November 3, 2021
Sales growth slowed but remained elevated at 15% in Amazon’s 3Q, as the Company lapped outsized growth in the prior-year period, and consumers shifted their purchases back to stores in 2021. By segment, online sales growth slowed the most, only increasing 3% (up 41% on a two-year stack basis), while physical store sales were up 10% and third-party sellers were up 19%. Costs also rose faster than sales, thus operating income fell 20% to around $5 billion (4.4% margin). Looking forward, the Company expects more of the same in 4Q, as sales growth is expected between 4% and 12%, while operating income is expected to decline by more than 50%. Amazon also announced major incentives to find and retain workers, which will make waves in the market, including further education funding for front-line workers and $3,000 sign-on bonuses for seasonal workers. Additionally, the Company continues innovating; it now has same-day delivery service in 15 cities, up from nine, allowing delivery for up to three million items in as little as five hours. Labor shortages have cut into Amazon’s plan to make one-day delivery standard for members of its Prime loyalty club. Amazon CFO Brian Olsavsky describes one-day delivery for Prime members as “unfinished business,” first hit by the demands of the pandemic and now impacted by the staffing and supply chain issues hitting every retail business.
Amazon’s grocery store rollout in Northern Virginia is expanding to Manassas. The Company plans to use 45,000 square feet of a former 104,629 square-foot Kmart for a new Amazon Fresh, according to plans and permit applications submitted to Prince William County. The Amazon Fresh will be in between an AutoZone and a Sky Zone trampoline park. At least four more Amazon Fresh stores are planned for Northern Virginia. Click here for a list of future Amazon Fresh openings.
Brookshire Grocery Co. announced that it has agreed to acquire 17 stores in Oklahoma from Reasor’s LLC. The deal, terms of which have not been released, is expected to close in 1Q22 and has been approved by the governing boards of both companies. However, closing is subject to customary conditions, including obtaining required governmental approvals and the approval of the transaction by the Reasor’s Holding Company Employee Stock Ownership Plan (ESOP), which is the sole shareholder of Reasor’s parent entity. Reasor’s will be the newest banner for Brookshire (about $2.90 billion in annual sales), which operates more than 200 stores under four other banners, including Brookshire’s, Super 1 Foods, FRESH by Brookshire’s and Spring Market in Texas, Louisiana, and Arkansas. Click here for a list of future openings.
Direct-to-consumer (DTC) brands are increasingly partnering with "ghost-retailers", or virtual stores, to keep up with changing consumer needs. Historically, brands have opened hundreds if not thousands of stores countrywide, which made sense before e-commerce. A virtual store exists only on the internet, with no physical shop front. When DTC brands only plan for a few stores, they now have the option of enlisting companies that open physical stores and manage everything from the design and construction to the day-to-day operations. The success of this model became apparent due to the influx of brands post-pandemic now relying on such companies to operate stored efficiently. It remains to be seen whether landlords are willing to invest in the DTC brands partnering with third parties. While the brands might have much higher growth, they come with more risk. Click here for more info.
Our Hot Market Report takes a closer look at the Seattle, WA 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.
Dick’s Sporting Goods will open its second Public Lands store on November 5, a 60,000 square-foot unit in Columbus, OH. It will feature a 30-foot rock wall, an in-store gear repair and rental department, and specialized shops for biking, camping, fishing, paddling, climbing, running, and hiking. The Company opened the first Public Lands location in September, in the Pittsburgh, PA suburb of Cranberry Township.
In addition, Dick’s will open its second Golf Galaxy Performance Center, in Woodbury, MN. The former Golf Galaxy store was redesigned to offer golfers an immersive experience with hitting bays, custom fittings, and golf lessons. The location also sells a wide assortment of equipment, apparel, and footwear. The first Golf Galaxy Performance Center opened in Framingham, MA in August.
On November 15, Dick’s will open two Going, Going, Gone! stores in Temple, AZ and Pittsburgh, PA. It will also open two Warehouse Sale locations, in Virginia Beach, VA and Lakewood, CA. As of October 30, the Company operated 734 stores across the U.S. Click here for a list of future openings and closings.
