January 19, 2022
On January 10, Big Lots provided a long-term growth outlook, though did not provide relevant timelines. The Company set goals of $8 billion to $10 billion in sales and the opening of an additional 500 stores. The store base is currently 1,424. Based on Big Lots’ stated plans to open 50 stores in FY22 and about 80 per year thereafter, it would take about seven years to achieve its goal. This would imply a growth rate of about 4%. Projecting sales growth over the same period would require growth of about 4% to 7%. These numbers reflect a significant change from past behavior, when store openings were running at 20 or less on an annual basis. Click here to request a sample list of future openings.
Bob Evans Restaurants is reportedly exploring a sale that could value the Company at up to $600 million. The Company and its private equity owner Golden Gate Capital are said to be working with financial advisers. According to sources, in the past 12 months, the Company had EBITDA of about $65 million, implying a valuation of as much as $600 million. Golden Gate acquired the restaurant operations from Bob Evans Farms in 2017 for $565 million. The Bob Evans restaurant chain now operates close to 500 locations in 18 states primarily in the Midwest, mid-Atlantic and Southeastern U.S. Click here to request more info.
Shop-Rite Supermarkets (SRS) (part of the Wakefern cooperative) has deployed a Bell and Howell QuickCollect Go! Pod smart grocery retrieval system in the parking lot of a ShopRite store in New Rochelle, NY that offers customers self-serve pickup of online orders. An outdoor, freestanding unit, the QuickCollect Go! Pod holds refrigerated and frozen foods and employs automation to enable secure delivery and retrieval of online orders at any time. SRS operates 36 ShopRite stores in New Jersey and in the Hudson Valley and Capital Region in New York. Click here to request a sample list of future openings.
More than 8,000 workers at nearly 80 of Kroger’s King Soopers stores went on strike last Wednesday as negotiations stalled; the stores stayed open, and the chain hired temporary staff and promoted online ordering. According to UFCW Local 7, the strike is expected to continue for three weeks. The striking workers are employed at stores in the Denver metro area, Boulder, Parker and Broomfield cities of Colorado, among others. At King Soopers, workers have sought an increase in wages of at least $6 per hour for all. The Company’s “last, best and final offer”, made a week ago, proposed raises of up to $4.50 per hour based on job classification and tenure. The proposal, which came after the union rejected two previous offers, provides for investment of $170 million in wages over the next three years, more healthcare benefits and a starting pay of $16 per hour. That was lower than the $18 per hour King Soopers advertised for replacement workers at various locations, including Denver, Evergreen, Golden and Littleton. The Company also encouraged customers to shop online by reducing delivery fees to $1 for orders worth over $35 for a limited time, while also opening up alternative “offsite” pickup locations, including a parking lot in Lakewood, CO.
Macellum Advisors, which holds nearly 5% of outstanding common shares of Kohl’s Corporation, issued an open letter to fellow shareholders, stating its belief that the Company’s board and management “have spent another year materially mismanaging the business and failing to implement necessary operational, financial and strategic improvements – contributing to a 22% share price decline from the point in which [Macellum] settled with Kohl’s for two director designees in April 2021.” The letter also claims Macellum intends to nominate a slate of candidates for election at Kohl’s 2022 annual meeting unless the board decides to collaborate with it on a director refresh and “promptly implement changes to improve operational execution and optimize the balance sheet.” Under a “historically low PE multiple of ~7x-8x,” Macellum’s analysis indicates a properly optimized balance sheet (e.g., monetizing $4 billion of its real estate and returning the proceeds to shareholders through a buy-back) could translate to, at minimum, $100 per share. Finally, Macellum reiterated the existence of “well-capitalized strategic and financial buyers” as well as the potential value of separating Kohl’s ecommerce and brick-and-mortar businesses. Click here to request more info.
