CoStar compiles news of consolidations, closures, layoffs and lease cancellations in the weekly Lease Down news report, a concise read keeping you updated on major corporate moves affecting commercial real estate. For news on corporate expansions, relocations and lease extensions, check out CoStar's weekly Lease Up report.
In this week's issue:
Barnes & Noble looks to adapt to a changing industry
Aviat Networks gives details on its restructuring plan
A&P closes 25 stores
Barnes & Noble Up For Sale, Store Closures Coming?
Barnes & Noble's recent announcement that it is putting itself up for sale has led to speculation that store closures and lease cancellations/renegotiations could be imminent.
As the bookstore chain's customer base continues to stock its digital library, Barnes & Noble has found itself in a tight spot. Profits have gradually dropped as even the most avid readers have begun to pass over bookstores entirely for the convenience of downloading the latest bestseller online.
Now the company is up for sale, with multiple parties interested. One of which is Leonard Riggio, current chairman and largest shareholder, who might buy the bookseller and take it private.
That scenario could likely mean a continuation of Barnes & Noble's strategy it announced in its June quarterly earnings presentation. The company said it would be pumping $140 million over the next year into marketing its digital products, while at the same time trying to shave rent costs on its stores.
Barnes & Noble's digital sales went from 0% to 20% of the company's total market share from June 2009 to June 2010. The bookseller has had more than 2.4 million downloads in the past year.
Those numbers are only likely to increase as Barnes & Noble has just released its new Nook application for the iPhone. By the end of 2010, the company predicts that digital sales will represent 50% of its total revenue. 2011 estimates have digital sales representing 75% of the total profit.
But overall profits could continue to fall if Barnes & Noble is unable to increase sales at its 720 bookstores.
Although Barnes & Noble refers to its bookstores as its best asset to market its digital products, it mentioned in its presentation that it has the "flexibility of relatively short leases." The bookseller said that it has 416 leases up for renewal in the next four years and is looking to cut rents by 10% to 20%. Though the company did not elaborate further, a likely solution could be a combination of rent reductions and store closures.
Barnes & Noble said that its bookstores drive its digital sales because they attract core customers and offer special services such as allowing customers to read complete eBooks for free, while in the store. However, the company also called consolidation in the bookselling industry "inevitable."
Aviat Networks Consolidating as Part of Restructuring Plan
Faced with slumping revenues, Aviat Networks is undertaking a corporate restructuring plan in an attempt to cut costs and return to profitability. The Santa Clara-based wireless technology company is aiming to trim annual spending by $30 to $35 million.
To do so, Aviat said it would reduce its global workforce and consolidate operations by closing or relocating a number of facilities. Although the company wasn't specific about the numbers, it mentioned that it has already begun consolidating in India and China, and has recently ceased operations at its San Antonio plant.
"Cost reductions are the first step in improving Aviat Networks' performance," said Chuck Kissner, chairman and CEO of Aviat. "As we look ahead, we will focus on maintaining an efficient cost structure, concentrating on the right product portfolio and optimizing our business model."
The company recorded a $25.7 million net loss on $120 million in revenue for the third quarter of fiscal 2010, which ended on April 2. Aviat said that its struggles in recent quarters have likely been the result of its top customers taking a more cautious approach to spending.
Aviat expects to incur about $11 to $13 million in pre-tax restructuring charges related to severance costs and impairment of facilities. The company expects to record these charges in 2011.
The restructuring is not expected to have a long-term effect on Aviat's ability to generate revenue, the company said.
Kissner said that Aviat would reveal the key details of its restructuring plan during the company's earnings call next month.
A&P To Close 25 Stores
By Mark Heschmeyer
The Great Atlantic & Pacific Tea Company Inc. (A&P) in Montvale, NJ, plans to close 25 stores in five states as the company begins to execute a comprehensive turnaround.
The company said the affected stores include stores that are in close proximity to other company stores, those facing real estate and cost issues, and/or underperforming non-core stores. The store closures are expected to be completed in the company’s fiscal third quarter.
"Currently we are not releasing the store list. The impacted stores include those across our A&P, Waldbaum's, Pathmark, SuperFresh and Super Food mart banners located in five states - Connecticut, Maryland, New Jersey, New York and Pennsylvania," said Lauren La Bruno, senior director public relations & corporate social responsibility for A&P.
United Food and Commercial Workers International Union (UFCW) issued a statement saying that A&P’s director of labor relations informed Local 1262 that the company will close nine of its stores in the local’s jurisdiction primarily in New Jersey affecting approximately 800 of Local 1262’s members. The stores would be closing on Oct. 13, 2010.
