Jos. A. Bank Offers To Buy Eddie Bauer.
Recently spurned in its attempt to acquire
competitor Men’s Wearhouse, Jos. A. Bank
Clothiers has offered to acquire Eddie Bauer
for $825.0 million in cash and stock. Private
equity firm Golden Gate Capital bought the
apparel retailer out of bankruptcy in 2009 for
$286.0 million in cash plus the assumption
of liabilities. Eddie Bauer currently operates
approximately 370 stores in the U.S. and
Canada. Not to be outdone, Men’s
Wearhouse promptly revised its takeover
offer for Jos. A. Bank only to be rejected
again, with the latter stating that it was open
to talks.
Mergers & Acquisitions
$32
$30
$28
$26
$24
$22
$20
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
Billions
$29.0
$21.4
$15.6
$13.9
$9.0
$1.8
2008
2009
$0.4
2010
2011
2012
2013
YTD2014
Source: PNC Real Estate Market Research
Major Jewelers To Merge. Signet Jewelers Ltd has agreed to acquire rival Zale Corp for $690.0 million in
cash creating a jewelry chain with leading positions in the U.S., U.K., and Canada. Combining for sales of $6.2
billion and approximately 3,600 stores and kiosks, the companies will own a number of the best know jewelry
chains including Zale, Kay Jewelers, and Jared the Galleria of Jewelry in the U.S. Though the deal requires
approval by Zale stockholders, Signet has already won the support of Golden Gate Capital, owner of roughly
22% of Zale stock. Signet reportedly approached Zale regarding a merger in 2006, but was rebuffed. Zale only
recently returned to profitability after struggling amid the financial crisis during which it closed hundreds of
stores. Signet plans to operate Zale as a separate business.
Chuck E. Cheese’s Parent Acquired. An affiliate of buyout firm Apollo Global Management LLC has agreed to
purchase CEC Entertainment Inc., the parent company of Check E. Cheese’s, for roughly $950.0 million. CEC
and its franchisees operate 577 Chuck E. Cheese’s stores located in 47 states and 10 foreign countries or
territories. The company has experienced sluggish revenue growth in recent years amid heightened
competition for children’s entertainment.
Safeway Up For Sale. Grocery store operator Safeway said it is in ongoing talks concerning a potential sale of
the company. The retailer did not disclose with who it is in discussions, adding that it has not yet reached a
final sale agreement and there is no guarantee that a sale will actually close. Safeway reported fourth quarter
2013 revenue of $11.3 billion and a full-year same-store sales increase of 1.7%, which was offset by lower fuel
sales and the disposition of its Genuardi’s banner. Other retailers recently putting their businesses up for
sale include women’s apparel chains Bebe Stores and J. Jill and discounter Fred’s Inc.
Sporting Goods Retailers Getting
Less Pop From Guns & Ammo. The
SPO RTING G O O DS STO RES BY THE NUMBERS
SAME S TO RE SALES G RO W TH
4Q 2010 4Q 2011 4Q 2012 4Q 2013
RETAILER
8.6%
-2.5%
1.2%
7.0%
DICK'S SPORTING GOODS
7.3%
1.7%
12.0%
-10.1%
CABELA'S
0.1%
-2.1%
6.5%
-0.5%
BIG 5 SPORTING GOODS
1.3%
6.8%
4.9%
NAV
HIBBETT SPORTING GOODS
recent sharp boost in demand for
firearms and ammunition has quickly
fizzled, as fears of increased
regulation following the presidential
election have abated. As a result,
some sporting goods retailers are beginning to post significant same-store sales declines. As illustrated in
the adjacent table, Cabela’s leads the way as sales tumbled 10.1% during 4Q2013, following strong gains of
12.0% and 24.0% in 4Q2012 and 1Q2013 respectively. Big 5 Sporting Goods followed suit with a loss of 0.5%
after posting gains of 6.5% and 10.5% during the same periods. The retailer said sales of these products are
down in excess of 50% for the period-to-date. Both of these chains offer a large assortment of firearms and
ammunition, with firearms accounting for roughly 20% of Cabela’s sales and 10.0% at Big 5. Conversely,
Hibbett Sporting Goods, which does not offer these products, managed to grow same-store sales 4.9% during
4Q2012 (down 190 bps from the previous year).
January-February
Store
Closing
Announcements. Department store operator
JC Penney announced it will close 33 stores
(click here for the list) and slash 2,000
positions, which is expected to result in annual
costs savings of about $65.0 million. Despite
this, the company suggested that its multi-year
turnaround strategy may be showing
encouraging results. Though the retailer
refused to give actual numbers, it recently
stated in a press release that it was “pleased”
with the holiday performance and that
customers responded well. During the previous
year’s holiday quarter, JC Penney saw samestore sales plunge 31.7% setting the retailer up
for an easier comparison. During October, the
company reported positive comps for the first
time since December 2011.
JANUARY-FEBRUARY 2014 ANNOUNCED STORE CLOSINGS
# of Announced
Retailer
Segment
Store Closings
Radio Shack
Electronics
500
Dots
Apparel
360
Sbarro
Restaurants
155
Archiver’s
Specialty Stores
33
JC Penney
Department Stores
33
Ruby Tuesday
Restaurants
30
Albertsons
Grocery Stores
26
Sony
Electronics
20
Big 5 Sporting Goods
Sporting Goods
15
American TV & Appliance Electronics
11
Build-A-Bear Workshop
Specialty Stores
10
Marsh Supermarkets
Grocery Stores
8
Macy’s
Department Stores
5
Winn-Dixie
Grocery Stores
4
Sweetbay
Grocery Stores
3
Reid’s
Grocery Stores
3
Harveys
Grocery Stores
2
Nordstrom
Department Stores
2
Macy’s recently detailed a series of normalcourse adjustments to its portfolio of Macy’s and Bloomingdale’s stores across the country. The company will
close five underperforming namesake locations (Mesa, AZ; Overland Park, KS; Florissant, MO; Irondequoit,
NY; Murray, UT) in early spring 2014. Eight new and replacement Macy’s and Bloomingdale’s stores are
currently planned (click here for the list) and/or under construction. The retailer said same-store sales in
November and December rose 3.6% from the year-ago period.
Fellow department store operator Nordstrom announced plans to close its stores in Lloyd Center Mall
(Portland, OR) and Vancouver Mall (Vancouver, WA) in January 2015. The company said the two locations failed
to perform at the level the company needed and investing in remodels did not pan out.
