Gallelli Gazette_July 11, 2023

QUOTE OF THE WEEK:

Here’s hoping that you all had a great fourth of July holiday! We took the week off from publishing and so this week we have two weeks’ worth of retail and retail real estate news for your review… and what a busy two weeks!

Unfortunately, much of the news has been challenging for retail. After what has been a two-year reprieve for retail after the unprecedented challenges of 2020, we are seeing bankruptcies creeping back into the picture.

If you’ve been following the Gazette, you probably notice that in our Local News section—which I usually dedicate to stories about retail conditions in various markets around North America, that the overwhelming message of most CRE statistical articles in the past few months has been that of record low availability. So, I am not worried that the market is backsliding into ‘the retail apocalypse” storyline, though I have already seen some idiots online breaking out that old trope. Additionally, I will add that virtually every retailer that has filed in this wave of failures was on bankruptcy watch lists going back to before the pandemic. It’s actually amazing that some of these chains were able to survive 2020 and carry on as long as they did before succumbing to the inevitable. That said, we’re going to see more bankruptcies ahead. It won’t be a return to what we saw from 2015 through 2019. But the economic stars are aligning for some challenges in the months ahead…

Incidentally, here is a good running list from Axios of retailer and consumer goods bankruptcies that is up to date.

So, let’s get into the latest news… First up, yesterday Tuesday Morning officially filed a motion in U.S. Bankruptcy Court to convert its ongoing Chapter 11 reorganization to a Chapter 7 liquidation. This is not a surprise—the court allowed Tuesday Morning’s sale in May to fixed asset recovery specialist (AKA liquidator) Hilco in May at which point the Dallas-based retailer began going out of business sales. Tuesday Morning entered 2023 with roughly 490 stores, which averaged about 13,000 square feet in size. There are only about 200 left, but those will likely all be gone within a matter of weeks. Here is a list of the last locations that will be closing imminently. All told, the collapse of Tuesday Morning will translate into roughly 6.4 million square feet of retail space becoming available.

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No. 7 |

THE GALLELLI GAZETTE Retail Roundup

and CTS had its own issues. They filed Chapter 11 in May. After failing to find a buyer, the reorganization was converted to a liquidation with the chain’s 71 remaining stores now in the process of final going out of business sales. With a typical footprint of 40,000 square feet, this breaks out to roughly 3.1 million square feet of space being returned to the market. Here is a list of all the Christmas Tree Shops that are closing. While most of the chain’s newer stores are housed in typical big box space, many of its older locations are known for their quirky, often themed, roadside architecture.

Buybuy Baby initially looked like it was going to be bought out of bankruptcy. Unfortunately, most of its suitors developed cold feet and a planned auction of the retailer’s assets was cancelled last week. While it appears that there will be a buyer for the chain’s intellectual property, it’s increasingly apparent that its remaining stores (roughly 115) will end up being liquidated. With an average footprint of 29,000 square feet, this breaks out to just over 3.3 million square feet of space going vacant.

Incidentally, dead retailers never really die—they just come back as zombies thanks to the voodoo of intellectual property rights. Overstock. com bought BB&B’s IP for $21.5 million and is going to rebrand itself as Bed, Bath & Beyond. Adios Overstock!

Unfortunately, there was more closure news over the past two-week news cycle. The week before last Walgreens announced plans to close 450 stores globally—300 in the United Kingdom and 150 in the US. This is not particularly surprising. Though eCommerce has not fully disrupted the prescription business (which typically accounts for anywhere from 50% to 80% of drug store revenues, it has impacted the retail portion. CVS has been downsizing for the last few years—having closed 300 last year and planning to close another 300 this year and again in 2024. The typical Walgreen’s is 14,000 square feet in size, so this equates roughly to 2.1 million square feet going dark.

Accessories and costume jewelry concept Alex & Ani will be closing 20 stores and its headquarters as part of its recent bankruptcy—leaving only seven units left open. The stores typically have been small; less than 2,000 square feet and situated in lifestyle centers or malls. Here is a list of the stores that will remain open. All told—this will mean the return of 40,000 square feet or less.