Advent International and KKR & Co. are reportedly among private equity firms that could potentially bid for Boots, Walgreen’s international drugstore business. The Boots business is also attracting initial interest from Clayton Dubilier & Rice, the firm that owns British grocer Wm Morrison Supermarket Plc, as well as Apollo Global Management. The unit, which mostly operates pharmacies in the U.K., could be valued at as much as £7 billion (US$9.60 billion) in a sale. Bain Capital and CVC Capital Partners have teamed up as they consider making a joint offer for Boots. Walgreens could kick off a sale process as soon as the coming weeks. Boots runs a chain of roughly 2,200 stores in the U.K. Click here to request more info.
Sportsman’s Warehouse announced financial highlights for the eight weeks ended December 25, reflecting “tremendous strength across all categories despite a difficult comparison in firearms and ammunition.” For the eight-week period, net sales were $299.6 million, flat versus the comparable eight weeks of fiscal 2020 and up 59.3% from $188.1 million in the 2019 comparable period. Same-store sales dropped 6.1%; excluding firearms and ammunition, comps increased 2.8% compared to the eight-week period of fiscal 2020 and up 38.7% compared to the fiscal 2019 period. Comps in the Footwear, Optics/Electronics/Accessories, and Clothing categories increased 15.7%, 6.7%, and 4.4%, respectively. Ecommerce sales rose 2.5% compared to the same period of fiscal 2020 and approximately 200% compared to fiscal 2019. The Company opened three new stores, in Chandler, AZ; Elk Grove, CA; and Greenwood, IN during the period. The Company recorded a one-time gain based on receiving $55 million from the termination of its merger agreement with Great Outdoors Group, LLC.
REI Co-op is building a new 400,000 square-foot distribution center in Lebanon, TN. Expected to open in fall 2023, the DC will support the Company’s continued growth on the East Coast and in the Midwest and South. The DC has the capability to support more than 70 REI stores and nearly 5.6 million customer members. This is REI’s fourth distribution facility; the others are located in Bedford, PA; Goodyear, AZ; and Sumner, WA. The Company has more than 20 million members and operates 174 locations in 41 states and the District of Columbia. Click here to request a sample list of future openings.
In May 2021, we reported that The ODP Corporation planned to separate itself into two independent, publicly traded companies as a means of facilitating a non-binding proposal by Staples’ retail unit to acquire ODP’s consumer retail unit for $1 billion in cash. Staples’ retail unit is owned by Sycamore Partners. Last week, ODP announced that in December its board received a non-binding proposal from another third party to acquire its consumer retail business; the terms of that proposal are confidential. ODP said it remains in conversations with Sycamore as it is “carefully reviewing both proposals with the assistance of financial and legal advisors to determine the course of action that is in the best interests of the Company and its shareholders.” CEO Gerry Smith added, “We look forward to further evaluating the potential sale of ODP’s consumer business to determine whether a sale may provide greater value for our shareholders than a public company separation. If the consumer business is not sold, then ODP’s Board of Directors will reevaluate the advisability and timing of the public company separation.” Click here to request more info.
Benzer Pharmacy has had a storied, infamous history. After launching a franchise model in 2016, its store count had reportedly topped 100 locations by 2019, including many independently owned franchised locations, with aggressive store growth planned. However, the model began to unravel, and by early 2020, it was shuttering pharmacies at a rapid clip amid reports of mounting debt, mismanagement and legal battles. In July 2020, McKesson filed a complaint, claiming Benzer breached their supply agreement, and was seeking over $7 million in late payments, fees and legal expense. Click here to request more info.
BJ’s Warehouse Club will reenter Columbus, OH with a 100,000 square-foot store, after exiting the market more than 20 years ago. BJ’s plans to open 10 new stores this year and appears to be expanding west. Most of its 224 stores are located on the East Coast, but new builds have been announced in Pittsburgh and Lansing, MI. Click here to request a list of future openings.
Our Hot Market Report takes a closer look at the Miami, FL real estate landscape, and provides visual competitive analyses as well as key real estate metrics such as future openings, store count, market share, digital insights, and demographics. Click here to request a copy of the full report.
Reef Technology is temporarily closing nearly one-third of its 300 mobile ghost kitchen locations that the Company considers to be underperforming. Miami-based Reef has become a major ghost kitchen player, signing deals with a number of popular restaurant brands.
