confirming it has paused the expansion of Amazon Fresh units until it has assessed how to differentiate the grocery store banner. Nationwide, the Company operates 44 Amazon Fresh stores, and it has just over 30 Amazon Go stores in the Seattle, Chicago, San Francisco, and New York markets.
After announcing earlier this month that it plans to add 150 new stores in 2023, Aldi opened a location in La Plata, MD, approximately 35 miles south of Washington D.C. On February 23, a new location will open its doors in Millsboro, DE, and on March 2, another Aldi will debut in Alexandria, VA. Additionally, as part of the Company’s fast-growing presence in the Gulf Coast, a new store will open in Fairhope, AL also on March 2, exactly one year after the grocery chain arrived in the region with a store in Mobile.
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Party City, DIP has announced its first two tranches of store closures, for a combined 22 locations thus far. Real estate advisors, A&G Real Estate Partners, is expected to auction the leases and potentially others in the weeks ahead, with the total number depending on the outcome of ongoing negotiations with Party City’s landlords. The restructuring is expected to be completed in 2Q23.
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Barnes & Noble has benefitted from consumers returning to purchasing books in brick-and -mortar stores in 2022 after the industry shifted significantly to the internet during the pandemic. Barnes & Noble is embarking on an expansion plan after closing just a few units in 2022. In 2023, the Company plans to open between 30 and 35 stores and close between 10 and 15 units, for a net growth rate of 2% – 4%. The new stores will be a mix of sizes, between larger 30,000 square-foot stores and others as small as 8,000 square feet. The Company introduced the smaller version of its standard store format in 2022; these units tend to generate more revenue per square foot than the larger stores, which promotes efficiency and profitability. At the end of 2022, the Company operated 603 stores, of which 3% are small footprint units averaging 8,000 square feet. Management said its expansion plans are limited by the labor supply, as it is difficult to find experienced staff and managers. The Company expects sales to increase in the high single digits to the low double-digits for its current fiscal year, which concludes at the end of April 2023. All stores are currently profitable on a 4-wall basis, highlighting difficulty quantifying the productivity of smaller format stores relative to the traditionally larger units because many of the smaller units tend to be in prime locations.
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Tuesday Morning, DIP filed Chapter 11 for the second time in just over two years, with the intent of reorganizing; it has requested Court approval to close about 57% of its store base, leaving only about 200 of its 464 units. Circumstances early in the proceedings highlighted concerns over whether a reorganization is realistic. The filing occurred prior to the Debtor receiving a commitment for a DIP facility, which is highly unusual. At the last minute, Invictus Global Management provided a $51.5 million DIP Facility. The Court authorized the Debtors to access up to $15 million of the DIP Facility on an interim basis, which was less than the $25 million the Debtors requested. The interim authorization followed an objection by Wells Fargo Bank, the prepetition lender, which expressed concerns that the Invictus DIP Facility would not offer sufficient liquidity to the bankruptcy estate. The ruling defers payment of certain items until final authorization is granted, and the period between interim authorization and a final hearing is shorter than was originally contemplated, consequently the Debtors’ working capital needs will be less. A hearing on final approval of the facility is scheduled for March 2.
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Walmart finished the year on a strong note with 4Q23 revenue gaining 7.3% and comps improving 8.8%, exceeding most of its 4Q and FY guidance. Walmart U.S. and Sam's Club posted comp growth of 8.3% and 12.2%, respectively, on both traffic and average ticket increases, while International sales gained 2.1%. Sales were propelled by continued strength in food sales, which were up in the high-teens, offset by a mid single-digit decline in general merchandise, especially toys, apparel, and electronics. The growth was also partially due to inflation. The effect of the product mix shifts continue to stress gross margin, which declined about 80 bps in 4Q. The Company estimates inflation in food categories was up mid-teens and anticipates continued stubborn inflation in dry grocery and consumables for the coming year. Walmart finished FY23 with inventory about flat compared to last year. Management indicated that the normalization of inventory was ahead of schedule.
The Company reported that December sales were the highest monthly sales in the Company's history. Walmart also surpassed $600 billion in annual sales for the first time.
In other news, Walmart confirmed plans to shutter three of its U.S. technology hubs located in Austin, TX, Carlsbad, CA, and Portland, OR. Operations will transition to Bentonville, AR and San Bruno, CA. Walmart operates 16 hubs globally, including two opened in the last year in Atlanta, GA and Toronto, ON, Canada.
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In 4Q22, Ahold Delhaize reported consolidated sales of €23.36 billion, up 16% (up 8.1% at constant exchange rates). Overall, the top line was impacted by several factors, including inflation, strong U.S. operating performance and comp growth of 7.9%. At Ahold Delhaize USA, inflation continued to boost the top line, as sales grew 9.2%, to $15.10 billion; comps, excluding fuel, advanced 9.3%. Brand performance continued to be led by Food Lion, which has now delivered 41 consecutive quarters of positive sales growth. Food Lion and Hannaford achieved positive double-digit comparable store sales growth for the second consecutive quarter. At Stop & Shop, management noted that the brand's remodeled New York City stores are delivering double-digit sales growth and exceeding expectations. Ahold Delhaize remodeled four NYC stores during 2H22 and plans to remodel eight more in 1Q23. In addition, the Company will roll out key learnings from prior remodels to 40 other stores in the fleet throughout the year. In 4Q, U.S. online sales were up 17.3%, to $1.16 billion (7.7% of U.S. revenue), on top of 31% growth a year earlier. At the end of FY22, 97.5% of the Company's U.S. customers had access to online grocery options.