Southeastern Grocers (SEG) has officially canceled plans to go public, nine months after announcing it would delay an IPO launched in 2020. It also withdrew an IPO in 2014. The Company filed a letter Friday requesting the SEC “consent to the withdrawal of its Registration Statement on Form S-1.” In January, we reported that due to a lack of demand, Southeastern Grocers postponed its IPO offering a week after providing a price range of $14 – $16 for 8.9 million shares. Click here for more info.
IKEA anticipates opening two “planning studios” in the Los Angeles, CA area in 2022, including an 8,000 square-foot location in Long Beach. The second location has yet to be announced. The Company debuted the concept in the U.S. in 2019 in a 17,000 square-foot location on the Upper East Side of Manhattan, NY. The location provides personalized design services, with all orders placed online or in-store for delivery. The West Coast planning studios will offer appointments with design specialists who support planning and ordering home furnishing solutions for kitchens, bedrooms, and bathrooms. Other planning studios are in London, Stockholm, and Warsaw.
IKEA continues to open traditional locations but with a smaller footprint in urban areas. The Company acquired a seven-floor, 239,000 square-foot building in London, U.K. for £378 million (US$522 million). The site includes a now-vacant 100,000 square-foot space that previously served as Topshop’s flagship location. It also includes a Nike Town and Vans store, both of which will continue to operate. Three floors of the building will be transformed to an IKEA store, which is scheduled to open in fall 2023. This follows the opening of an 115,000 square-foot store in January 2021 in Queens, NY; this location is about half the size of an average IKEA. The Company operates 389 stores in 32 countries, including 52 in the U.S. Click here for a complimentary list of future openings.
This whitepaper discusses the pandemic-induced and lingering supply chain constraints, and their impacts on inventory levels, costs, retail pricing and profits, and overall inflation. Click here to request a copy of the full report.
Petco recently opened its first Reddy store, an experiment in experiential retail for dogs, located in the Soho neighborhood of NYC. Reddy is a premium dog accessories and clothing brand. The 2,000 square-foot store will have stations where dogs can be custom-fitted with leashes and harnesses, or where clothing, accessories and supplies like beds or bowls can be personalized. The store will also carry a selection of premium dog food, nutritional supplements, and treats. Click here for a list of future openings.
Noodles & Company’s 3Q21 revenue increased 18.1% to $125.1 million, driven by an increase in system-wide comps of 16.3% as well as new restaurant openings performing at higher levels than historical openings. Comp growth was comprised of a 15.3% increase at Company-owned restaurants and a 21% increase at franchise restaurants, reflecting continued strength in both digital and in-person channels. Digital sales during the quarter accounted for 52% of total revenue. Company average unit volumes, which normalize for the impact of temporary restaurant closures, increased 16% compared to 3Q20 and 15.9% compared to 3Q19. Adjusted EBITDA rose 71.2% to $13.2 million in 3Q21.
There were two Company-owned restaurant openings during 3Q21, including one restaurant that was closed and relocated. There were 450 restaurants system-wide at the end of 3Q21, comprised of 374 Company-owned restaurants and 76 franchise restaurants.
Life Time Group Holdings’ recovery from the pandemic continued in 3Q ended September 30. Revenue was up 67%, driven by 58.7% comp growth and membership growth of 17% (~668k members as of 3Q21). Nearly 20% of the Company’s centers continue to be adversely impacted by COVID-19 mask restrictions, which management noted has been weighing down its recovery. During the quarter, the Company opened two new fitness centers (155 centers as of September 2021); it has now opened a total of six in YTD21, with 12 additional centers under construction. Overall, the Company reported positive EBITDA of $47 million, compared to a loss of $12 million in the prior-year period. Free cash flow before capex totaled negative $100 million, somewhat improved from negative $145 million in the prior-year period. Looking forward, management expects 4Q revenue to be $350 million – $360 million, with EBITDA to be $48 million – $52 million. For FY21, the Company anticipates revenue to be approximately $1.30 billion (down 32% from pre-pandemic FY19), and EBITDA to be approximately $82 million (down 81% from FY19).