Electronics chain Radio Shack reportedly plans to close about 500 of its roughly 4,500 locations within months
as part of a restructuring move. The company has been working with bankers to boost its liquidity, while
launching a new store prototype designed to appeal to tech-savvy customers.
Restaurant operator Ruby Tuesday said it expects to shutter 30 of its 779 namesake locations over the next
quarter, as it continues to work on restoring the brand’s value positioning. The Maryville, TN-based company
has posted several quarters of negative same-store sales (including -7.8% in the second quarter) and in
December reportedly began seeking strategic alternatives (including a possible sale). Of the upcoming 30
closures, 27 are expected to occur in the third quarter, with the remaining three to come in the fourth quarter.
In an attempt to improve profitability, Italian restaurant chain Sbarro intends to close 155 underperforming
North American locations. The Melville, NY-based retailer is attempting to rebound after emerging from
bankruptcy in 2011. Sbarro’s restaurants are concentrated in malls, where slowing traffic and tepid consumer
spending has taken its toll on food courts. The company operates 800 stores worldwide and opened 81 new
locations during 2013.
As part of a restructuring, Sony Electronics announced plans to close 20 of its 31 U.S. Sony retail stores.
While the recent launch of the PlayStation 4 video game console has been very successful, the company as a
whole continues to struggle. Sony’s credit rating was recently downgraded to junk status by Moody’s Investor
Services.
Fashion Retailer Dots To Liquidate. Fashion
MAJOR U.S. RETAILER BANKRUPTCY FILINGS
retailer Dots filed for bankruptcy protection
40
with a plan to close several dozen of its roughly
400 stores and find a buyer to purchase the
35
remaining ones. However, restructuring firm
30
Gordon Brothers won the bid in bankruptcy
25
court to liquidate all 360 stores beginning
st
20
March 1 . The company cited the economic
37
35
downturn, stating that the company’s financial
15
28
15
25
difficulties have been exacerbated by a number
10
18
of largely unsuccessful changes in product
5
pricing and marketing. The subsequent
9
5
turnaround effort had begun to improve sales
0
2007
2008
2009
2010
2011
2012
2013 YTD2014
growth, but the overall business continued to
be under financial pressure with sales below
Source: PNC Real Estate Market Research
projections. Dots struggled against competition
from both online retailers and other bricks-and-mortar discount retailers that have greater resources and
wider brand recognition. The Ohio-based retailer was purchased by an affiliate of Irving Place Capital in early
2011.
Madison, WI-based electronics retailer American TV & Appliance has filed for receivership and is closing all
11 locations (click here for the list), citing an “unforgiving” economy over the last five years. Additionally,
regional sellers of home electronics have faced elevated competition from big box discounters such as
Walmart, h.h. Gregg, and Costco as well as online merchants.
Specialty retailer Archiver’s announced it would cease operations in mid-February and close all 33 stores.
The scrapbooking supply chain cited the combination of a weak economy and new technology, which has
resulted in steady declines in the memory craft business.
Mall and airport-based specialty chain Brookstone Inc is reportedly contemplating a possible bankruptcy
filing, as it continues to talk with potential buyers including Hilco Global and Tiger Capital Group LLC. The
Merrimack, NH-based retailer has struggled amid disappointing sales, weak liquidity, and a hefty debt load of
approximately $140.0 million. The company cited increased competition from internet retailers as well as
reduced spending stemming from the recent recession, particularly for discretionary items. Brookstone
reportedly missed an interest payment in January on about $125 million of debt and the company holds just
$1.1 million in cash (down from $31.6 million a year earlier). Brookstone’s chief rival Sharper Image filed for
Chapter 11 in February 2008. Though its bricks-and-mortar stores were liquidated by a group of firms
including Hilco, the brand was revived on the internet.
American Apparel bondholders have hired advisers in preparation for restructuring negotiations with the
struggling retailer. The Los Angeles-based chain issued $206 million of bonds last April and entered a new
$35 million asset-backed credit revolver to pay off higher-interest debt. The company increased that credit
line to $50 million three months later, but ran into problems when a malfunctioning distribution center
required costly repairs and slowed sales. American Apparel operates roughly 250 stores.
Women’s apparel chain Coldwater Creek is seeking additional financing after an unsuccessful search for a
potential buyer of the business. The retailer operates approximately 343 retail stores, 36 factory stores, and 7
spas, but said it is planning to close 10 more retail stores during the near-term. Coldwater Creek’s balance
sheet as of November 2nd included nearly $7.0 million in cash and $15.0 million drawn on the retailer’s
revolver.
Expansion-Minded Retailers.
Cabela’s is
set to enter three new markets in 2015 and
2016, with plans to open new stores in
Ammon, ID; Short Pump, VA; and Fort
Oglethorpe, GA. Scheduled store openings
for 2014 represent a 17% increase to the
company’s existing retail square footage.
JANUARY-FEBRUARY 2014 ANNOUNCED STORE OPENINGS
# of Announced
Retailer
Segment
Store Openings
Tim Horton’s
Restaurants
300
O’Reilly Auto Parts
Auto Parts Stores
200
Carter’s
Apparel
84
Hobby Lobby
Specialty Stores
70
Fresh Thyme
Grocery Stores
60
Ashley Furniture
Home Furnishings
50
Lumber Liquidators
Home Improvement
30
Cabela’s
Sporting Goods
23
Sprouts Farmers Markets
Grocery Stores
22
Conn’s
Electronics
15
Uniqlo
Apparel
5
Topshop/Topman
Apparel
5
Macy’s
Department Stores
5
Bloomingdale’s
Department Stores
2
Flight 23
Shoe Stores
1
Jordan Brand has confirmed plans to build
stores that will exclusively sell the Nike
brand’s apparel and footwear beginning with
a location just a block from Madison Square
Garden in New York City. Nike indicated it is
ready to build Jordan-specific retail stores
as well as move the brand into new product
categories, such as running. The company
will work with Footaction on the concept,
known as Flight 23. A recent estimate pegged Jordan’s annual footwear sales in the U.S. at $2.5 billion, which
would give it a No. 2 market share (11.8%) trailing only its parent company.
Hobby Lobby announced plans to open 70 stores throughout the U.S. in 2014, giving it a total 625 locations
nationwide. As part of this expansion, the arts and crafts retailer will enter the states of Vermont and Oregon.
