Weekly Store Openings and Closures Tracker #14: True Religion Bankruptcy & Walgreens Adds Stores Fung Global Retail & Technology tracks store openings and closures for a select group of US retailers. 1) We forecast that there will be 9,452 announced store closures by the end of 2017, exceeding the 6,164 stores closed in 2008. Our forecast for 2017 represents a year-over-year increase of 361%. 2) This week, denim retailer True Religion filed for bankruptcy protection and will undergo a capital restructuring. 3) Walgreens purchased 2,186 stores from competitor Rite Aid for a cash deal worth $5.2 billion. 4) Beauty company PDC Brands was acquired by private equity firm CVC Capital Partners for $1.42 billion. 5) Year-to-date 2017, the number of store closure announcements has increased 162% year over year, bringing the total number of stores to be closed to 5,368, with more to surely follow. Deborah Weinswig Managing Director Fung Global Retail & Technology deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 1
2017 Store Openings and Closures What Is Happening This Week? Traditional retailers continue to be overwhelmed by bankruptcy. Denim retailer True Religion filed for Chapter 11 this week and undergoes a capital restructuring, with 27 stores to be closed in the process. Meanwhile, drugstore operator Walgreens purchased 2,186 stores from Rite Aid, after failing to acquire Rite Aid itself. Finally, beauty company PDC Brands was acquired by private equity firm CVC Capital Partners for $1.42 billion. True Religion Files for Bankruptcy and Is to Close 27 Stores Denim retailer True Religion filed for Chapter 11 this week, citing a capital structure reorganization as the primary reason. The Chapter 11 filing is expected to reduce existing debt by $350 million and convert it into the reorganized company s equity. Some 27 retail stores, i.e., 19% of the total store fleet, are set to be closed in the process, according to USA Today. The need to reorganize its capital structure came as the rise of e-commerce and internet shopping has put intense pressure on earnings at True Religion, which is owned by a private equity firm, and has a significant debt load. Management reiterated that business operations will not be affected by the restructuring. Walgreens Acquires over 2, Stores from Rite Aid Walgreens announced a definitive agreement with Rite Aid under which Walgreens will acquire three distribution centers, 2,186 stores and all related inventories for a cash deal worth $5.2 billion. The store acquisitions came as the deal which would have seen Walgreens acquire Rite Aid fell apart. Negotiations started as early as October 2015, but the deal-in-progress faced intense scrutiny from antitrust officials and broke down eventually. The final store acquisition plan is seen as a backup plan for Walgreens to keep expanding. After the deal, Rite Aid s store count will be halved, bringing the store count to around 2,300 stores, while Walgreens will have over 10,000 stores in the US. Private Equity Firm CVC Capital Partners Acquires PDC Brands CVC Capital Partners closed the $1.42 billion deal to acquire PDC Brands, a beauty company with an international presence. Notable brands under PDC include Dr. Teal s, Cantu, Body Fantasies, BOD Man and Eylure. The beauty company was previously owned by Yellow Wood, also a private equity firm. PDC will continue its strategy to identify brands and bring them into the company for more rapid growth. 2
Year-to-Date 2017 Major US Store Closure Announcements RadioShack Payless Inc Gymboree Rue 21 Ascena Retail The Limited Sears and Kmart hhgregg GameStop Bebe Stores Inc Wet Seal Crocs Inc. JCPenney BCBG American Apparel Gordmans Stores Inc. Michael Kors Macy s Staples CVS MC Sports Guess Chico s Lucy Acgvewear lululemon athlegca Eastern Oueifers Gander Mountain True Religion Ralph Lauren 250 246 220 190 180 171 160 138 120 110 101 70 70 68 60 50 44 40 36 32 27 23 400 400 450 512 0 Total: 5,368 announced store closures 162% year over year 0 200 400 600 800 0 1200 Gymboree announced it would be closing 350 450 stores. Ralph Lauren s store closing number was part of the 50-store closure plan announced in June 2016. Payless will close an additional 296 stores if negotiations with landlords are unsuccessful. Ascena will close between 268 and 667 stores by July 2019, depending on negotiations with landlords. 3
Year-to-Date 2017 Major US Store Opening Announcements Dollar General Dollar Tree Aldi TJX Five Below Ulta Lidl Ross Stores Sephora H&M Hobby Lobby Walmart Dick s Sporgng Goods, Inc. Target Costco Bonobos Macy's Backstage Nordstrom Forever 21 (Riley Rose) Thredup 111 90 70 60 60 59 52 30 24 20 19 17 10 5 400 650 1,290 Total: 3,267 announced store openings 53% year over year 0 200 400 600 800 1,000 1,200 1,400 Aldi will complete a 400-store expansion by the end of 2018. Walmart s target of 59 stores includes new, expanded and relocated stores. Target is only opening stores in small format. Macy s Backstage will be opened within existing full-line Macy s stores. 4
2016 Store Openings and Closures 2016 Major US Store Closures Sports Authority Hancock Fabrics Sears and Kmart Men s Warehouse/Jos A. Bank Aeropostale Walmart Office Depot Gap Walgreens Wolverine World Wide Ralph Lauren Staples Chico s FAS The Children s Place American Eagle Kohl s Finish Line JCPenney 71 67 51 50 48 34 34 26 18 18 9 123 154 154 233 243 255 463 Total: 2,051 announced store closures 0 50 150 200 250 300 350 400 450 500 2016 Major US Store Openings Dollar General 900 Dollar Tree 584 TJX 146 Ulta Ross Stores Dick s Sporgng Goods Sephora H&M Aldi Costco Under Armour Target Zara 104 93 79 72 53 45 19 19 15 10 Total: 2,139 announced store openings 0 200 300 400 500 600 700 800 900 1,000 5
Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 deborahweinswig@fung1937.com Kiril Popov Senior Analyst Esme Pau Analyst Matthew Lee Research Assistant Hong Kong: 8th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 4406 London: 242-246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 New York: 1359 Broadway, 18th Floor New York, NY 18 Tel: 646 839 7017 FungGlobalRetailTech.com 6