But… the news is not all bad! Yesterday, David’s Bridal pulled off what Tuesday Morning, Buybuy Baby and Christmas Tree Shops could not— they landed a buyer. CION Investment reportedly has successfully bid for most of David’s assets. The undisclosed bid still needs to be approved by bankruptcy court later this month, however it reportedly will mean that instead of liquidating 290 stores across the US, the deal would keep at least 195 units open. David’s Bridal stores are typically between 10,000 and 12,000 square feet. Assuming 95 closures, this translates into roughly 1,050,000 square feet.

Tune in next week when I will be detailing retailer growth plans that haven’t necessarily been featured in the headlines, we feature at the Gallelli Gazette Retail Roundup.

If this was shared with you and you would like to receive the Gallelli Gazette Retail Roundup weekly in your email, email me directly at gbrown@gallellire.com and get on my mailing list.

TOP TEN RETAIL STORIES OF THE WEEK

Tuesday Morning Moves to Convert its Bankruptcy to Chapter 7 Retail Dive 7/10

2 How Lunya’s Bet on Brick and Mortar Contributed to its Bankruptcy Retail Dive 7/10

3 Payrolls Rise by 209,000 in June; Unemployment at 3.6% CNBC 7/7

4 Christmas Tree Shops Closing All Remaining 77 Stores Here’s the List Chain Store Age 7/7

5

Buybuy Baby Stores Likely Closing as No Buyers Step Forward Retail Dive 7/7

6

Here’s What Americans Say They Need to Earn to Feel Financially Secure CNN 7/6

7 CRE Transactions May be Beginning to Thaw Globe Street 7/3

8

The Ten Fastest Growing Restaurants in America by Sales Nation’s Restaurant News 7/3

9 Walgreen’s Closing 150 US, 300 UK Stores CBS 6/30

Gallelli Real Estate - www.gallellire.com

10 Overstock.com to Rebrand as Bed Bath & Beyond Retail Dive 6/29

– Marcus Aurelius

RETAIL OFF TO A ROUGH START IN JULY

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THE GALLELLI GAZETTE Retail Roundup

RETAIL AND CONSUMER TRENDS

Consumers Slam the Brakes on Borrowing in May Market Watch 7/10

How American Consumers Lost Their Optimism

Financial Times 7/6

Shoppers Fleeing High Prices Boost Bargain & Discount Food Retailers Winsight Grocery Business 7/5

Retailers Brace for Hit to Discretionary Spending as Supreme Court Nixes Student Loan Forgiveness

Retail Dive 6/30

TOP ECONOMIC STORIES

Yellen Says Still Too Early to Rule Out Risk of US Recession

Bloomberg 7/9

Wage Gains, Low Unemployment Keep Pressure on Fed Wall Street Journal 7/7

Fed’s Goolsbee Sees ‘Golden Path’ to Lower Inflation w/Out Recession

CNBC 7/7

US Grocery Retail Market Projected to Grow 5.6% in 2023

Winsight Grocery Business 7/6

US Goods Trade Deficit Narrows; Retail Inventories Rise

Reuters 6/28

TOP RETAIL REAL ESTATE TREND NEWS

Retail Construction at Historic Lows

Costar 7/4

The Evolution or Retail Centers

Planetizen 6/30

Vacant Sears Stores Find New Life as Housing in Mixed-Use Malls

Globe Street 6/29

The 50-Year Journey of Chicagoland Mall; Hawthorn Chain Store Age 6/27

Transformed Former Holt-Renfrew Department Store in Montreal Leased Up to Retail, Office Users

Costar 6/27

BUILDERS & BUYERS NEWS

Developer to Convert Vacant Walgreen’s Offices to Retail & Entertainment Center

Crain’s Chicago Business 7/11

Investors Bet on More Demand for Dining Out; REITs Active in Buying Restaurant Properties

Costar 7/10

Big Lots Executes $318 Million Sale-Leaseback w/Financing Partner

Costar 7/6

Namdar Buys Distressed Joliet Il Mall for $31M

The Real Deal 7/5

Cordish’s Next Entertainment District: Nashville Live! Chain Store Age 6/30

Student Loan Relief is Gone for millions of Americans—Here’s What it Means to Retailers CNBC 6/30

SUPPLY CHAIN/ECOMMERCE/OMNICHANNEL/TECH

Amazon Wants to Top Grocery Gains This Prime Day

Supermarket News 7/7

How Disruptive Would a UPS Strike be for Retail?

