PRINT THIS STORY:

CHANGE TEXT SIZE:

Claire’s goes private

Teen accessories retailer Claire’s Stores agreed to a buyout by Apollo Management, a Purchase, N.Y.-based private equity firm, for $3.1 billion. Currently, some 70 percent of Claire’s sales are generated at its 3,000 North American stores, and the buyout is expected to help with the chain’s overseas expansion. Claire’s already has a joint venture for stores in Asia and a licensing agreement in Turkey and the Middle East. The company’s fourth-quarter net sales rose nearly 5 percent year on year, to $414.7 million. Same-store sales, meanwhile, rose 6 percent, up from a 5 percent increase for the year-ago quarter. Net sales for the year climbed 7 percent year on year, to $1.37 billion. The full year’s same-store sales, meantime, rose 6 percent, down from an 8 percent increase in 2005. Apollo owns Lord & Taylor, Jacuzzi Brands and Smart & Final, a Sacramento, Calif.-based food chain. It is also one of the private equity firms considering bids for Cadbury and Harrah’s Entertainment.

Tesco sells space

U.K. supermarket chain Tesco is mining its real estate portfolio for cash. In March the company announced a $1.3 billion sale-leaseback deal with British Land, a U.K. REIT. Tesco will sell about 3 percent of its real estate, including 21 Tesco stores in the U.K., to British Land, then lease the properties back for 20 years. Tesco stands to net a profit of about $277.1 million from the transaction, which bears a cap rate of 4.5 percent. The terms say British Land will not raise Tesco’s rents more than 3.5 percent per year. Tesco realized some $876 million in profit from a similar sale-leaseback agreement with the British Airways Pension Fund in January. And the company has pre-existing sale-leaseback deals with British Land dating back to 1996 and covering four retail parks, three shopping centers and 13 Tesco stores.

Galeries in the Gulf

French retailer Galeries-Lafayette will open a 192,000-square-foot department store at Dubai (United Arab Emirates) Mall, a 3.4 million-square-foot shopping and entertainment center slated to open by late next year. The store is a partnership between the Paris-based chain, Lebanese investment firm Gard Investments and the mall’s developer, Dubai-based Emaar Properties. Saks Fifth Avenue and upscale U.K.-based chain Harvey Nichols have both opened stores in Dubai through similar partnerships. Some 12 million square feet of retail space is scheduled to open in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates by 2010, says Rashid Doleh, executive director of retail at Emaar, which plans to open 150 new malls in the Middle East and North Africa, the Indian subcontinent and South Asia.

Dollar sells for billions

Kohlberg Kravis Roberts, which has shown a growing appetite for retail investments, added Goodlettsville, Tenn.-based Dollar General to its portfolio. The private equity firm plans to buy the ailing chain for $7.3 billion, plus $380 million in assumed debt. The merger, pending approval, is to be completed sometime in the third quarter. Observers say Dollar General has overextended itself by opening too many stores, pushing down sales. In 2001 the chain’s same-store sales rose 7 percent year on year; in 2005 its same-store sales rise was just 2 percent. The company announced in November that it would remodel about 300 stores and close 400 this year to lift sales. Also part of the recovery plan is a change in merchandise handling. Before, if holiday merchandise remained unsold, it was returned to inventory and put back on the shelves the following year.

This proved to be a poor practice, the company says, because much of that merchandise was never sold at all. The new policy mandates that unsold merchandise be put on clearance. KKR expresses confidence that it can turn the company around. “We look forward to partnering with the Dollar General team to position the company for future growth,” said Michael M. Calbert, KKR’s chief executive, in a press release. The firm plans to change Dollar General’s inventory strategies and to keep closing weak stores. In 2005 KKR bought Wayne, N.J.-based Toys ‘R’ Us. In 2004 it took in European store operator Maxeda. The firm has also participated in bidding wars for European retailer Alliance Boots and Australia’s Coles Group.

A&P’s new path

The Great Atlantic & Pacific Tea Co. is in discussions to buy Pathmark Stores, which operates 141 supermarkets primarily in New Jersey, New York and Philadelphia, for about $653 million. The deal would create a network of about 600 stores posting some $6 billion in sales annually. “At long last, it appears Northeast consolidation is upon us,” wrote Karen Short, a retail analyst at Friedman Billings Ramsay, in a report. Short writes that if the deal goes through, A&P will probably sell off Pathmark’s stores in Michigan and New Orleans.

Ann’s big plans

AnnTaylor Stores Corp. will roll out a new concept in the fall of next year. Though the company is keeping quiet about the details, it did say in a press release that the concept will be aimed at “a very attractive untapped opportunity in the market today.”

The New York City-based chain said 2006 net sales rose 13 percent from the year before, to $2.3 billion. Same-store sales, meanwhile, were up 2.8 percent for the year. “As we look ahead, clearly the most meaningful opportunity we are pursuing is the launch of our new concept in fall 2008,” said President and CEO Karen Krill. “We are very excited about delivering on the enormous growth potential we see, and we believe our outlook is extremely bright.

Bombay restrategizes

Bombay Company is rethinking its real estate strategy with an eye toward opening more off-mall stores and also announced plans to close 75 stores in fiscal 2007. The furniture and home-goods retailer, which suffered a same-store sales decrease of 3.1 percent for its fourth quarter, ended Feb. 3, will also be closing its 33-unit Bombay Kids chain. The company will shut mall stores with leases that are not economical, says Peter Lynch, principal of DJM Realty, the firm Bombay hired to negotiate lease terminations and restructure existing leases. “As they go through a restructuring, the issue is what the right number of stores is,” Lynch said.