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Restaurant Brands' Management provided an update on its Burger King U.S. "Reclaim the Flame" initiative previously announced in September 2022. The $400 million initiative calls for $150 million in advertising and digital investments and $250 million in spending on remodels, relocations, technology, kitchen equipment, and building enhancements over a two-year period. Through December 31, 2022, the Company has funded $30 million of these investments, which had a 5% negative impact on Burger King adjusted EBITDA growth and a 2% negative impact on consolidated adjusted EBITDA growth in 4Q22.
Chipotle announced a new restaurant concept, "Farmesa," specializing in fresh, customizable bowls ranging from $11.95 to $16.95. Chipotle is partnering with the ghost kitchen operator Kitchen United Mix to initially offer Farmesa's menu from a single existing location in Santa Monica, CA, before evaluating further expansion. The Company previously tested alternate restaurant concepts such as Tasty Made and Asian ShopHouse, but those concepts were shuttered in 2017 and 2018, respectively.
Bass Pro Shops announced upcoming plans to open three new locations. In 2H23, the Company has a 63,000 square-foot store slated to open in the Youngstown, OH suburb of Niles at Howland Commons within the Eastwood Mall complex. The retailer is also expecting to open a 125,000 square-foot superstore in Spring, TX, between Dallas and Houston, in Fall 2024. In addition, a 70,000 square-foot store is scheduled to debut during 2024 in Clifton Park, NY, in the Adirondacks region near Albany. Bass Pro Shops operates 160 locations in the U.S. and Canada.
According to a February 15 filing with the SEC, The RealReal is planning to terminate approximately 230 employees, representing about 7% of its workforce, and reduce its real estate presence. The Company also intends to close two flagship stores (San Francisco, CA and Chicago, IL), two neighborhood stores (Atlanta, GA and Austin, TX), and two luxury consignment offices (Miami, FL and Washington, D.C.), including any co-located logistics hubs. Additionally, the retailer intends to reduce its office spaces in San Francisco, CA and New York City. The changes are part of a new cost savings plan, and the Company stated it will continue to evaluate its real estate presence as it deems appropriate to create efficiencies and to address trends in the marketplace and macroeconomic factors. The RealReal estimates that it will incur non-recurring charges of approximately $1.7 to $2.2 million in connection with the staff reduction and expects that the majority of these charges will be incurred in 1Q23 with a substantial amount completed within that quarter. There are currently 15 brick-and-mortar-locations in operation, primarily in California and New York.
Petco is expanding its partnership with Canadian Tire, with plans to open shop-in-shop sites at 450 Canadian Tire retail locations. The deal will allow Petco to gain a greater foothold into the Canadian market since the two companies launched this arrangement in 2018. The Company expects the in-store units will be available in 90% of Canadian Tire's locations across the country by the middle of 2023. Currently, Petco operates more than 1,500 pet care centers across the U.S., Mexico, and Puerto Rico.
Trader Joe’s is building a new distribution center in south central Kentucky. The Company purchased 160 acres in an industrial park in Franklin and plans to invest $260 million to develop a multi-building facility that will provide 1 million square feet of warehousing, distribution, and cold storage for the grocery chain. The largest of the buildings, approximately 650,000 square feet, is expected to be up and running by the end of 2023. The Company presently operates three Kentucky locations, in Louisville, Lexington, and Crestview Hills.
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Yum! Brands’ Taco Bell opened a restaurant in the Hollywood neighborhood of Los Angeles, CA under the Cantina banner, which has a smaller footprint than a traditional Taco Bell and a menu that includes alcoholic beverages. Customers order from standing menu kiosks inside the restaurant. Hollywood Cantina is Taco Bell’s first Cantina location in Los Angeles County and joins nearly 150 Taco Bell restaurants across the count.
In FY22, Giant Eagle’s revenues advanced 11%, to an estimated $11.10 billion, primarily reflecting the impact of inflation on food prices and sharply higher fuel prices, which benefited its convenience store business. As of mid-February 2023, the Company operated about 470 stores (including about 200 supermarkets and 270 convenience stores) throughout western Pennsylvania, north and central Ohio, northern West Virginia, Maryland, and Indiana.
Operationally, the Company is in a highly competitive geography where it has been challenged to maintain market share. Giant Eagle remains the market leader in Pittsburgh, PA and Cleveland, Akron, and Canton, OH. However, in Columbus, OH, the Company ranks number three behind Kroger and Walmart, while in Youngstown, OH, and Erie, PA, it trails Walmart. More importantly, Walmart has gained or maintained share in every market without adding new stores, bolstered by its significant online offering. Kroger has also upped its e-commerce game, operating customer fulfilment centers (CFCs) in the Company's operating area, particularly in Ohio.
