Wednesday, March 7, 2018

Investments in grocery-anchored centers grew in 2017

Investments in grocery-anchored shopping centers grew by 5.3% last year compared to 2016, according to a report issued by Chicago-based Jones Lang Lasalle (JLL). The increase makes the grocery-anchored segment one of the few retail sectors to see real growth.

The report also stated that grocery store openings declined by 29% in 2017, with several retailers cutting back on expansion plans and others shutting stores as they attempted to avoid bankruptcy.

"Grocery is considered to have a moat around it to defend against e-commerce, and because of that, these assets are seen by retail property investors as a safe investment," according to JLL.

A Supermarket News article points out investing in supermarket-anchored centers is not 100% safe, as Amazon and other e-commerce firms make inroads into the market. As a result, many shopping centers run the risk of dying, like their regional mall counterparts anchored by weak department stores.

Tops Friendly Markets (upstate New York) filed for bankruptcy last month, and Southeastern Grocers (Bi-Lo, Winn-Dixie, Harveys) may file this month. A&P, once a major player in the grocery industry, filed for bankruptcy and liquidated in 2015.

Not surprisingly, shopping centers anchored by strong operators like Whole Foods, Sprouts, Trader Joe's, Kroger, ShopRite, Wegmans and Publix are among those that have the greatest investment potential.

Kohl's to add Aldi to stores in pilot program

Kohl's announced last week that it will bring Aldi into as many as 10 stores later this year in an attempt to increase customer traffic and store productivity. The specific stores were not released.

Earlier this year Kohl's CEO Kevin Mansell said the company had "a whole list of partners" ready to fill the space leftover from Kohl's recent efforts to rightsize its footprint. In addition to grocery stores, Mansell mentioned convenience stores and fitness centers as candidates.

Aldi, which continues to expand at a rapid pace, currently has 1,600 stores across 35 states. It plans to expand to 2,500 stores by 2022, which would make it the third largest grocer in the U.S. behind Walmart and Kroger.

PA Dairy Farm sells 15,000 pastries on Fasnacht Day

In what apparently is an annual tradition at Oregon Dairy in Lititz, PA, Fasnacht Day was held last month and was a great success. A fasnacht is a Pennsylvania Dutch doughnut-style pastry historically served on Shrove Tuesday, also known as Fat Tuesday or Mardis Gras, to mark the beginning of fasting on Ash Wednesday.

Oregon Dairy sells the pastries in powdered, glazed and plain varieties, and since 2011 only sells them one day a year. They offer drive-thru service in the carport of their 35,000 square foot facility that also operates a restaurant, ice cream parlor and dairy farm.

On February 13, the store sold more than 15,000 fasnachts, a new record. Everyone was thrilled, including Buttercup, the company's cow mascot, who was taking and delivering orders.

Target ramping up CapEx, small-format stores, e-commerce efforts

Target announced earlier this week that it plans to spend about $3.5 billion on capital expenditures in 2018 (compared to $2.5 billion last year) as it accelerates investments in store remodels, small-store formats and other initiatives.

The company also reported that the investments will likely have an adverse affect on profit margins. Target execs said that they expect to generate a lower operating margin in the near term as they continue to increase wages and upgrade its stores and supply chain to better accommodate its growing e-commerce business.

Regarding Target's e-commerce efforts, the company unveiled free two-day shipping on hundreds of thousands of items and plans to offer same-day delivery through Shipt, which it acquired last year, in most major markets by the end of this year.

Shipt is currently available to deliver from 455 Target stores. Target said Shipt also plans to continue to expand its partnerships with other retailers, including Costco, Publix and others.

Following up on the "nearly 30" small-format stores opened in 2017, Target said it plans to open about 30 more in 2018 and another 30 in 2019.

Wednesday, February 21, 2018

Albertsons and Rite Aid announce merger; new company to have $83 billion in sales

Albertsons and Rite Aid announced yesterday that the companies plan to merge into a new publicly traded entity with an estimated $83 billion in annual sales. It is expected that the deal will close during the second half of the calendar year.

Here are some of the details of the planned merger:

  • Albertsons' private food label products will be sold in Rite Aid stores, and most Albertsons pharmacies will be rebranded as Rite Aid.
  • The new company will operate about 4,900 locations, 4,350 pharmacy counters and 320 clinics across 38 states and Washington D.C. It will service more than 40 million customers per week.
  • The name of the company has not been determined, but it will have dual headquarters - Albertsons' current home in Boise, ID, and Rite Aid's current home in Camp Hill, PA.
  • Rite Aid's John Standley will become CEO of the combined company, and Albertsons' Bob Miller will serve as Chairman.
  • The company says it is too soon to determine if any overlapping stores will close. In the Greater Philadelphia market, both Albertsons (Acme Markets) and Rite Aid have a strong presence.
  • According to Burt Flickinger III, managing director at the Strategic Research Group, "(Rite Aid) will get Albertsons distribution power and they both have good distribution centers. It is a strategic triumph for Albertsons, and whereas Kroger is selling off assets like convenience stores, Albertsons is profitably growing and making strategic acquisitions."
  • In exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either one share of Albertsons Companies stock plus $1.83 in cash, or 1.079 shares of Albertsons Companies stock. Depending on the result of the election, Rite Aid shareholders will own a 28% - 30% stake in the combined company.
  • Walgreens and Rite Aid planned to merge last year, but the deal encountered resistance from the FTC and fell apart. Shortly thereafter, Walgreens agreed to acquire 1,932 Rite Aid stores and select distribution centers. According to Bloomberg, the newly formed company will have fewer pharmacy counters than Rite Aid did before it agreed to sell the stores to Walgreens. 

Saturday, February 10, 2018

Amazon introduces home delivery from Whole Foods

On Thursday Amazon introduced free two-hour delivery of certain Whole Foods Market items between the hours of 8am and 10pm in select zip codes in Austin, Cincinnati, Dallas and Virginia Beach. Orders can be made via or the Prime Now app.

Amazon expects to expand the service across the U.S. later this year.

According to Amazon, Prime customers can shop for thousands of Whole Foods items, including produce, bakery, dairy, meat, seafood, floral and everyday groceries. Select alcohol is also available for delivery. Prime members receive two-hour delivery for free, and "ultra-fast" delivery within one hour for $7.99 on orders of $35 or more.

Many traditional supermarkets already offer home delivery services. Ahold (Giant, Stop & Shop) was one of the originators with Peapod, ShopRite offers delivery provided by individual stores, and Acme partnered with Instacart earlier this year to delivery orders "in as little as two hours."

Amazon's first cashier-less store opens in Seattle

Late last month Amazon opened its first Amazon Go store to the public. The store has few employees and no cashiers.

Located at company headquarters in Seattle, customers with the Amazon Go app scan their smartphones and enter the store through a gate. Once inside they are free to roam the 1,800 square foot store and place items in their bags. Through a series of cameras and sensors located throughout the store, Amazon tracks each item customers pick up and places these items in their virtual shopping cart. When customers leave, their Amazon accounts are charged.

According to a reporter who shopped in the store on opening day, the process was pretty seamless. However, he noted that if a customer picks up an item and hands it to a friend, the person picking up the item will be charged.

Amazon has not yet revealed plans for additional Amazon Go stores.