Trendy British retailer Topshop/Topman plans to open a 40,000-square-foot flagship store in fall 2014 on
Fifth Avenue in New York adjacent to Rockefeller Center. The retailer will expand further within the U.S. with
four additional new store openings across the country. This consists of Topshop and Topman joint stores in
Fashion Valley San Digo (17,500 sf), and a stand-alone Topshop in Springfield Town Center Washington (5,000
sf) in th fall of 2014, and Topshop and Topman joint stores in Galleria Mall Houston (16,500 sf) and Lennox
Square Mall Atlanta (15,500 sf) slated for spring 2015.
Japanese casual wear retailer Uniqlo will continue its U.S. expansion with the expected opening of five stores
this spring/summer, including its first foray into the greater Philadelphia metro area. New locations will
include King of Prussia Mall (King of Prussia, PA), Stamford Town Center (Stamford, CT), Serramonte Center
(Daly City, CA), Sunvalley Shopping Center (Concord, CA), and Great Mall of the Bay Area (Milpitas, CA).
In an attempt to infiltrate more densely populated urban markets, Target is testing a new store format called
TargetExpress. The discount retailer completed a lease earlier this year for a 20,000-square-foot test
location in Minneapolis, measuring about a fifth of the size of its smallest format stores to date. The store is
scheduled to open July 27th near the University of Minnesota campus and less than 10 minutes from Target’s
headquarters in downtown Minneapolis. The TargetExpress test store will carry a mix of grocery and
pharmacy items as well as a small selection of basic clothing, home décor, and electronics.
Walmart Doubling Small-Store Growth Amid Weak Same-Store Sales. Citing a recent change in customers’
needs and expectations, Walmart has doubled the number of planned openings among small-format stores
this year to between 270 and 300, up from its initial projection of 120 to 150 smaller locations. The company
has been working to improve its speed-to-market and lower capital costs to allow it to move more
aggressively on small-format stores. Walmart’s 346 Neighborhood Markets continued to post solid
comparable store sales growth of approximately 4.0% during the fiscal year ended Jan. 31st. The company
also said it is pleased with the performance of its 20 Express stores and intends to expand the pilot beyond
the initial three markets. However, overall comparable store sales in the U.S. declined 0.4% during the most
recent quarter and the retailer expects economic factors to continue to weigh on its outlook. Among these
factors include reductions in government benefits, higher taxes, and tighter credit. These concerns, coupled
with investments in e-commerce, are expected to make it difficult for the company to achieve its operating
income in line or above that of sales.
Credit Ratings Changes.

Two of the three ratings agencies have
JANUARY-FEBRUARY DEBT RATINGS CHANGES
Ratings
issued opinions on Safeway’s decision
Agency
Former Rating
New Rating
to look at strategic alternatives. Retailer
Fitch
BBB/Stable
BBB/Stable
Moody’s said the development could Kroger
Moody’s
Caa2/Negative
Caa2/Stable
be “credit negative”, but has no A&P
Safeway
Fitch
BBB-/Stable
BBB-/Neg Watch
immediate impact on ratings. Fitch
SOURCE: S&P; Moody's; Fitch; PNC Real Estate Market Research
placed its rating of the grocery store
operator on Rating Watch Negative, which reflects the expectation that a sale of the company could
cause financial leverage to increase further, into the mid-4x range or higher depending on the
structure of the transaction.

Moody’s upgraded its outlook on the debt of grocer A&P, citing some gains the chain has made as
well as cash generated through asset sales. Although it still believes the retailer’s capital structure is
unsustainable, the ratings agency indicated that the operating performance and liquidity have
demonstrated some improvement, as management initiatives have had a positive impact on
profitability, cash flow, and traffic. Moody’s stated that same-store sales growth continued to
underperform, and reversing the company’s brand erosion due to an extended period of
underperformance will continue to be challenging in light of elevated competition and a sluggish
economy.
Grocers’ Corner

Fresh Thyme Farmers Markets, a new specialty grocer format featuring value-priced healthy and
organic offerings, announced plans to open more than 60 stores (averaging 28,000 square feet)
throughout the Midwest over the next five years. The company’s first store is slated to open in Mt.
Prospect, IL this Spring, followed by eight more openings across Illinois, Indiana, and Ohio throughout
the remainder of this year. The retailer intends to enter Michigan, Missouri, Wisconsin, and Minnesota
in 2015 (click here for the list).

Albertsons recently shuttered 26 underperforming stores (click here for the list) across the country
as part of a quarterly review of performance. The closings included 13 stores in the chain’s Southern
California division, including 11 in California and two in Las Vegas; two in its Southwest division; seven
stores in the Pacific Northwest; two Acme Markets; and two Shaw’s units.

Marsh Supermarkets announced the closure of eight stores (click here for the list), including five in
the Indianapolis area, as part of a three-year plan the retailer is implementing to position the
company for growth and profitability. The strategy is to remodel, rebuild, and re-banner its properties
in an effort to better compete amid heightened competition from discounters and specialty grocers.
Marsh is operated by Florida-based Sun Capital Partners, which purchased the supermarket chain in
2006. The closing announcement follows a recent decision by Pittsburgh-based Giant Eagle to enter
the Indianapolis market in 2015. The first store will be located in Carmel, IN, with opportunities for
additional locations being evaluated.

Bi-Lo Holdings revealed its intention to close 13 grocery stores, eight of which are located in Florida,
as part of its recent acquisition of concept from the Delhaize Group. The parent company of BI-LO and
Winn-Dixie supermarkets struck a deal to acquire 134 stores under the Sweetbay, Harveys, and
Reid’s banners in the southeast. The deal makes Bi-Lo the fifth largest grocery store owner in the
country. Given the number of stores it is acquiring, the company was asked by the FTC to divest some
locations in order to close the deal. Three of the stores closing are Sweetbays, two are Harveys, and
three are Reid’s. Four Winn-Dixie units and one BI-LO store will also be closing under the plan due
primarily to geographic proximity to other stores owned by the company.