During its fourth quarter the company already closed 16 stores and opened four, ending fiscal 2006 with 441 stores. Of those, 195 are in malls, 199 are off-mall stores, and 47 are outlet stores. Lynch says Bombay plans to tweak its merchandise and to open stores in cities where it enjoys strong online sales. For the latest fiscal year, Bombay’s total revenue fell about 5 percent from the previous year, to $536.3 million, and same-store sales decreased 5.4 percent.

Sears to focus inward

Don’t expect Sears Holdings to open any new stores anytime soon, CEO Edward Lampert said in his annual note to shareholders. “As we have said before, we do not want to spend one dollar too much or $50,000 too little on our stores,” he wrote. “Unless we believe we will receive an adequate return on investment, we will not spend money on capital expenditures to build new stores or upgrade our existing base simply because our competitors do.” Share repurchases and acquisitions remain the best way for Sears to make money for shareholders, Lampert wrote. “For Sears Holdings, in the near term we believe the greatest value will come not from increasing our store base, but primarily from better utilizing our existing assets to deliver more value to our customers and ultimately our shareholders.” Sears Holdings’ stock has been one of the top retail performers for each of the past two years, he wrote, as was Kmart’s in 2004, in spite of this nontraditional approach.

And for anyone who has been waiting for the retailer to dispose of some of the well-located stores in its vast real estate portfolio is seeing precisely the opposite. An SEC filing reveals that the retailer has instead bought some stores it had been leasing. In fiscal 2006 Sears bought eight such properties for $26 million, in 2005 it bought 19 of them for $98 million, and in 2004 it acquired 31 for $124 million. The company spent about $887 million on rental expenses in 2006, up slightly from $886 million in 2005. Sears said in the filing that this year it will “consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties.” The company also said it plans to spend about $200 million this year on upgrades of its existing stores and on an increase of appliance merchandise at its Kmart stores.

HMV plots recovery

London-based music chain HMV Group, which generates 80 percent of its profit in the U.K. and Ireland, downgraded its sales forecast for the rest of this year while also unveiling a three-year turnaround plan. “The markets in which we operate are undoubtedly very challenging,” said CEO Simon Fox in a press release. “Waterstone’s and HMV are great brands, but have not adapted quickly enough to the way customers are now buying and consuming media. Our performance has suffered as a consequence.” Fox says the retailer plans to slash costs by £40 million ($77 million) per year by revising its purchasing and supply chains and by slowing its store expansion program.

Further, the company plans to add more portable digital music players to its selection at the 223 HMV stores in Britain and Ireland, which will also sport a new design. The company’s 194 Waterstone’s bookstores, meanwhile, will offer more children’s books and high-quality gift stationery. And the company says it will introduce a loyalty card program. Fox says HMV’s Web site will be supplying 20 percent of the division’s U.K. sales by 2010, and that he wants the Waterstone’s Web site to account for 9 percent of that division’s sales.

Eagle spreads wings

Teen-age consumers are responding well to American Eagle’s six-month-old, lingerie-focused aerie by American Eagle concept, but the retailer says changes need to be made at its other new concept, the Gen-X apparel chain Martin + Osa. “If the new stores continue to perform like the test stores, we believe aerie could be a 350-plus store concept,” said Jim O’Donnell, American Eagle’s CEO, on the chain’s year-end earnings call. He said the retailer will open at least 15 stand-alone aerie stores and five units connected to existing American Eagle stores this year. Martin + Osa will require some tweaking before further rollout, he said. Prices will be lowered, and the women’s collection will be more feminine and less outdoorsy, he said. “We are also working to improve the customer’s perception of overall value, in terms of price and quality.” The company plans to open about 50 new stores in its American Eagle brand, Donnell said. “These locations are made up primarily of ‘A’ and ‘B’ centers including lifestyle centers,” he said. “It is worth noting the performance in our existing 54 lifestyle centers generates 93 percent of an average store, with higher profitability due to a lower rent structure.”

CompUSA reboots

CompUSA plans to close more than half of its U.S. store base within the next three months. The Dallas-based chain said 126 underperforming stores will close so that the company can focus on the 103 profitable stores. “Based on changing conditions in the consumer retail electronics market, the company identified the need to close and sell stores with low performance or nonstrategic, old store layouts and locations faced with market saturation,” said CEO Roman Ross. The company also obtained a $440 million cash infusion to help strengthen the balance sheet. Comp-

USA is a wholly owned subsidiary of Mexican holding company U.S. Commercial, which is indirectly controlled by the reputedly richest man in Latin America, Carlos Slim Helú.

Tiffany speeds up

Tiffany says it plans to boost its U.S. store growth plans to about six new units annually. The New York City-based jewelry chain also aims to open about 10 stores internationally this year. In the U.S. Tiffany’s same-store sales increased 9 percent year on year for its fourth quarter (ended Jan. 31). Meanwhile, sales at the chain’s iconic New York City flagship, at the corner of 57th Street and Fifth Avenue, climbed 17 percent for the quarter. Comparable-store sales at Tiffany’s seven stores in the New York market outside Manhattan rose 13 percent, said Mark Aaron, vice president of investor relations, on a conference call. For 2006 the flagship posted $6,000 in sales per square foot, he said.

© 2008 ICSC. All rights reserved. | Terms and Conditions | Privacy Policy | Contact ICSC | ICSC Home |