Scheels plans to open its first All Sports Store in Meridian, ID in spring 2024. The 240,000 square-foot location will feature a Ferris wheel, a 16,000 gallon saltwater aquarium, a wildlife mountain, Fuzziwig’s Candy Shop, arcade games, sports simulators, and Ginna’s Cafe. This will be the Company’s 33rd location, including 30 existing stores in 13 states and two scheduled to open in 2023 in Wichita, KS and Chandler, AZ. Click here for a sample list of future openings.
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Foot Locker completed the acquisition of atmos, a sneaker retailer headquartered in Tokyo, Japan for $360 million. The acquisition established an entry point in Japan for Foot Locker, allowing it to benefit from immediate scale. Atmos has stores across Japan and the Southeast Asia region, as well as three U.S. stores in New York, Philadelphia, and Washington D.C. Foot Locker expects atmos to generate low double-digit sales growth annually and low double-digits to mid-teens EBITDA margins over the next five years. Click here to request a list of future openings.
Last week, The Fresh Market reopened its flagship location in Greensboro, NC, following a renovation that included a made-to-order carryout restaurant. The revamped grocery store will have longer operating hours than in the past. Click here to request a sample list of future openings.
H.E. Butt recently opened a new 90,000 square-foot store in Austin, TX. It replaces a former store in the same neighborhood. The new store offers fresh food options, services that allow for a customizable shopping experience, as well as the inclusion of H-E-B Curbside, orders placed online and picked up at the store. Click here for a list of future openings.
Yum!’s 3Q21 sales rose 10.9% to $1.61 billion. Across all of its brands, same-store sales increased 5%. The Company said it is experiencing sustained momentum in digital sales, which accounted for roughly 40% of orders this quarter. System-wide digital sales topped $5 billion in the quarter. KFC’s comps climbed 6% after falling 4% a year ago. While growth in China, its largest market, was muted during the quarter, its home market saw comps climb 4%. On a two-year basis, U.S. comps were up 13%. As of July, YTD digital sales surpassed those for all of 2020. Pizza Hut reported comp growth of 4% as international markets bounced back. In the U.S., comps rose just 2%, as it faced tough comparisons with a year ago and staffing challenges. On a two-year basis, Pizza Hut’s U.S. comps are up 8%. Domestic off-premise sales climbed 17% in the quarter, fueled by accelerated growth of its carryout business. Taco Bell’s comps rose 5% in the quarter and 8% on a two-year basis. The chain has struggled to recover late-night and breakfast sales throughout the pandemic but relaunched its breakfast in August. Yum added 760 net new locations across all of its brands during the quarter, setting a record for the company.
Like other restaurant companies, Yum! is facing higher inflation, particularly in the U.S. However, executives shook off worries about costs eating into margins, citing its scale in the U.S. and adding that international markets account for 60% of sales. Click here for a sample list of future openings.
Callaway Golf Company completed a $30 million minority investment in Five Iron Golf, an urban indoor golf and entertainment company offering simulator rentals, golf lessons, custom club fittings, social events, and a curated food and beverage menu. Callaway will be accounting for the investment on a cost basis. Other terms of the transaction were not disclosed. Five Iron Golf was founded in 2017 and operates nine domestic venues across seven cities and one international franchise in Singapore. Seven additional venues are currently under development, including in Chicago and Seattle, which are projected to open in December 2021 and January 2022, respectively.
Boot Barn announced record 2Q22 results, with sales up 67% over 2Q20 (pre-pandemic) to $312.7 million; comps were up 53.6% relative to 2Q20. Online sales increased 57% and represented 14% of total sales, down from 17% in the prior-year period due to an increased mix of in-store sales. Overall, EBITDA was up 212% from the prior-year period, driven by top-line growth and margin expansion from increased full-priced selling. During the quarter, the Company opened three stores and closed one location, operating 278 stores as of September 25. Boot Barn anticipates unit growth of 10% in FY22. The Company also announced the appointment of Jim Watkins as CFO on November 1. Mr. Watkins previously served in various roles within the Company, including SVP of finance and investor relations. Previous CFO Greg Hackman will continue to serve as EVP and COO. Click here for a list of future openings.
