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Future Availabilities Report: Sbarro Closes 183 Locations as Part of Ch. 11 Reorg

Also This Week: Staples Detaching 225 Stores in Next Two Years; and Additional Opportunities from Facility Closures & Downsizings
March 17, 2014
Still unable to generate enough dough, pizza chain Sbarro LLC is back in bankruptcy court protection looking to cut more costs.

The Italian quick service and casual table dining restaurant chain operates 217 company-owned restaurants nationally and 582 franchised restaurants globally with annual revenues over $38 million.

Since re-emerging from a first bankruptcy reorganization in November 2011, Sbarro has continued to face reduced consumer demand, which it chalks up to declining mall foot traffic and increased pressure from competitors.

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Compared to projections for 2012 and 2013 EBITDA of approximately $25 and $31 million, respectively (adjusted EBITDA of $30 and $36 million, respectively), the firm’s EBITDA fell to $15 million in 2012 and under $4 million in 2013.

As part of its latest restructuring efforts, Sbarro is looking to reject 183 store leases and has already moved out of the properties. Forty-six of the stores are leased to General Growth Properties; 27 to Simon Property Group, 20 to CBL & Associates, and 13 to Rouse Properties, with the remainder to various other landlords.

According to Fitch Ratings, the Sbarro bankruptcy does not portend a widespread increase in bankruptcies of U.S. restaurants, but rather is more an isolated example of a brand that had lost its competitive position and relevancy with consumers.

Click here for a ccomlete list of the 183 Sbarro locations closing..

Staples Detaching 225 Stores in Next Two Years

Saying that shrinking its retail footprint by more than 1 million square feet in 2013 wasn't enough, Staples Inc. has initiated a plan to close up to 225 stores in North America by the end of 2015.

The company also initiated a multi-year cost cutting plan which it expects will bring pre-tax cost savings of $500 million by the end of 2015. The firm said the cuts will come from supply chain, retail store closures and labor optimization, non-product related costs, IT hardware and services, marketing, sales force, and customer service.

“During 2013, we reduced our retail footprint by more than 1 million square feet through 40 net store closures and 40 downsizes and relocations,” said Ronald L. Sargent, chairman and CEO of Staples. “We also developed a new 12,000-square-foot store. We now have about 30 of these new stores in operation, which continues to retain over about 95% of sales.

“Over the past year, we learned a lot of valuable lessons, and we built a stronger foundation to accelerate growth. But our progress has not been fast enough. It’s clear that we underestimated the headwinds that we’re facing in our retail stores as well as demand for core office supplies,” Sargent added.

“As a result, we will take more aggressive action to right-size our retail footprint and create an organization that is better positioned to respond to the changing needs of our customers,” he said.

Sargent added that Staples had no plans of getting out of the retail business. "Stores have to earn the right to stay open, and we are committed to making tough calls when it’s necessary.”

Sargent said that in addition to the closures, it was accelerating store relocations and downsizings to its new 12,000-square-foot format in 2014.

Not all the stores on this 225 list are unprofitable. The company also said it looked at opportunities to improve its network of existing stores by targeting areas where it anticipated store closures from its competitors.

Additional Facility Closures & Downsizings

Abercrombie & Fitch Co. said it expects to close 60 to 70 stores in the U.S. during the fiscal year through lease expirations.

The Archivist of the U.S., David S. Ferriero, announced the permanent closure of three National Archives facilities. This year, the National Archives facility in Anchorage, AK, will close and two facilities in the Philadelphia area will be consolidated to a single site. Within the next two years, two Archives’ facilities in Fort Worth, TX, also will be consolidated to a single site. These closures and consolidations will result in estimated annual cost savings of approximately $1.3 million.

Big Lots Inc. announced that it expects to open 30 new stores and close 50 existing locations in the U.S. during fiscal 2014.

Childrens Place Retail Stores Inc. recorded charges of $9.4 million for unusual items, which primarily consisted of store impairment charges related to the continued review of underperforming stores and early closure expenses. As part of this ongoing review, the company now expects to close a total of 125 underperforming stores through 2016, including the 41 stores which were closed in 2013. In 2014, the company plans to open 35 stores and close 30, for a net of 5 additional stores in North America. Square footage is expected to remain comparable to 2013.

CST Brands Inc. continues to assess its asset base and close stores. It closed seven locations in the U.S. during the fourth quarter of 2013 and a total of 11 sites during the year. In addition, the company has been conducting market reviews across its U.S. system. CST has identified approximately 100 stores that are candidates for sale, the majority of which could potentially be added to the company’s wholesale distribution business in the U.S. The company has engaged an outside consultant, NRC Realty & Capital Advisors, to market these properties and go to market by the middle of April. Stores were identified based on several criteria, and while many of them may be smaller in square footage, and below the company store average from an inside sales and EBITDA perspective, the 100 locations still average over 3,000 gallons of fuel sold per store per day, which the company believes makes them an attractive location for sale and good dealer candidates for its wholesale business.

Fresh Market Inc. is closing four underperforming stores in the next week. Three of these stores are located in Sacramento and one in Houston.

Morgans Hotel Group Co. said it will reduce headcount at its corporate headquarters office as part of the company’s previously announced strategy to reduce overhead and costs allocated to property owners.

Nacco Industries Inc. said that its Kitchen Collection chain expects to close more than 50 stores in 2014, the majority closing in the first quarter. The company is also planning a number of cost reduction programs at its headquarters, distribution center and remaining core stores and by terminating its medical benefit plan.

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