The Company’s limited interest in store growth over the past few years has centered on its convenience store business, rather than on its flagship traditional supermarket banner, which saw one closure in 2022. In September 2022, the Company outlined plans to open a 49,600 square-foot Market District in Westfield, IN; no opening date was disclosed.
Dillard's reported 4Q22 sales inched up 0.6% to $2.13 billion, with retail sales and comps unchanged compared to the prior-year period. Gross margin eroded 310 bps to 37.7% as weaker sales at the beginning of the quarter and during the holiday season led to increased markdowns and stronger January sales compared to 4Q21. The Company plans to open a new, 140,000 square-foot store in Sioux Falls, SD in Spring 2024. It also announced the closure of three stores during 1Q23:
Ft. Walton Beach, FL 115,000 square feet
Grand Island, NE 80,000 square feet
Phoenix, AZ 90,000 square feet
Fleet Feet is opening a 2,700 square-foot location in Harrisburg, PA on February 25 at the High Pointe Commons Shopping Plaza. A franchisee also opened another unit in Richland, WA last week. The Company has more than 250 outlets in 40 states and Washington D.C.
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Ace Hardware Corporation reported 4Q22 revenues of $2.20 billion, an increase of $124.5 million, or 6%, compared to a year ago. The Company reported a 5.2% increase in U.S. retail same-store sales during 4Q22. Estimated inflation of 9% drove a 6.4% increase in average ticket; same-store transactions were down 1.2% during the quarter. Total wholesale revenues were $2 billion in 4Q22, up 7.5%, with increases seen across a majority of departments with outdoor power equipment, paint and outdoor living showing the largest gains.
For the full year, revenues were a record $9.20 billion, up 6.7%, versus FY21. FY22 retail comps were up 3.2%, as estimated inflation of 10.7% drove an 8.4% increase in average ticket, while transactions were down 4.7% for the full year. During FY22, the Company added 232 new retail locations and there were 69 retailer outlet closures, resulting in 5,746 stores at FYE.
The owners of Kum & Go are reportedly looking for potential buyers for their c-store chain of more than 400 stores across 11 states. According to the report, the Krause family, who owns the Company, is also considering other options, including refinancing, real estate leasebacks or other forms of recapitalization.
Boscov’s is planning to open its first store in West Virginia, marking its 50th location overall. The new store is slated to open this fall in a 151,000 square-foot space in Bridgeport at the Meadowbrook Mall. The family-owned Company operates its other stores in Pennsylvania, New York, New Jersey, Maryland, Delaware, Connecticut, Rhode Island, and Ohio.
H-E-B opened a 97,000 square-foot location in the Lake Austin area of Austin, TX, its first multi-level store in the city. Construction began in 2019, but was delayed due to the pandemic. The store features H-E-B’s Texas BBQ restaurant and SouthFlo Pizza eatery. H-E-B operates 52 stores in the Austin MSA, as well as two Central Market units.
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During its Chapter 11 proceedings, Independent Pet Partners Holdings, DIP assigned 20 of its Loyal Partner store leases to Pet Supplies Plus, a unit of Franchise Group, as part of a sale transaction. Independent Pet Partners is the parent company of Chuck & Don’s, Loyal Companion, Kriser’s and Natural Pawz. As part of the restructuring, Independent Pet Partners is exiting its Loyal Companion and Natural Pawz brands and closing 93 of its stores on the East Coast, Texas, and California. As of the petition date, Independent Pet Partners operated 159 pet stores across 12 states and the District of Columbia.
Hy-Vee is acquiring North Scott Foods, a family-owned, single-unit supermarket in Eldridge, IA. The deal is expected to be completed in early April. Currently, North Scott Foods is the only grocery store in Eldridge; Hy-Vee’s nearest location is approximately 10 miles away in Davenport, IA. The Company operates more than 285 stores in eight Midwestern states: Iowa, Illinois, Missouri, Kansas, Nebraska, South Dakota, Minnesota, and Wisconsin.
Ross Dress for Less announced it will reopen its tornado-damaged store at the Boardwalk Shopping Center in Round Rock, TX on March 4. The 30,000 square-foot location had to be repaired after a tornado struck the city in March 2022.
Steele Brands announced that its flagship brand Crisp & Green signed a 40-unit development deal with franchise partner Rory Kelly of Salads & Smoothies. This agreement adds to Salad & Smoothies’ existing 11-unit agreement with Crisp & Green, bringing the total to 51 units. The group is currently operating two locations in Minnesota, and the remaining 51 locations are slated to open incrementally by 2028. The third location is due to open this spring in Mankato, MN. Future openings are planned for Crisp & Green’s home state of Minnesota as well as new MSAs including Phoenix, Milwaukee, Indianapolis, and Cincinnati. Crisp & Green plans to open 50 locations across 15 states this year.
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