Retail Wire 7/6

TikTok Uses Brick-and-Mortar Shop to Promote ‘Community Commerce’ PYMNTS 7/6

Jenny Craig to be Revived as eCommerce Business

Retail Wire 7/5

AI Market in Retail to Hit $85 Billion by 2033

Happi 7/3

ARE YOU EXPERIENCED? EXPERIENTIAL RETAIL NEWS

Atlanta Area Food Hall, Hall at Ashford Lane, May Have Closed Eater 7/7

First Ever Angry Birds “Retail Café” Opens in NYC Chain Store Age 7/6

Urban Space Has Left Tysons Galleria—Uncertainty for Food Hall Eateries?

Ffx Now 7/5

Entertainment Pickleball Concept Smash Park Scores Private Equity Investment for Growth

FSR Magazine 6/29

High-Tech Mini Golf Concept Puttshack Inks 30K SF Deal in Chicagoland’s Old Orchard Mall Costar 6/27

RETAIL CHAIN STORE OPENINGS AND GROWTH

DTC Apparel Brand Rails Plans Georgetown DC Store, Planning More Physical Stores

Retail Dive 7/7

Reformation Opens SoHo Flagship

Retail Leisure International 7/7

John Elliott Opens First International Flagship in Toronto

Retail Leisure International 7/6

Hair Care Brand Ceremonia Opens First Physical Store in NYC (SoHo)

Retail Dive 7/5

Sporting Goods Retailer Hibbett Heading to Milwaukee

Milwaukee Business Journal 7/5

THE GALLELLI GAZETTE Retail Roundup

80-Unit Isabel Morant Opens Second LA Store Near Beach WWD 7/5

Sheetz to Open First Michigan Location Near Detroit NACS 7/3

Givenchy Opens First LA Store to Add to US Fleet of Nine Stores

Yahoo! Life 7/3

Home Entertainment Concept Watson’s Expands to Southeastern Michigan

Crain’s Detroit Business 7/3

French Fashion Brand Etam to Open First US Store at Miami’s Dadeland Mall

Apparel Resources 7/3

Hobby Lobby Opening Second Mohawk Valley Store

Utica Observer Dispatch

Good American Opens Flagship Store at Westfield Century City in LA

Retail Leisure International 7/3

Swiss Running Brand “ON” Opens 4th US Store in Brooklyn’s Williamsburg Neighborhood

Retail Dive 6/30

181-Unit REI Expansion Continues Into 2025; 8 New Stores in Works Currently

Chain Store Age 6/29

Academy Sports to Open 13 – 15 Stores in 2023: Here’s Where

Chain Store Age 6/28

Barnes & Noble Plans 4 New Dallas/Fort Worth Stores

Dallas Morning News 6/28

Casey’s to Add 350 C-Stores Over Next 3 Years

Chain Store Age 6/28

What to Expect when Mayfair’s Chicago Store Opens in 2024

Home Accents Today 6/27

Bass Pro Bringing $25MN Store to Spring TX

The Real Deal 6/27

Kim Kardashian’s Skims is Opening First Stores Next Year in LA, NY Bloomberg 6/27

RETAIL CHAIN STORE CLOSINGS AND CONTRACTION

David’s Bridal Receives Going Concern Bid from Potential Buyer; Cancels Auction of 229 Store Leases

Philadelphia Business Journal 7/6

Chipotle to Permanently Shut Down its Fast Casual Pizza Business; 5 Pizzeria Locales to Close

