National

Dozens of Sears Hometown stores are closing and holding liquidation sales, according to Facebook posts from the shuttering locations.

Why it matters: Sears and Kmart have closed thousands of stores and cut around 250,000 jobs over the last 17 years.

The two iconic retailers were owned by Sears Holding, which filed for Chapter 11 bankruptcy protection in 2018 and escaped liquidation when Eddie Lampert's Transformco acquired them out of bankruptcy.

Transformco also acquired Sears Hometown stores in 2019.

Sears Hometown was touted in a November 2019 news release as a "network of more than 400 independently-owned and operated, dealer-managed smaller-format stores" selling "a range of home products, including appliances, lawn & garden, tools and sporting goods."

What's happening: Transformco did not provide a list of the closing locations or how many will remain, but stores around the country posted announcements on their Facebook pages, viewed by Axios. An unverified list was also posted on the message board TheLayoff.com.

The store closing or liquidation sales will vary in length and discounts, according to the social media posts.

Transformco did not respond to Axios' request for comment.

As of April 2022, there were three remaining Kmart stores in the continental U.S.

What they're saying: "Very sad to announce but our Sears hometown store at 126 Buchanan street N in Cambridge MN is closing. Everything on the floor must go!!," the store in Cambridge, Minnesota, posted on its Facebook page. 

"This is your last chance to save! Check out our Store Closing Liquidation event in-store at select locations only through 6/27," the Sears Hometown store in Kilmarnock, Virginia, posted to its Facebook page.

"Unfortunately we must announce the closing of our Sears Hometown Store. It is not a decision that we have made lightly. We have loved all of our time that we have been able to spend with you over these last 10 years. Our last day that we are open is June 23, 2022," the store in Luling, Louisiana, posted on Facebook.

Of note: Store locator websites for Sears and Kmart were not accurate as of Wednesday and listed locations that previously closed.

Sears Hometown shoppers are advised to check Facebook pages or call stores to confirm they are still open.

More than 70 Sears stores to close across country

The Sears Hometown liquidation sales have begun and will vary in length.

Hundreds of Sears stores have closed over the years and more than 70 Sears Hometown stores are currently slated to be liquidated. Photo: Getty Images

Sears

Retail

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Walmart is pulling pints of its store-brand Great Value ice cream labeled as “Celebration Edition Juneteenth” from store shelves after backlash on social media.

Why it matters: Amid discussions of racial injustice, Juneteenth became the 11th federal holiday last June and some major retailers and businesses started offering the day as a paid holiday. The holiday commemorates the formal end of slavery in the U.S.

Juneteenth commemorates June 19, 1865 — the day U.S. Major General Gordon Granger rode into Galveston, Texas, with word that the Emancipation Proclamation had been signed by President Abraham Lincoln more than two years before.

June 19 also is known as Emancipation Day, Freedom Day and Jubilee Day. 

Meanwhile, consumers took to social media to say the red velvet and cheesecake flavored ice cream was done in poor taste. 

Bridge, a group formed by marketing and diversity, equity and inclusion executives from Unilever, Discover Financial, NBC Universal and other companies, sent a letter to Walmart executives calling on the retailer to remove the ice cream from its shelves.

“Would you launch an ice cream called January 27? The day the world remembers the Holocaust. Or April 7, the day that memorializes the genocide in Rwanda. Of course not,” the letter said. “So why Juneteenth?"

"Clearly, from the slogan on the packaging, you intended to share in the emancipation celebration of Black Americans. But launching an ice cream by its name creates more pain than support. So what went wrong here?” 

What they’re saying: “Juneteenth holiday marks a commemoration and celebration of freedom and independence," Walmart said in a statement to Axios.

"However, we received feedback that a few items caused concern for some of our customers and we sincerely apologize. We are reviewing our assortment and will remove items as appropriate.”

Flashback: This isn't the first time a company had to change Juneteenth plans. 

Last year, an Ikea store in Atlanta drew criticism after making a special menu for Juneteenth that Black employees called insensitive with items including fried chicken and watermelon, CBS reported. 

Walmart pulls Juneteenth ice cream from stores after backlash

Consumers took to social media to say Walmart's red velvet and cheesecake flavored ice cream was done in poor taste.

Walmart's store brand Great Value created a "Celebration Edition Juneteenth" ice cream. Photo: Getty Images

Walmart

It's not just the cost of borrowing to buy a home that's getting more expensive. Pricier credit card debt is also putting a squeeze on consumers who are relying more on plastic amid the worst inflation shock in decades.

Why it matters: For those carrying a balance, that debt is expected to get even costlier to pay off, as the Federal Reserve continues an aggressive interest rate hike campaign to tamp down red-hot price growth. 