CARTER’S (CRI)
Children’s Apparel Stores
REITERATING AGGRESSIVE
CARTER’S
FY2013
Average
FY2012
Avg. Sales/SF
Store Count
ROA
Store Size
Avg. Sales/SF
Store Count
$378
476
8.9%
4,400
$383
413
Alternate Concept: OSHKOSH (Expanding)
$295
181
8.9%
4,400
$324
168
ROA
9.9%
Largest Store
Concentration
NAV
9.9%
NAV
Sources: Company's 10-K; PNC Real Estate Market Research
Children’s apparel retailer Carter’s continues
Historical Development Activity
to accelerate its expansion amid record levels
CARTER'S
of sales and profitability. The retailer has
100
$35.00
posted 25 consecutive years of sales growth,
FORECAST
$34.00
including an 11.0% gain during the most recent
80
$33.00
fiscal year. Despite disappointing sales among
$32.00
60
further out drive-to outlet center stores,
$31.00
40
$30.00
consumers appear to enjoy the convenience of
$29.00
shopping at the company’s 24 side-by-side
20
$28.00
stores (featuring Carter’s and OshKosh
$27.00
0
products). As a result, Carter’s plans to
2008
2009
2010
2011
2012
2013
2014
introduce an additional 24 locations in the sideOpenings
Closings
Remodels
Avg. Base Rent PSF
by-side format during 2014 as well as 60
standalone Carter’s stores. Further out, the company expects to more than double the number of Carter’s
and OshKosh brand units over the next five years.
Atlanta, GA-based Carter’s currently operates 476 namesake (averaging 4,500 square feet) and 181 OshKosh
units (averaging 4,600 square feet), mostly located in outlet and strip centers throughout the Despite an
increase in overall sales, U.S. sales productivity among OshKosh stores fell amid comparable store sales
decline of 3.4%. The company boosted new store openings from 71 locations during fiscal 2012 to 83 units in
fiscal 2013, with closings remaining minimal at less than 10. During this period, the company’s return on
assets declined 100 bps to 8.9%.
Carter’s posted capital expenditures of $183.0
Historical Capital Expenditures
(In Millions )
million in 2013 compared to $83.0 million the
CARTER'S
previous
year,
reflecting
meaningful
$200
investments to support its planned growth
FORECAST
$180
agenda. Specific areas of investments included $160
new retail stores in the U.S. and Canada, a new $140
multi-channel distribution center, and the $120
build-out of its new Atlanta global $100
$80
headquarters. The company anticipates capital
$60
spending will return to a more normalized level
$40
in 2014. Since its inception, Carter’s e$20
$0
commerce channel has experienced rapid
2008
2009
2010
2011
2012
2013
2014
sales growth. Online sales increased nearly
50.0% last year, growing to 17.0% of retail sales, compared to 13.0% the prior year.
1
NOTE: Retailers are considered to be “Aggressive” if they have indicated that they expect to add stores equal to or in excess of 10% of their current
fiscal year store count. Those retailers that expect to net at least one new store, but less than 10% of their current fiscal year store count are
considered to be “Expanding”. Those retailers whose openings and closings cancel each other out are labeled “Stable”. Finally, the “Contracting”
label is used for those retailers projecting to close more locations than they will open.
MACY’S (M)
Department Stores
REITERATING STABLE
MACY’S
FY2013
Average
FY2012
Avg. Sales/SF
Store Count
ROA
Store Size
Avg. Sales/SF
Store Count
$163
840
6.9%
180,400
$162
841
Closest Competitor: DILLARD’S (Contracting)
NAV
NAV
NAV
168,875
$126
302
ROA
6.3%
Largest Store
Concentration
Northwest (128)
8.3%
Texas (60)
Sources: Company's 10-K; PNC Real Estate Market Research
Department store operator Macy’s Inc. again
Historical Development Activity
revealed a series of openings and closings as
MACY'S
part of the company’s normal-course process
$5.20
to selectively trim underperforming locations 20
FORECAST
$5.10
while introducing new stores to local markets 15
$5.00
lacking a presence. As a result, the retailer will
close five namesake locations in early spring 10
$4.90
2014 (click here for the list), booking an
$4.80
5
estimated $2.0 million to $4.0 million of costs.
$4.70
These shutterings will be offset by five new
$4.60
0
Macy’s stores and two new Bloomingdale’s
2008
2009
2010
2011
2012
2013
2014
store (as well as one replacement store in Palo
Openings
Closings
Remodels
Avg. Base Rent PSF
Alto, California). Though the company posted
same-store sales growth of 1.4% during the fourth quarter (and 1.9% on the year), sales in January fell well
short of expectations due to the weather in many parts of the country.
Macy’s currently operates approximately 840 department stores across 45 states and the District of
Columbia under the names of Macy’s and Bloomingdale’s. Total retail square footage remained relatively
unchanged at 150.5 million square feet during the most recent fiscal year while net sales grew less than
1.0% to $27.9 billion, yielding sales productivity gains (including online sales) of 1.1%. The company’s return
on assets also improved during the same period, rising 60 bps to 6.9%. Namesake stores typically range in
size from 150,000 to 300,000 square feet (with new stores ranging from 100,000 to 160,000 square feet), while
Bloomingdale’s are larger at 200,000 to 260,000 square feet (though newer stores are expected to be smaller
at 120,000 square feet). The company leases approximately a third of its existing store base.
Looking ahead, capital expenditures are
Historical Capital Expenditures
expected to approximate $1.05 billion during
(In Millions )
MACY'S
fiscal 2014. This represents a 13.5% increase
$1,200
over that which was earmarked for 2013 and
FORECAST
the largest total since prior to the beginning of $1,000
the recession. Though it failed to report
$800
updated numbers for fiscal 2013, the
$600
company’s recent focus on improving its ecommerce platform appears to be paying off.
$400
Internet sales jumped 41.0% during 2012
$200
accounted for 11.3% of overall sales (affecting
$0
comparable store sales by 2.2%). Macy’s will
2008
2009
2010
2011
2012
2013
2014
have to deal with $453 million of debt maturing
in July, which it expects to refinance during the year. Long-term debt is somewhat of a concern at more than
$6.8 billion ($1.8 billion in cash), though near-term maturities total $500.0 million.