One day prior to Reef’s announcement, Denny’s said it is partnering with Reef to offer delivery options from ghost kitchens in metro markets where Denny’s doesn’t have a strong presence. The companies will disclose the test market locations in a future announcement.
A Tops Supermarket in Watertown, NY will be converted to a Piggly Wiggly and is expected to reopen on March 3. Price Chopper and Tops announced their merger in November. As a condition of the merger, Watertown’s two Tops locations were sold to C&S Wholesale Grocers, parent of Piggly Wiggly and Grand Union. The other Tops in the city is expected to be rebranded as a Grand Union.
Southeastern Grocers will close a Winn-Dixie store near LSU in Baton Rouge, LA. The Company has at least five other stores in metro Baton Rouge. The Company did not provide a reason or date for the closure.
In other news, Winn-Dixie announced it is offering deeper discounts on more than 150 popular products, claiming an average savings of more than 15% on average.
For the full year ended December 31, Xponential Fitness increased studio count to over 2,100 and reported system-wide sales (gross sales by all franchisees) of $708 million, up 26% compared to 2019. Comps were up 41%, following a 34% comp decline in the prior-year period. Membership grew to 449,000, up 29% from 348,000 in 2019. Studio visits increased 18% compared to 2019. Management expects to meet or exceed the high end of its FY21 outlook, including new studio openings of 230 to 250, North America system-wide sales of $690 million – $700 million, FY21 revenue of $147 million – $148.5 million, and adjusted EBITDA of $25 million – $26 million. The Company plans to report FY21 results in early March 2022.
Captain D’s recently opened its newest franchised restaurant in Posen, IL, marking the brand’s first location in the greater Chicagoland market and eighth in Illinois. Captain D’s said it is slated to open multiple additional new restaurants on the heels of its Posen debut and further fuel its Midwest expansion over the next several years. The latest opening is the first of several Captain D’s planned for the Chicago area, including a new restaurant in Matteson, IL opening later this year. Click here to request a list of future openings.
The largest U.S. drugstore chains are shutting some pharmacies on weekends, as the spread of COVID-19 and the Omicron variant exacerbates already severe staffing shortages. CVS Health and Walgreens Boots Alliance said weekend shutdowns are unusual but inevitable when locations lack enough pharmacists and technicians to remain open. Supermarkets and U.S. retailers are also shortening hours, as throngs of American workers stay home because they are sick, awaiting test results or caring for others with the virus.
JOANN elaborated at a recent investor conference that over 99% of its 852 stores are “4-wall” cash flow positive. The Company plans to refresh more than 50 stores in the coming fiscal year and build up to a 70-store pace annually by the end of the year. Joann has identified 60% of its locations for a refresh and 30% for relocation. The expected average net sales uplift is 5% – 25% for a remodel and 15% – 75% for a relocation.
Last week, Sur La Table announced the launch of an updated line of private-label cookware that pairs with its existing tools, bakeware, food and tableware. The line features materials like “enameled cast iron, five-ply stainless steel and ceramic nonstick,” and are available at its stores and on its website. Riding the wave of consumers increasingly cooking at home again, the Company is planning new initiatives, partnerships and launches throughout 2022, which coincide with its 50th anniversary. Pre-pandemic, Sur La Table had $230 million in brick-and-mortar sales, $80 million in e-commerce sales, and a cooking class business that accounted for revenue of $35 million in fiscal 2018. After the pandemic necessitated temporary store closures and the suspension of its class operations, the Company filed for Chapter 11 protection in July 2020; a month later, a joint venture between Marquee Brands and CSC Generation purchased Sur La Table for $88.9 million, identifying 50 of its 121 stores for closure.