"The prime rate may end the year at 6%. Add in credit card companies' average margin and that could push the average credit card rate a little over 19% — the highest we have on record," says Ted Rossman, a senior industry analyst at Bankrate.

Credit card rates — unlike mortgage rates — move with a lag in response to Fed policy.

By the numbers: Consumers have opened a record number of new credit card accounts so far this year — 11.5 million, according to Equifax. 

And in a sharp shift from a pandemic-era trend, credit card balances are growing again. Balances jumped consecutively in the final three quarters of 2021, before backing off slightly last quarter, according to the Fed's latest household debt and credit report.

Balances are still about 10% below the pre-pandemic peak. 

The bottom line: Amid the booming job market, delinquency rates remain at rock-bottom levels, though there's been a slight uptick in borrowers with lower credit scores starting to fall behind on payments.

Latest borrower squeeze: Credit card rates climb

It comes as some consumers rely more on plastic amid the worst price shock in decades.

Credit cards

Jobs

Stock market

Consumers continued to spend in April, with retail sales jumping 0.9% from the prior month, according to government data released on Tuesday.

Why it matters: Shoppers aren't pulling back on spending even as prices soar at the fastest pace in 40 years. This is a good sign for the American economy amid fears of a coming recession as inflation rages.

Retail sales rose 8.2% from a year ago, a period when inflation jumped by 8.3%.

Stripping out spending on gasoline, retail sales were even stronger, rising 1.3% from the prior month.

Details: Consumers upped spending at restaurants and bars, and spent more on clothing, furniture and cars.

Spending on gas fell 2.7% compared to March, when gas prices rose as Russia invaded Ukraine.

The bottom line: Economists are keeping a close eye on consumer spending for signs of how they are grappling with soaring prices. So far, activity remains robust.

What to watch: Walmart, the nation's biggest retailer, says it sees some signs that cash-strapped consumers are adjusting their behavior because of higher prices.

CFO Brett Biggs told CNBC on Tuesday that the company is seeing more sales of half-gallons of milk and its private brand of lunch meat. The company expects inflation to continue to crimp its business this year.

Editor's note: This story has been updated with additional details from the report.

Retail sales jump as prices soar at fastest pace in 40 years

Retail sales rose 0.9% last month — a good sign for the economy.

People shopping in the meat aisle in a grocery store 

People shop at a grocery store this month in New York City. Photo: Spencer Platt/Getty Images

Consumers

Axios Closer

Percentage who say they have bought or are willing to buy secondhand products

Data: GlobalData via ThredUP; Chart: Baidi Wang/Axios

Buying secondhand is no longer an afterthought. 

Driving the news: 93% of shoppers in the U.S. have or are open to buying secondhand products, according to a new report from resale platform ThredUP out this morning.

Why it matters: We’ve grown increasingly aware of our consumption habits — particularly the youngest consumers among us — and are living in a period of high inflation which has us questioning our purchase decisions. 

Details: Nearly 2 in 3 people believe their individual buying habits have a significant impact on the planet, according to a survey of 3,500 U.S. adults. 

82% of respondents said they feel a positive emotion when they buy used.

74% said preowned apparel is more socially acceptable now than it was five years ago. 

Yes, but: Saving money is the top reason people buy secondhand over new — across all age groups — the study found.

Among Gen Z, sustainability is the second top motivator.

For average consumers, being able to afford higher-end brands is the second leading motivator.

The big picture: E-commerce technology has matured so much over the past few years that it’s helped to increase the availability of used clothing around the world, whether that’s through dedicated platforms like ThredUP, Poshmark, The RealReal or a closet-sharing service like Tulerie. 

What to watch: Big legacy brands are building more ways to resell their own products. 

Doing so not only helps companies like Oscar de la Renta and Levi’s retain customers, but it also adds a new stream of revenue to their business by taking back what a resale platform may have made on their products. 

Thrifting is the new normal

Nearly all Americans are buying or are open to buying secondhand, a study from ThredUP shows.

E-commerce

Instacart, the online grocery delivery platform, confidentially filed to go public, according to a statement late Wednesday.

Why it matters: In a slow year for large IPOs, the listing could be a bellwether. The timing of Instacart's public debut could still be thwarted by a rocky stock market and uncertainty in the macroeconomic environment.  

Of note: Only two IPOs of more than $500 million have listed this year in the U.S., according to Bloomberg. Investors have largely sold down the 2021 IPO class.

Context: Just under two months ago, the company slashed its valuation by nearly 40% to $24 billion.