OFFICE DEPOT (ODP)
Office Supply Stores
REITERATING CONTRACTING
OFFICE DEPOT
FY2013
Average
FY2012
Avg. Sales/SF
Store Count
ROA
Store Size
Avg. Sales/SF
Store Count
$164
1,912
-0.3%
22,950
$175
1,112
Closest Competitor: STAPLES (Contracting)
$263
1,886
-1.7%
18,000
$259
1,917
ROA
-1.9%
Largest Store
Concentration
Texas (222)
7.3%
California (218)
Sources: Company's 10-K; PNC Real Estate Market Research
Following a transformational merger with rival
Historical Development Activity
OfficeMax in 2013, Office Depot now boasts
OFFICE DEPOT
annual sales of approximately $17.0 billion
$19.00
among more than 2,200 stores worldwide. The 140
NO
120
FORECAST $18.50
combination of two businesses offering similar
$18.00
products and services that operate with similar 100
80
structures is expected to yield annualized cost
$17.50
60
synergies of more than $600 million, excluding
$17.00
40
any benefit from rationalizing the U.S. retail
$16.50
20
store base. The company has launched a full
$16.00
0
analysis of its real estate portfolio in an effort
2008
2009
2010
2011
2012
2013
2014
to construct a plan to rationalize the real estate
Openings
Closings
Remodels
Avg. Base Rent PSF
footprint and consolidate store operations in
the U.S. The retailer will begin by testing a plan to maximize transfer rates from closed stores to existing
stores. The company will focus on unprofitable stores, with closures to occur from a lease obligation and
cash flow standpoint.
Boca Raton, Florida-based Office Depot currently operates approximately 1,912 North American stores,
averaging roughly 22,950 square feet. During the most recent fiscal year, the company opened just four new
stores and closed 33 underperforming locations. Overall store productivity within the Retail segment fell
6.3% over the past year to $164 psf and was weighed down by a 4.0% decline in North American same-store
sales. Among legacy Office Depot contract business, the company saw significant sales declines among
federal agency customers, arising from the government shutdown and general budgetary constraints.
Despite rising 160 bps, the company’s return on assets remained in negative territory at -0.3%.
Office Depot expects CapEx to range from $200
Historical Capital Expenditures
to $250 million annually between 2014 and
(In Millions )
OFFICE DEPOT
2016, with approximately $50 million related to
merger integration. Though adjustments to the $350
FORECAST
retail store base have yet to be quantified, $300
approximately three quarters of domestic store $250
leases expire over the next five years, which $200
provides the retailer with the flexibility to make $150
significant changes. Office Depot expects to
$100
finalize the plan by the end of the second
$50
quarter and begin executing in the back half of
$0
2014. The company ended 2013 with total
2008
2009
2010
2011
2012
2013
2014
liquidity of $2.1 billion, comprised of $1.0
billion in cash and $1.1 billion available from our asset base lending facility. Near-term maturities total just
$44 million during the current fiscal year and $104 million over the next 1-3 years.
SPROUTS FARMERS MARKET (SFM)
Grocery Stores
REITERATING EXPANDING
FY2013
Avg. Sales/SF
Store Count
$532
167
$505
7,873
SPROUTS FARMERS MARKET
Average
FY2012
ROA
Store Size
Avg. Sales/SF
Store Count
4.4%
27,440
$490
148
Segment Average:
4.4%
45,200
$490
7,796
ROA
2.2%
Largest Store
Concentration
California (73)
3.9%
-
Sources: Company's 10-K; PNC Real Estate Market Research
Nascent grocery chain Sprouts Farmers
Historical Development Activity
Market continues to project robust store
SPROUTS FARMERS MARKET
growth amid strong same-store store sales
$20.00
FORECAST
increases. On a combined basis, the company 25
has opened an average of 17 stores per year 20
$15.00
from fiscal 2008 through 2013 and plans to 15
introduce between 22 and 24 new units during
$10.00
the current fiscal year. Sprouts has achieved 27 10
$5.00
consecutive quarters of comparable store sales
5
growth, which has accelerated more recently to
0
$0.00
9.7% and 10.7% during fiscal 2012 and 2013
2010
2011
2012
2013
2014
respectively. Stores acquired through the
Openings
Closings
Remodels
Avg. Base Rent PSF
recent Sunflower transaction contributed 39%
of the increase in net sales during 2013, with new store openings chipping in for another 29%.
Phoenix, AZ-based Sprouts currently operates nearly 170 stores across nine states, including 73 units in
California (representing 44% of total stores and 46% of total net sales in 2013). Though this makes the
company significantly less diversified than many of its peers, it has benefited more recently from its
overweight exposure to states experiencing economic recovery such as California, Nevada, and Arizona.
Stores are located in a variety of mid-sized and larger shopping centers, lifestyle centers, and stand-alone
developments. Store sizes generally range between 25,000 and 28,000 square feet, which is significantly
smaller than many of its competitors and allows for flexibility in site selection. Since its inception in 2002, the
company has introduced 91 new stores while rebranding 43 Henry’s and 39 Sunflower stores to the Sprouts
banner. A 22.4% increase in net sales during its first full year as a public company translated to an 8.6%
boost in store productivity to an average $532 psf. The grocer’s return on assets improved 220 bps to 4.4%
during the same period.
Kroger
Roundy's
Harris Teeter
Safeway
Publix
Supervalu
Whole Foods
Sprouts
Looking ahead, Sprouts expects capital
(Square Feet)
Grocery Store Sizes
expenditures to range from $110 to $120
million in fiscal 2013 and will be primarily used 70,000
to fund investments in new stores (including its 60,000
first store in Kansas), remodels, and
50,000
maintenance. The retailer expects to achieve
new store growth of 12% or more annually over 40,000
the next five years. Sprouts will make its first 30,000
foray into the Atlanta market this year, with
four new stores set to be introduced this 20,000
summer. Long term the company believes it 10,000
can support approximately 1,200 stores,
0
including 300 in states in which it currently
operates. Store remodels are expected to total 15 on the year and will be mainly focused in the Texas region.
