March 22, 2023
Foot Locker detailed plans to transform its store network over the next few years. The Company plans to close about 400 mall locations through 2026, which collectively represent 10% of its annual sales but have been underperforming, in part due to slowing traffic to malls. At the same time, Foot Locker plans to open 300 new stores under larger formats through 2026, including the 15,000 square-foot Community store model, the 10,000 square-foot Power store model, and the 7,500 square-foot Kids Foot Locker House of Play concept.
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In an effort to advance its planned merger with Albertsons, Kroger hired former U.S. House Speaker John Boehner to “provide strategic counsel” to its executives. Boehner works for the law and lobbying firm Squire Patton Boggs, but will not register to lobby on Kroger’s behalf. However, two former Boehner aides who also work at the same firm, Tommy Andrews and David Schnittger, as well as former chief of staff to then- Rep. Karen Bass, Caren Street, will lobby on Kroger’s behalf. According to reports, Kroger spent $950,000 on lobbying in 2022, the highest total in the Company’s history, and Albertsons, which contracts with Jeff Miller, the lobbyist with the closest ties to Speaker Kevin McCarthy, spent approximately $2.2 million on lobbying in 2022, more than tripling the previous year’s total.
At the same time, a coalition of 100 organizations sent out a press release announcing that they have launched a website as part of the “Stop the Merger” campaign. The group has written numerous letters to the FTC and state Attorneys General, held meetings with federal and state elected officials and regulators, conducted press conferences and virtual town halls, attended public events on the merger hosted by government officials, and participated in various local community activities opposing the merger. The coalition is made up of over 100 national, state, and local organizations.
The Children’s Place’s 4Q22 top line decline was mainly due to a slowdown in demand due to inflationary pressures, permanent store closures, lapping of the child tax credit, and a record holiday season in 2021. Digital represented 48% of sales during the quarter, flat from 4Q21 and up from 30% in 4Q19. The Children’s Place ended the year with 613 stores, down 9% from a year earlier, and is planning to close 100 more stores, with the bulk in FY23. The Company expects FY23 sales to decline 3% to 5% with operating margin expansion.
During the first half of March, Publix opened five new locations, expanding its footprint in Alabama and adding its first store in Durham, NC (see chart below). For FY22, capital expenditures totaled $1.77 billion, up from $1.29 billion in the prior-year period, primarily due to opening 40 supermarkets (including eight replacements) and remodeling 117 supermarkets; 11 supermarkets were closed during the year, one of which has already been replaced and the remaining 10 will be replaced in a subsequent period. As of December 31, 2022, the Company operated 1,322 stores across seven states, including 842 supermarkets in Florida, 200 in Georgia, 86 in Alabama, 69 in South Carolina, 55 in Tennessee, 51 in North Carolina and 19 in Virginia. Also, at the end of 2022, supermarkets were under construction in Florida (26), Georgia (9), Alabama (4), North Carolina (3), South Carolina (2), Tennessee (2) and one in Kentucky, which will be the eighth state in which the Company operates.
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Whole Foods Market will open a new 50,000 square-foot store just outside Rochester, NY on April 12. The new location will feature more than 500 locally sourced items from the Central and Western New York region. In January, the Company opened another unit in New York City’s Wall Street neighborhood. Currently, Whole Foods Market operates more than 500 stores in the U.S, Canada, and the U.K.
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Party City, DIP filed a monthly operating report for January 2023. Revenue was $121 million, with a net loss of $20 million for the month. Inventory totaled $387 million (stated at cost). “Post-petition debt” (including accounts payables and certain other post-petition obligations) totaled $355 million, while prepetition unsecured debt (such as accounts payables, contract obligations, lease liabilities, or unsecured debt) was $765 million. Prepetition unsecured debt is subject to compromise, leading to the possibility that it will not be repaid at the full claim amount under a Chapter 11 Plan. There was $221 million of negative equity at the end of the period.
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Five Below’s positive comps for 4Q22, entirely driven by traffic, broke a streak of three consecutive quarter of negative comps, but seems to indicate that consumers are still pulling back on discretionary spending. The Company opened 48 new stores during 4Q22 and 150 during the year, finishing with 1,340 locations.
At DXL, 4Q22 store visits accelerated throughout the quarter and outpaced the direct business; comps increased 13.2% in stores and 6.2% in the direct business. During the year, the Company closed nine stores, converted one Casual Male XL (CMXL) store to a DXL store, and remodeled two DXL stores, ending the year with 281 locations. In FY23, the Company is planning to close five stores and open three DXL locations, while also converting 10 CMXL stores to DXL and remodeling five DXL locations.
In 4Q22, Cato closed 37 locations as leases expired; during FY22, the Company opened 15 stores, relocated four, and permanently closed 46 locations. As of January 28, 2023, the Company operated 1,280 stores in 32 states, compared to 1,311 stores in 32 states as of January 29, 2022. For FY23, Cato plans to open up to 30 new stores and close up to 50 stores as leases expire.