Family-friendly, experiential retailer Camp is opening its eighth location, a 9,400 square-foot unit at the Burlington Mall in Burlington, MA, on February 3. Camp at Burlington will feature a retail section (“canteen”), with toys, gifts, books and accessories for all ages; as well as themed environments that include a lookout tower, ride-on cars, zip-lines, and other action activities. Stores have a new theme every four months; this location will open under the banner, “The Paw Patrol Experience: Only at Camp.” The Company plans to open additional brick-and-mortar units this year, including a flagship in Los Angeles in early spring. Launched in December 2018, Camp operates four locations in New York City, along with stores in Paramus, NJ; Norwalk, CT and Dallas, TX, as well as a digital platform.
Lids opened a 7,000 square-foot store at the massive American Dream entertainment and retail complex in East Rutherford, NJ. It is the Company’s first East Coast flagship location, on the heels of opening of its first stores in Europe in the U.K., and represents Lids’ largest store to date. Lids operates nearly 2,000 stores throughout North America, including through its ongoing partnerships with Macy’s and Designer Brands (DSW).
Batteries Plus announced its goal of signing an additional 60 franchisees this year while opening another 55 new stores across the country by year-end. The Company’s target development markets are the Northeast, specifically Philadelphia to Boston, and Southern California. Last year, Batteries Plus opened 22 stores and had 88 total signings through multi-unit agreements and organic growth with current franchisees. Included in the 88 signings were a 10-unit signing for Nevada and Utah, a 10-unit deal in Texas and Louisiana, an eight-unit signing in Atlanta (which sold out the market), and a three-unit signing in Long Island, along with agreements in Vermont, California, Arkansas, Georgia, Texas and Illinois. Also last year, the Company partnered with Samsung to become the first retail partner in Samsung’s Service Provider program. Batteries Plus is the country’s largest battery, light bulb, key fob and phone repair franchise, with more than 800 stores in operation and development nationwide.
Victoria’s Secret COO Ishan Patel spoke international expansion, including the importance of knowing how the brand resonates in each local market abroad, at the National Retail Federation (NRF) show in New York last week. The Company decided in 2014 to lengthen its global reach; today, it has operations in more than 60 countries — most recently launching in Milan, Israel, and India — as well as entering multiple franchise deals. Mr. Patel commented, “Our catalogue heritage allowed us to get brand residence significantly overseas. We were shipping to over 200 countries long before we were online, but it was a very U.S.-centric experience…. We moved into five markets where we really tried to create the [same] experience with language, currency and merchandising [abroad]: Canada, Australia, U.K., France, Germany, and then later Spain. And then, we really started to gain more understanding of those markets. It’s a country-by-country, market-by-market assessment; it’s breaking through that mindset to understand that in each distinct market there will be variables and synergies and distortions from your home market that you need to understand…. It’s understanding the cost of entry, the competition. All the research that is super important.” Mr. Patel also discussed establishing trust during the checkout process, including no hidden fees and clear delivery dates, a variety of secure payment methods, and convenient options to return items as essential in creating loyalty in new customers. Despite losing domestic market share in recent years before spinning off from Bath & Body Works in August 2021, in its most recent quarter Victoria’s Secret’s international business generated $114 million in revenues, ahead of the critical holiday shopping season.
Sherwin-Williams announced “weaker than expected” preliminary unaudited results for 4Q21 and FY21 ended December 31. 4Q21 net sales rose about 6.1% compared to the prior year, and diluted net income per share is expected at approximately $1.15 per share. Adjusted full-year 2021 diluted net income per share is anticipated at about $8.15 per share, excluding acquisition-related amortization expense and a loss from the Wattyl divestiture of $0.85 and $0.34 per share, respectively. Prior adjusted full-year 2021 guidance was $8.35 – $8.55 per share, excluding acquisition-related amortization expense and a loss from the Wattyl divestiture of $0.85 and $0.34 per share, respectively. The Company opened 79 stores in North America in 2021, including 32 in 4Q. Click here to request a list of future openings.
Sally Beauty has been in the process of revamping its omnichannel offerings to include virtual cosmetics application, a social influencer program, and a new mobile app and loyalty offering. More recently, the Company partnered with Salesforce to implement cloud-based omnichannel enhancements and deployed an AI-based pricing platform from Revionics. Sally Beauty operates approximately 5,000 stores, including 141 franchised locations.
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