CABELA’S (CAB)
Sporting Goods
REITERATING AGGRESSIVE
CABELA’S
FY2013
Avg. Sales/SF
Store Count
$379
50
$204
1,980
Average
FY2012
ROA
Store Size
Avg. Sales/SF
Store Count
3.5%
117,800
$359
40
SEGMENT TOTAL/AVERAGE
12.3%
23,495
$194
1,887
ROA
3.0%
Largest Store
Concentration
Nebraska (3)
11.5%
-
Sources: Company's 10-K; PNC Real Estate Market Research
Despite continued encouraging results from its
Historical Development Activity
next-generation stores, Cabela’s reported a
CABELA'S
10.1% decline in fourth quarter sales. The
$16.00
retailer cited a sharp dropoff in sales of 16
FORECAST
$14.00
14
firearms and ammunition, as the recent 12
$12.00
“bubble” prompted by fears of increased 10
$10.00
regulation following the presidential election
$8.00
8
$6.00
6
appears to have burst. Through the first six
$4.00
4
weeks of 2014, sales of firearms and
$2.00
2
ammunition were down roughly 50% compared
$0.00
0
with the same period last year, when sales
2008
2009
2010
2011
2012
2013
2014
among this category doubled. Comp store
Openings
Closings
Remodels
Avg. Base Rent PSF
sales excluding firearms and ammunition were
down 3.5% during the same quarter. On the positive side, next-generation stores were at least 50% more
productive than legacy locations in both sales and profit per square foot.
Sidney, NE-based Cabela’s currently operates approximately 50 North American stores, consisting of 46
stores in 26 states and four units in Canada. During 2013, the company opened ten retail locations, including
three new Outpost stores, pushing total retail square footage to 5.9 million square feet. While large format
stores are 150,000 square feet or larger, the next-generation format totals between 70,000 and 100,000
square feet allowing for a more efficient development timeline. In an effort to serve more small markets,
Cabela’s has also developed a new “Outpost” format, averaging 40,000 square feet. Sales productivity across
all stores averaged $379 psf during fiscal 2013, up 5.6% from the prior year. Sales among the company’s
direct segment rebounded this past year (4.6%), following three consecutive years of declines and now
accounts for 30.4% of overall revenue.
Looking ahead, Cabela’s projects capital
Historical Capital Expenditures
expenditures will range between $400 and $450
CABELA'S
million during fiscal 2014, most of which will be
$450
used to fund its accelerating store growth
FORECAST
$400
plans. Accordingly, the company expects to
$350
complete a small financing transaction during $300
the year and may also renegotiate its existing $250
credit agreement to increase capacity and $200
extend the maturity. Scheduled store openings $150
on the year represent a 17% increase in retail $100
$50
square footage. Further out, the retailer has
$0
announced nine next-generation stores for
2008
2009
2010
2011
2012
2013
2014
2015, as it continues to evaluate new sites. This
will likely be met with increased competition, as rival Dick’s Sporting Goods recently acquired the Field &
Stream brand and expects to begin to roll this concept out to more markets.
CVS CAREMARK (CVS)
Drug Stores
REITERATING EXPANDING
CVS CAREMARK
FY2013
Average
FY2012
Avg. Sales/SF
Store Count
ROA
Store Size
Avg. Sales/SF
Store Count
$515
7,660
6.4%
9,790
$526
7,458
Closest Competitor: WALGREENS (Expanding)
$303
7,930
6.4%
14,500
$298
7,761
ROA
5.9%
Largest Store
Concentration
California (856)
9.9%
Florida (881)
Sources: Company's 10-K; PNC Real Estate Market Research
Drug store operator CVS Caremark announced
Historical Development Activity
a major decision to exit the tobacco category, a
CVS CAREMARK
category it believes is inconsistent with its
FORECAST
200
$35.00
growing role in the changing healthcare
$30.00
marketplace. The company projects it will lose 150
$25.00
$2.0 billion in revenues on the year, consisting
$20.00
of $1.5 billion in tobacco sales and another 100
$15.00
$0.5 billion from the rest of that shoppers’
$10.00
50
basket. The chain continues to believe its store
$5.00
development program is an integral part of its
$0.00
0
ability to maintain a leadership position in the
2008
2009
2010
2011
2012
2013
2014
drugstore industry. During 2013, the retailer
Openings
Closings
Remodels
Avg. Base Rent PSF
opened 169 new stores (while closing 13
existing locations), boosting retail square footage 2.6% to 75.0 million square feet. During the last five years,
the company has introduced more than 1,300 new and relocated stores, while acquiring an additional 82
stores.
CVS Caremark currently operates approximately 7,660 stores (averaging 9,790 square feet) among 43 states,
the District of Columbia, and Puerto Rico primarily under the CVS and Longs Drugs banners. The retailer
operates within 95 of the top 100 U.S. drugstore markets and hold the number one or number two market
share in 86 of these markets. During 2013, the company filled 734 million retail prescriptions, or
approximately 21% of the U.S. pharmacy market. Sales productivity among these stores averages $515 psf
(not including prescription revenue accounting for 69.5% of total sales), down 2.1% from the previous year.
The company’s return on assets rose 50 bps to 6.4% during the same period. CVS leases nearly 95% of its
locations, with base rents among these stores averaging approximately $31.18 psf during FY2013.
Looking
ahead,
CVS
expects
capital
expenditures
to
remain
steady
at
(In Millions )
approximately $2.0 billion during fiscal 2014.
The company anticipates square footage $3,000
growth of between 2.0% and 3.0% during the $2,500
same period. Though same-store sales $2,000
increased 4.0% among the entire retail
business during the most recent fourth $1,500
quarter, front store business declined 1.9%, $1,000
reflecting a decline in traffic partially offset by
$500
an increase in basket size. However, the
$0
company did achieve its goal of retaining at
least 60.0% of the scripts gained during the
impasse between rival Walgreens and Express Scripts.
Historical Capital Expenditures
CVS CAREMARK
FORECAST
2008
2009
2010
2011
2012
2013
2014
BIG 5 SPORTING GOODS (BGFV)
Sporting Goods
REITERATING EXPANDING
FY2013
Avg. Sales/SF
Store Count
$210
429
$205
1,980
BIG 5 SPORTING GOODS
Average
FY 2012
ROA
Store Size
Avg. Sales/SF
Store Count
6.3%
11,000
$207
414
SEGMENT TOTAL/AVERAGE:
12.3%
23,495
$194
1,887
ROA
3.7%
Largest Store
Concentration
California (217)
11.5%
-
Sources: Company's 10-K; PNC Real Estate Market Research
Big 5 Sporting Goods expects to introduce a
Historical Development Activity
similar number of new stores this year despite
BIG 5 SPORTING GOODS
a slowdown in same store sales. Comparable
$13.40
FORECAST
store sales rose 3.9% during fiscal 2013, 20
$13.20
including a decline of 0.5% during the fourth 15
$13.00
quarter, which were impacted by extraordinary
firearms and ammunition sales from the prior 10
$12.80
year. Looking ahead, the first quarter has been
$12.60
5
very challenging, particularly when compared
$12.40
to the 10.5% same-store sales increase
$12.20
0
achieved during the prior year. Drought
2008
2009
2010
2011
2012
2013
2014
conditions in many of the retailer’s key western
Openings
Closings
Remodels
Avg. Base Rent PSF
markets have reduced demand for winterrelated products, while lower firearms and ammunition sales have adversely affected historic traffic levels.