Denny’s announced that it invested more than $25 million to upgrade and improve its kitchen equipment, which has led to the development of new and improved food offerings while increasing efficiency and reducing food waste. As part of the modernization effort, the Spartanburg, SC-based chain also rolled out a new menu that features a custom augmented reality (AR) experience. Customers can activate the AR functionality by scanning the menu with a smartphone, enabling them to take a virtual, interactive tour of each page. As of March 1, Denny's had 1,602 franchised, licensed and Company restaurants, which includes 157 restaurants in Canada, Costa Rica, El Salvador, Guam, Guatemala, Honduras, Indonesia, Mexico, New Zealand, the Philippines, Puerto Rico, the United Arab Emirates, and the United Kingdom.
Nordstrom is opening two new Nordstrom Rack locations in Fall 2023; a 26,000 square-foot unit is slated for Natomas, CA, in the Central Valley region of the state, and a 35,000 square-foot store will be added in San Antonio, TX. In FY22, the Nordstrom opened three stores (one ASOS and two Nordstrom Racks) and closed one Nordstrom Rack store. Looking ahead, the Company has plans to open or relocate 20 stores through Spring 2024.
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Camping World announced an agreement to acquire Pan Pacific RV Center, which includes two northern California RV Dealerships located in French Camp and Morgan Hill. The new SuperCenters will offer a wide range of new and used RVs in addition to a full assortment of RV and outdoor products and accessories as well as the entire portfolio of Good Sam products and services. The acquisition is anticipated to close in the 2Q23 and will increase the Company’s California location count to twenty.
Marymount University in Arlington, VA opened a convenience store on its campus featuring Amazon’s “Just Walk Out” technology. As we reported last week, Amazon is introducing the technology to college campuses across the country.
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Williams-Sonoma opened four stores and closed 21 during 4Q22. Two Pottery Barn stores, one Williams Sonoma and one West Elm were opened, while 11 Williams Sonomas, six Pottery Barn Kids, three Pottery Barns and one West Elm store were closed. The Company ended the quarter with 530 locations.
Designer Brands’ sales decline is based on the closure of nine stores over the past year and a 5.5% drop in comps; U.S. retail sales were down 9.5% (representing 84.1% of total sales), Brand Portfolio sales declined 23.9% (7.3% of total sales), while Canadian retail sales improved 7.3% (8.6% of total sales).
This month marks the return of Zellers with 25 in-store shops inside Hudson’s Bay department stores (taking up about 8,000 – 10,000 square feet) and the launch of its overhauled website. Zellers confirmed the first locations will open in Ontario and Alberta on March 23. HBC is hoping to tap into consumers' sense of nostalgia in reviving the brand and had tested a few pop-up shops during the pandemic. A launch date for locations in other provinces has not yet been released.
Margins and profitability improved at Academy Sports + Outdoors despite lower sales during 4Q22. A 5.1% decrease in comps (lower transactions, despite higher average ticket) partially offset the impact of opening nine stores during the year. In FY23, management plans to accelerate the pace of new store openings to between 13 and 15 units (an increase of 5% in the store base, at the midpoint).
At J. Jill, higher store traffic and stronger full-price selling drove in-store comps up 6%; these improvements were partially offset by a 2.5% decline in direct-to-consumer sales (50% of 4Q revenue), as online returns ticked up. During the year, the Company opened its first new store in over three years and closed 11, ending the year with 243 stores. Looking ahead, management expects FY23 adjusted EBITDA to be flat and expects store openings to be equally offset by closures.
Alimentation Couche-Tard agreed to acquire certain assets of TotalEnergies. The proposed transaction includes 100% of TotalEnergies' retail assets in Germany and the Netherlands along with a 60% controlling interest in the Belgium and Luxembourg entities. The retail assets cover 2,193 sites with 1,195 in Germany, 566 in Belgium, 387 in the Netherlands, and 45 in Luxembourg. The acquired assets generated about €500 million in EBITDA in calendar year 2022. The proposed acquisition price is €3.10 billion, implying a multiple of about 6x. Alimentation plans to finance the acquisition with cash on hand, existing credit facilities, its U.S. commercial paper program, and a new term loan. The term loan will be led by National Bank Financial Markets, The Bank of Nova Scotia, and RBC Capital Markets. The deal is expected to close before the end of calendar year 2023. For 2Q23, Alimentation reported total revenue growth of almost 19%, led by fuel sales which gained 24% while merchandise revenue rose 2.3%.
Signa Sports’ 1Q23 sales were driven by the contribution of businesses acquired in FY22, WiggleCRC and Tennis Express; net revenue fell 11% on a pro forma basis. LTM active customers were up 26% and total visits rose 13%.
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