According to the UFCW, the stores are in Marlboro, North Brunswick, South Plainfield (3600 Park Ave.), West Paterson, Fort Lee, Belleville (Washington Avenue), Union and North Bergen in New Jersey, and Monsey in New York.
The company’s operational and revenue-driven turnaround initiative, which was announced late last month, is designed to generate sustained profitability and cash flow, drive sales growth, restore competitive margins to the business and strengthen the foundation of the company for the long term.
Founded in 1859, A&P is one of the nation's first supermarket chains. The company currently operates 429 stores in eight states and the District of Columbia under the following trade names: A&P, Waldbaum's, Pathmark, Pathmark Sav-a-Center, Best Cellars, The Food Emporium, Super Foodmart, Super Fresh and Food Basics.
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| Company | Address | Closure or Layoff | # Affected | Impact Date | | A&P | CT, MD, NJ, NY & PA | Closure | 800 | 10/13/2010 | | Community Education Partners | 4224 N Front St, Philadelphia, PA | Closure | 74 | 8/30/2010 | | Ingersoll Rand | 101 N Main St, Athena, PA | Closure | 131 | 10/3/2010 | | Keystone Food Products Inc. | 3767 Hecktown Rd, Easton, PA | Layoff | 60 | 10/11/2010 | | FEDEX Smartpost | 536 Jones Blvd, Pottstown, PA | Closure | 106 | 10/10/2010 | | Professional Veterinary Products | 3640 Sandhurst Dr, York, PA | Closure | 31 | 10/11/2010 | | Honeywell Aerospace | 402 S 36th St, Phoenix, AZ | Layoff | 280 | 12/31/2010 | | American Airlines | 400 World Way, Los Angeles, CA | Layoff | 60 | 9/24/2010 | | American Airlines | North Terminal-Baggage Service Office, San Francisco, CA | Layoff | 148 | 9/24/2010 | | Angelica Textile Services | 1428 W. Linwood Ave., Turlock, CA | Closure | 106 | 9/4/2010 | | Angelica Textile Services | 1145 S. Sierra Nevada St.`, Stockton, CA | Closure | 88 | 9/30/2010 | | Benefit Cosmetics | 725 85th Ave., Oakland, CA | Closure | 32 | 9/3/2010 | | Coca-Cola North America | 210 Ski Village Drive, Mount Shasta, CA | Closure | 49 | 9/27/2010 | | Correction Corp. | 22844 Virginia Blvd., California City, CA | Closure | 100 | 9/3/2010 | | Domtar Paper Co. | 14100 Vine Place, Cerritos, CA | Layoff | 47 | 9/6/2010 | | Furniture Homestores of Southern California | California | Closure | 80 | 9/29/2010 | | Golden State Mutual Life Insurance | 1999 W. Adams Blvd., Los Angeles, CA | Closure | 46 | 9/30/2010 | | Harman Consumer | 8500 Balboa Blvd., Northridge, CA | Closure | 48 | 9/30/2010 | | Hines Nurseries | 12621 Jeffrey Road, Irvine, CA | Layoff | 34 | 9/13/2010 | | IAP World Services | Bldg. T-510 And Other Buildings, Fort Irwin, CA | Layoff | 48 | 9/30/2010 | | McDonough Holland & Allen PC | 1901 Harrison St. 9th Floor, Oakland, CA | Layoff | 21 | 8/31/2010 | | McDonough Holland & Allen PC | 500 Capitol Mall, 18th Floor, Sacramento, CA | Layoff | 106 | 8/31/2010 | | Netflix | 1909 S. Susan St., Santa Ana, CA | Layoff | 24 | 9/17/2010 | | Netflix (3rd Party Agency Spherion) | 1909 S. Susan St., Santa Ana, CA | Layoff | 101 | 9/7/2010 | | Pomona Valley Hospital Medical Center | Ponoma, CA | Layoff | 160 | 9/27/2010 | | Simpson Dura-Vent Co. | 877 Contting Court, Vacaville, CA | Closure | 262 | 9/5/2010 | | Storer School And Contract Service | 1909 S Argonaut St., Stockton, CA | Closure | 97 | 9/19/2010 | | The Boeing Co. | 5301 Bolsa Ave., Huntington Beach, CA | Layoff | 64 | 9/24/2010 | | The Boeing Co. | 2260 E. Imperial Highway, El Segundo, CA | Layoff | 24 | 9/24/2010 | | UPS Teleservices | 2100-A Blosser Road, Santa Maria, CA | Closure | 74 | 9/11/2010 | | Verizon Mission Hills Remittance Processing Center | 11333 Sepulveda Blvd., Mission Hills, CA | Closure | 50 | 9/22/2010 | | Whole Foods Market | 15315 Magnolia Blvd., Suite 320, Sherman Oaks, CA | Layoff | 59 | 9/9/2010 |
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