Sales of these products are down in excess of 50% for the period-to-date.
El Segundo, CA-based Big 5 Sporting Goods currently operates nearly 430 stores (averaging approximately
11,000 square feet) across twelve western states. The company has sought to expand its store base through
controlled growth, including 62 new units over the past five fiscal years (44% of which were located in
California). Though the recent recession slowed this pace to just three new stores in fiscal 2009, the
company has since accelerated back to 12 new units annually over the past five fiscal years. The retailer’s
smaller store size allows it to operate in smaller markets and at lower net sales per store. As a result, its
stores are among the most productive of any full-line sporting goods retailer, averaging sales psf of
approximately $210 during fiscal 2013. Big 5 leases all of its stores, paying average base rents of $13.30 psf,
which represents a 0.7% increase over the previous year.
Big 5 Sporting Goods anticipates capital
(In Millions )
expenditures to range between $28.0 and $32.0
million during fiscal 2013. This is well above
the $22.0 million spent last year, which was $30
primarily used to introduce 15 new stores. The $25
company has been enhancing its website $20
ahead of launching a full e-commerce
platform, which it expects to occur during the $15
summer of this year. The company anticipates $10
opening approximately 15 net new stores
$5
during the current fiscal year and has closed
$0
four stores during the first quarter (three of
2008
2009
which were part of relocations). Over the next
five years, 39 leases are scheduled to expire without renewal options.
Historical Capital Expenditures
BIG 5 SPORTING GOODS
FORECAST
2010
2011
2012
2013
2014
O’REILLY AUTOMOTIVE (ORLY)
Auto Parts Stores
REITERATING EXPANDING
O’REILLY AUTOMOTIVE
FY2013
Average
FY 2012
Avg. Sales/SF
Store Count
ROA
Store Size
Avg. Sales/SF
Store Count
$221
4,166
11.0%
7,220
$216
3,976
Closest Competitor: ADVANCE AUTO PARTS (Expanding)
$219
4,049
7.0%
7,335
$223
3,794
ROA
10.2%
Largest Store
Concentration
Texas (603)
8.4%
Florida (519)
Sources: Company's 10-K; PNC Real Estate Market Research
Auto parts chain O’Reilly Automotive continues
Historical Development Activity
to grow market share with solid ticket count
O'REILLY AUTOMOTIVE
growth across the chain, coupled with robust
$14.00
build-out of professional business in its less 250
FORECAST
$12.00
mature markets, particularly in the western 200
$10.00
part of the country. Though the level of 150
$8.00
unemployment and underemployment remains
$6.00
high, the company expects to see growth in 100
$4.00
average transaction size due to increasingly
50
$2.00
complex parts. Same-store sales increased
$0.00
0
4.3% over the prior year (including growth of
2008
2009
2010
2011
2012
2013
5.4% during the fourth quarter) and were
Openings
Closings
Remodels
Avg. Base Rent PSF
positively affected by the DIY and professional
customers. The company met its goal of opening 190 net new stores on the year.
Springfield, MO-based O’Reilly Automotive currently operates approximately 4,200 stores (averaging 7,220
square feet) across 42 states. To augment its robust distribution center network, the company operates 266
Hub stores (averaging 10,000 square feet) that also provide delivery service and same-day access to an
average of 43,000 SKUs to other stores within the surrounding area. Sales productivity across all stores
averaged $221 psf during the most recent fiscal year, up 2.3% from fiscal 2012. The company’s return on
assets remains strong, increasing 80 bps to 11.0% during the same period. O’Reilly leases more than 65.0%
of its stores, with base rents averaging $12.69 psf (up 2.2% from fiscal 2012). Since 2010, the retailer’s longterm debt has increased more than 290% to nearly $1.4 billion. Near-term maturities remain manageable,
however, including $61.2 million over the next year amid cash and cash equivalents of roughly $230.0
million.
Looking ahead, O’Reilly projects capital
expenditures of between $390.0 and $420.0
million for fiscal 2014, relatively in line with the
$396.0 million spent during 2013. A portion of
this will be used to open 200 net new stores,
with the majority to come in Florida, California,
Texas, and the Upper Midwest. The company
will also complete construction of three new
distribution centers this year, consisting of
Lakeland, FL; Naperville, IL; and Devens, MA.
The retailer recently acquired and converted 56
locations from its deal with VIP Parts, Tires &
Services and intends to grow market share
with further expansion into the Northeast.