Skechers’ 3Q21 sales increased 19.2% to $1.55 billion, and direct-to-consumer comps were up 31%. Sales grew across all segments with increases to domestic wholesale (22.6% of total sales) of 10.1%, international wholesale (44.9% of total sales) of 10.6%, and direct-to-consumer (31.5% of total sales) of 44.1%. The direct-to-consumer segment achieved a double-digit increase in average selling price from higher prices and lower promotions. As a result, gross margin improved 150 bps to 49.6%, and operating income rose 58.7% to $146.2 million. Cash, cash equivalents, and investments totaled $1.18 billion, a decrease of 25.2% from December 2020 as a result of paying off the $452.5 million outstanding on its $500 million revolver in 2Q21. The Company opened a net 13 international units and closed a net seven domestic locations, ending the quarter with 344 international stores and 516 domestic stores. Looking ahead, Skechers narrowed its sales projections for FY21 to $6.15 billion – $6.20 billion, compared to $6.15 billion – $6.25 billion. Click here for a sample list of future openings.
Sleep Number’s 3Q21 sales increased 20.6% to $640.4 million on comp growth of 16%. Retail comps were up 19% and represented 88.4% of total sales; online comps were flat and represented 11.6% of total sales. Gross margin was down 210 bps to 61% due to significant cost increases. Adjusted EBITDA rose 1.8% to $94.9 million. The Company opened 18 new locations and closed seven underperforming units, ending the quarter with 632 stores.
Dorothy Lane Market (DLM) announced plans to open its first store in the Cincinnati, OH market, in Mason. The chain currently operates three locations in the Dayton, OH area. It is the Company’s first new store in almost two decades. The new unit will be part of a new $150 million mixed-use planned community that will break ground in spring 2022.
Starbucks’ salesrose 31.3% to $8.15 billion, an all-time quarterly high for the Company. Global same-store sales increased 17%, driven by a 15% increase in comparable transactions and a 2% increase in average ticket. U.S. comps jumped 22%, driven by a 19% uptick in comparable transactions and a 3% increase in average ticket. Starbucks’ loyalty program had 24.8 million active U.S. members, up 28% year-over-year. During the quarter, 51% of customers were Starbucks Rewards members. Drive-thru and mobile ordering made up 70% of transactions during the quarter, up 15% from pre-pandemic levels.
Comparable store sales in China, Starbucks’ second largest market, decreased 7%, amid the resurgence of COVID-19 in select cities.
The Company opened 538 net new stores in the quarter, ending the period with a record 33,833 stores globally. Stores in the U.S. and China comprised 62% of the Company’s global portfolio at the end of the quarter, with 15,450 and 5,360 stores, respectively. Click here for a sample list of future openings.
American Eagle Outfitters agreed to acquire Quiet Logistics, a supply chain partner that provides fulfillment services for the Company, for $350 million. Services are offered through a network of facilities in Boston, Chicago, Los Angeles, Dallas, St. Louis, and Jacksonville. Quiet Logistics creates inventory efficiencies, providing affordable same-day and next-day delivery options to customers and stores. Click here for a sample list of future openings.
O’Reilly Automotive’s 3Q21 sales increased more than 8%, aided by 146 net new stores opened YTD; comps were up 6.7%. However, SG&A margin was up 80 bps, and the gain in operating income was held to 4%. Management noted that it continues to be very pleased with the performance of its new stores. Based on its favorable view of the long-term catalysts of demand within the industry, including miles driven and age of vehicles on the road, the Company increased its new store openings target for FY22 to 175 – 185, up from 165 – 175 in FY21. Click here for a sample list of future openings.
On October 25, salad restaurant chain Sweetgreen publicly filed a registration statement on Form S-1 with the SEC relating to the proposed IPO of its Class A common stock. The number of shares to be offered and the price range for the proposed IPO have not yet been determined. Sweetgreen intends to list the stock under the symbol “SG”.
California Pizza Kitchen (CPK) is entering Canada with its first restaurant in Edmonton, Alberta. The new CPK will feature 4,500 square feet of indoor space and 1,800 square feet of enclosed, heated patio space. The unit is the first of many California Pizza Kitchen locations planned in the province during the next eight years. The Company also has plans to open restaurants in additional markets throughout Canada, including Vancouver and Toronto.
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