QSR Magazine 7/7

Christmas Tree Shops to Close Remaining 77 Stores

Retail Dive 7/7

Alex and Ani Closes 20 Stores

Retail Dive 6/29

THE GROCERY AISLE

Lee’s: Regional Utah-Based Grocer Expands to Seven Stores

Winsight Grocery Business 7/7

New Sprouts Farmers Market Opening in Fort Myers; Chain Planning 10% Growth

Progressive Grocer 7/7

Publix Building Anticipation Around its Kentucky Debut Grocery Dive 7/7

H-E-B Set to Open New McKinney TX Store This Month

Supermarket News 7/6

Gallelli Real Estate

Lidl Balances Store Openings and Closings

Progressive Grocer 7/5

Lidl Plans Store in Yonkers, NY

Supermarket News 7/5

Lucky’s Breaks Ground at New Mixed-Use Center in Columbus OH

Chain Store Age 7/5

Publix Settles into Growth Mode

Progressive Grocer 7/5

Why Cardenas Markets’ Owner is Purchasing El Rancho Supermercado

Progressive Grocer 6/29

Local Player Metropolitan Market Opens 10th Seattle Area Store

Progressive Grocer /29

FOOD & BEVERAGE

200+ Unit Slim Chickens Continues Expansion in Alabama; Wants 600 Units by 2025

QSR Magazine 7/7

BURRITObar to Expand in Hawaii—Sister of Canada’s BarBURRITO Ramping up US Growth

QSR Magazine 7/7

21-Unit Curry Up Now Now Entering Fort Worth Market

Nation’s Restaurant News 7/6

Van Leeuwen Opens Boutique Ice Cream Shop in Times Square; Plans More National Growth

Chain Store Age 7/6

+/- 165-Unit Slim Chickens Opens in Rio Rancho, New Mexico

QSR Magazine 7/5

1,100+ Unit Marco’s Pizza Adds 6th Orlando Area Location

QSR Web 7/5

Crisp & Green to End 2023 w/65 Units & 2024 w/130 Units

QSR Magazine 7/5

Regional Full Service Chain El Vaquero Opens 20th Unit in Cincinnati’s Clifton Neighborhood

FSR Magazine 7/5

Guy Fieri & Partner Open 10th Chicken Guy Unit at Miami’s Dadeland Mall

Fast Casual 7/5

90+ Unit TOUS Les Jours Opens 2 Greater Philadelphia Units

QSR Magazine 7/5

35-Unit Savvy Sliders Looking to Expand in Southwest, Midwest, Southeast US

QSR Magazine 7/3

Crimson Coward to Open 8th Unit in Pomona, CA

QSR Magazine 7/3

10-Unit Bango Bowls to Pursue National Growth Via Franchising

FastCasual.com 6/29

12-Unit Chill-N Nitrogen Ice Cream to Make Nashville Debut

FastCasual.com 6/29

Chicken Max Now Serving Houston; Says Will Double from 5 to 10 Units by End of Year

FastCasual.com 6/29

Ocean Prime Opening 19th Unit in Sarasota FL Next Year

FSR Magazine 6/28

Sip Fresh Inks Deal for Three San Diego Units; Wants 35 by Year End Shopping Center Business 6/28

CA-based 21-Unit Curry Up Now to Open Two North Carolina Units

QSR Magazine 6/27

THE GALLELLI GAZETTE Retail Roundup

Issue No. 7 | July 11th, 2023

Portillo’s Growth Potential Even Greater Than Once Imagined

QSR Magazine 6/27

100+ Unit Black Rock Coffee Bar Opens 6th Boise ID Store News=Review 6/27

LOCAL MARKET NEWS

More DC Spaces Opened Than Closed This Year but Market Still Has Way to Go Washington Business Journal 7/7

Top Four Metros in Texas Account for 20% of Retail Absorption Nationally Chain Store Age 7/5

Retail Incentive Program in Downtown Orlando Looks to Address Rising Vacancy Costar 7/5

Denver’s Booming Cherry Creek Neighborhood Has Reached Megaproject Status Costar 6/30