Historical Capital Expenditures
O'REILLY AUTOMOTIVE
(In Millions )
$450
FORECAST
$400
$350
$300
$250
$200
$150
$100
$50
$0
2008
2009
2010
2011
2012
2013
2014
JCPenney Store Closures Announced January 15, 2014 State AL CA CO CT FL FL IA IL IL IN IN MD MI MN MS MS MT MT NC NJ NJ OH PA PA PA TN VA VA WI WI WI WI WI City Selma Rancho Cucamonga Colorado Springs Meriden Leesburg Port Richey Muscatine Bloomingdale Forsyth Marion Warsaw Salisbury Marquette Worthington Gautier Natchez Butte Cut Bank Kinston Burlington Phillipsburg Wooster Exton Hazleton Washington Chattanooga Bristol Norfolk Fond Du Lac Janesville Rhinelander Rice Lake Wausau Shopping Center Selma Mall Arrow Plaza Chapel Hills Mall Meriden Square Lake Square Mall Gulf View Square Muscatine Mall Stratford Square Mall Hickory Point Mall Five Points Mall Marketplace Shopping Center The Centre at Salisbury Westwood Plaza Northland Mall Singing River Mall Natchez Mall Butte Plaza Shopping Center (N/A) Vernon Park Mall Burlington Center Phillipsburg Mall Wayne Towne Plaza Exton Square Mall Laurel Mall Washington Mall Northgate Mall Bristol Mall Military Circle Mall Forest Mall Janesville Mall Lincoln Plaza Center Cedar Mall Wausau Mall MACY’S
BLOOMINGDALE’S
Closings:
Openings:
Fiesta Mall (LNR Partners, 159,000 sf)
Mesa, AZ
Stanford Shopping Center
Palo Alto, CA (120,000 square feet, Fall 2014)
Metcalf South SC (MD Mgt, 216,000 sf)
Overland Park, KS
Ala Moana
Honolulu, HI (167,000 square feet, Fall 2015)
Jamestown Mall (JM Holding LLC, 200,000 sf)
Florissant, MO
Mall at Miami Worldcenter
Miami, FL (120,000 square feet, Fall 2016)
Medley Centre (Pyramid Mgt Grp, 129,000 sf)
Irondequoit, NY
Fashion Place Mall (GGP, 26,000 sf)
Murray, UT
Openings:
University Town Center
Sarasota, FL (160,000 square feet, Fall 2014)
Shops at Summerlin
Las Vegas, NV (180,000 square feet, Fall 2014)
Mall at Bay Plaza
The Bronx, NY (160,000 square feet, Fall 2014)
Plaza Del Caribe
Ponce, PR (150,000 square feet, Fall 2015)
Mall at Miami Worldcenter
Miami, FL (195,000 square feet, Fall 2016)
Westfield South Shore
Bay Shore, NY (200,000 square feet, Fall 2013)
AMERICAN TV & APPLIANCE CLOSINGS LIST
WISCONSIN
4750 Grande Market Drive
Appleton, WI 54913
1870 Casaloma Drive
Appleton, WI 54913
2404 W Beltline Highway
Madison, WI 53713
6700 W Brown Deer Road
Brown Deer, WI 53223
9191 S 13th Street
Oak Creek, WI 53154
5215 High Crossing Blvd
Madison, WI 53718
W229N1400 Westwood Drive
Waukesha, WI 53186
ILLINOIS
5801 W War Memorial Drive
Peoria, IL 61615
6651 E State Street
Rockford, IL 61108
IOWA
5355 NW 86th Street
Johnston, IA 50131
4800 Elmore Avenue
Davenport, IA 52807
FRESH THYME FARMERS MARKET OPENINGS LIST Illinois
Minnesota
Spring 2014
211 W. Rand Road
Mt. Prospect, IL 60056
Opening 2015
8005 Penn Ave. S.
Bloomington, MN 55431
Summer 2014
35 Waukegan Road
Deerfield, IL 60015
Missouri
Opening 2015
6567 N. Illinois St.
Fairview Heights, IL 62208
Opening 2015
321 Ogden Ave.
Downers Grove, IL 60515
Opening 2015
Naperville, IL
Opening 2015
Joliet, IL
Indiana
Summer 2014
8750 U.S. Highway 31
Indianapolis, IN 46227
Summer 2014
4225 East 82nd St.
Indianapolis, IN 46250
Fall 2014
282 S. Creasy Lane
Lafayette, IN 47905
Summer 2014
4310 Coldwater Road
Ft. Wayne, IN 46805
Opening 2015
2342 W. 86th St.
Indianapolis, IN 46260
Michigan
Opening 2015
940 Trowbridge Road
East Lansing, MI 48823
Opening 2015
10798 Manchester Road
Kirkwood, MO 63122
Opening 2015
Ballwin, MO
Ohio
Summer 2014
6700 Sawmill Road
Columbus, OH 43235
Fall 2014
11349 Montgomery Road
Cincinnati, OH 45249
Fall 2014
3321 Alamo Ave.
Cincinnati, OH 45209
Opening 2015
4341 Feedwire Road
Centerville, OH 45440
Opening 2015
2015 Centre Drive
Fairborn, OH 45324
Opening 2016
Worthington
Columbus, OH
Wisconsin
Opening 2015
Brookfield, WI
Opening 2015
Milwaukee, WI
ALBERTSON CLOSINGS LIST
CALIFORNIA
Westridge Village
26850 The Old Road
Valencia, CA
1100 N Hamner Avenue
Norco, CA
2522 S Grove Avenue
Ontario, CA
Canyon Square Plaza
18571 Soledad Canyon
Canyon Country, CA
8310 Limonite Avenue
Riverside, CA
Venice Crossroads
8985 Venice Boulevard
Culver City, CA
Bixby Hacienda Plaza
17120 Colima Road
Walnut, CA
632 Redondo Avenue
Long Beach, CA
1000 N Azusa Avenue
Covina, CA
Harbor Grove Center
13220 Harbor Boulevard
Garden Grove, CA
NEW MEXICO
341 E Imperial Highway
Fullerton, CA
Four Hills Village Shopping Center
13140 Centreal Avenue SE
Albuquerque, NM
OREGON
8030 Dale Street
Buena Park, CA
Garden Grove Town Center
9822 Katella Avenue
Anaheim, CA
3901 Crenshaw Boulevard
Los Angeles, CA
1000 S Central Avenue
Glendale, CA
18555 Devonshire Street
Northridge, CA
7227 Van Nuys Boulevard
Van Nuys, CA
Bear Valley Center
13650 Bear Valley Road
Victorville, CA
Pigeon Pass Plaza
11875-A Pigeon Pass Road
Moreno Valley, CA
17120 E Colima Road
Rowland Heights, CA
Albany Plaza
1177 Waverly Drive SE
Albany, OR
1300 SW Court Avenue
Pendleton, OR
WASHINGTON
Padden Market Center
8300 NE 137th Avenue
Vancouver, WA
Vancouver Market Center
5000 E 4th Plain Boulevard
Vancouver, WA
Westgate South Shopping Center
2401 N Pearl Street
Tacoma, WA
University Village Shopping Center
3905 Bridgeport Way W
Tacoma, WA
Canyon Park Shopping Center
22621 Bothell Everett Highway
Bothell, WA
MARSH SUPERMARKETS CLOSINGS LIST
Eagledale Plaza
2802 Lafayette Road
Indianapolis, IN
Emerson Plaza
5249 E Thompson Road
Indianapolis, IN
Speedway Plaza
6121 Crawfordsville Road
Indianapolis, IN
1162-1172 N Main Street
Franklin, IN
702 W South Street
Lebanon, IN
Southway Centre
3705 Madison Street
Muncie, IN
Rural King Center
3910 W Bethel Avenue
Muncie, IN
1084 E 2nd Street
Franklin IN