Phoenix Retail Rents Soar as Vacancy Hits All-Time Low Costar 6/27

CULTURE CORNER: FORTH OF JULY INDIGESTION

This past July 4th, Joey Chestnut consumed 62 hot dogs in ten minutes, winning his 16th Nathan’s Hot Dog Eating Contest Mustard Belt. Or, as emcee George Shea once put it, “through the curtain of the aurora, a comet blazes to herald his arrival. And his victory shall be transcribed into every language known to history, including Klingon. He is the man who ate the world…” In the summer of 1916, the average New Yorker paid $0.20 for a dozen eggs, $0.07 for a movie ticket, $0.04 for a loaf of bread and $0.10 for a hot dog. Against this backdrop entered 24-year-old Polish immigrant Nathan Handwerker. Handwerker had immigrated to the United States just four years before and had gone to work for at Feltman’s German Gardens restaurant in Coney Island, Brooklyn. Charles Feltman had died in 1910, but his restaurant is credited with being the first to serve the modified German frankfurter sandwich as ‘hot dogs” on Coney Island. Handwerker’s job there was to slice bread rolls.

Supposedly, Nathan was encouraged by two singing waiter coworkers, Eddie Cantor and Jimmy Durante, to go into business for himself—in direct competition with Feltman’s. One story around the founding of Nathan’s Famous is that in order to build the savings necessary to start his own business, his only meals for a couple of years were the hot dogs he could eat at work for free. Another is that he and his wife Ida borrowed $300 from two friends to get started. Either way, by the summer of 1916, Nathan and Ida Handwerker opened a small hot dog stand with a two-foot grill on the corner of Surf and Stillwell Avenues in New York. They spiced their hot dogs with Ida’s secret recipe and initially sold them at the same price as his former employee, a dime.

The hot dog stand was not an immediate success. After netting only $60 from his first week in business, Handwerker had an epiphany; lower prices, higher volume. And so, he dropped his price to a nickel and within one week his receipts more than quadrupled to $240. Again, according to legend, when consumers were initially skeptical about the quality and contents of a hot dog that could be sold for just a nickel, he reportedly hired people to dress as doctors and eat in front of his stand to show that medical professionals considered his food perfectly healthy.

One last bit of lore is that, shortly after opening, four immigrants came down to Coney Island to enjoy their 4th of July holiday and they decided to hold a contest to see who was most patriotic. Apparently, they decided that gluttony would be the best way to solve the question… and they held an impromptu hot dog eating contest at Nathan’s.

M&A MANIA

Birkenstock Reportedly Shopping Banks for IPO

WWD 7/6

Claire’s Postpones IPO

Retail Dive 7/5

SHEIN Denies Report of Filed IPO

Retail Dive 6/30

El Rancho Supermercado Bought by Heritage Grocers (Owner of Cardenas Markets) Grocery Dive 6.29

Gen Korean BBQ Drums Up $43.2 Million in IPO

FSR Magazine 6/28

According to that legend, this 4th of July marks the 107th annual Nathan’s Hot Dog Eating Contest. The reality is that it wasn’t until 1979 that the event was held regularly, and always, on the Fourth. In 1978 it was held on Memorial Day. There were no contests in 1976 or 1977 and before that (at least to 1967), the contest was intermittently held, and usually not on the fourth of July.

This is primarily because the verbose, outlandish and inspired Master of Ceremonies, George Shea, took over the event in 1991 while working as a press agent for the firm. Shea, fresh out of Columbia University with a literature degree, took a job at a small PR firm to pay the bills while he wrote books and screenplays at night. Eventually, the head of his firm died so George and his brother started their own public relations outfit and took the Nathan’s account with them. And that is where the two brothers turned a small local holiday gimmick into an event that draws crowds in excess of 25,000 people every year and is watched live on ESPN (since 2003) by more than a million globally.

While competitive eating obviously has a following (Shea and his brother founded the International Federation of Competitive Eating in 1997 and the MLE—Major League Eating), but for me, the real magic of the event is Shea’s straight-faced absurdist Master of Ceremonies.

In honor of this year’s event, here are links to the best George Shea introductions ever.