Last March, the company was valued at about $39 billion, following a $265 million fundraising round from existing investors that included Andreessen Horowitz, Sequoia Capital and D1 Capital Partners.

What's next: The timing or size of the listing wasn't disclosed in its statement.

Instacart confidentially files for IPO

In a slow year for large IPOs, the listing could be a bellwether.

Initial public offerings (IPO)

Kohl's shareholders voted to re-elect all 13 of the department store's nominees, according to a preliminary count following Wednesday's annual shareholder meeting, beating out activist investor Macellum's slate.

Why it matters: The shareholder vote and results of the board election play a critical role in the future of the company, as Kohl's has withstood an intense attack from Macellum, which nominated 10 directors and has pressured the company to put itself up for sale.  

What we're watching: During the proxy fight, suitors interested in a Kohl's takeover emerged, including Hudson's Bay and a joint bid by Simon Property Group and Brookfield Asset Management.

With the results of the board election nearly final, all eyes are on whether the acquisition interest in Kohl's turns into a full sale process or if the company elects to go forward on its own. 

"The board remains focused on running a robust and intentional review of strategic alternatives while executing our strategy to drive shareholder value," said chair Peter Boneparth in a statement.

Kohl's investors slap away activist's director slate

The department store now moves on to assess bidders circling the company.

A Kohl's advertisement at the LaBahn Arena in Madison, Wisconsin. Photo: Getty Images

Deals

Axios Media Trends

Sales growth for U.S. <span style="background:#054f9f; padding:3px 5px;color:white;">digitally-native</span> and <span style="background:#15a0ff; padding:3px 5px;color:white;">established</span> DTC brands

Data: eMarketer; Chart: Thomas Oide/Axios

Splashy direct-to-consumer brands like Peloton and Blue Apron are losing their edge as established companies double down on digital products and services.

The big picture: The digital upper hand can only take new brands so far. Established companies have far more capital and scale, enabling them to leverage the ideas and marketing that startups have tried to use against them.

State of play: At the start of the pandemic, digitally native companies prioritized marketing to consumers who were stuck at home and spending far more time on social media.

That drove a huge rise in investment in upstart brands that investors believed could eventually displace traditional firms. What they hadn't anticipated, though, was that many established firms would push aggressively to catch up. 

Driving the news: New data from Insider Intelligence shows that direct-to-consumer e-commerce sales from established brands will be three times larger than those of digitally native brands.

The upstarts' marketing playbook "has mostly run out of juice," wrote Andrew Lipsman, principal analyst for retail & e-commerce. 

Flashback: "We believe that there is a paradigm shift going on," Accenture CEO Julie Sweet said last month at Axios' "What's Next" Summit. 

"Back in 2019 when I became CEO, I said, 'Over the next decade, the disrupted would become the disrupters.' And by that I meant the traditional companies, the incumbents who've been disrupted by technology-first companies, would  over the course of a decade catch up. That's happening much more quickly," 

Traditional companies across industries are finally beginning to claw back at their upstart rivals. 

In entertainment, Netflix's massive sell-off last month showed just how much the streamer is suffering from competition from established media companies like Disney and Warner Bros. Discover, which is home to HBO Max. 

In food delivery, despite the pandemic-driven at-home meal kit boom, companies like Blue Apron, Sunbasket and HelloFresh have struggled to maintain their competitive edge against options from grocery giants Kroger, Albertsons, Walmart and Whole Foods, local restaurants and chains like Denny's and Chick-fil-A, and even food brands themselves like Pepsi and Kraft Heinz.

In clothing and fashion, brands like Nordstrom, Macy's and Walmart have launched livestream selling, podcasts and third-party marketplaces.

Details: Upstarts are finding it more difficult to do business online as advertising becomes more expensive, and privacy changes have limited their ability to track their customers.

"Digital ad costs are rising, the early arbitrage opportunity has eroded, and brands can't growth-hack their way to scale," Lipsman wrote.

As DTC companies mature and run out of digital reach and engagement, brands like Allbirds are spending more to extend themselves in the physical world by opening new stores, creating traditional TV advertising, and going wholesale. 

Big brands bite back

Established brands are disrupting the startups that once disrupted them.

Brands

Leap, a startup that locates and operates physical stores for consumer brands, is adding five new markets, the company said Tuesday.

Why it matters: Leap's expansion comes as the retail industry continues to open brick and mortar stores even amid an e-commerce boom. Case in point: Store openings outpaced store closings by more than two to one as of January.

Of note: Leap's expansion follows the move by a number of digitally native startups seeking physical locations. These include home furnishings brand Parachute, apparel brand Vuori and hair care brand Madison Reed.

Between the lines: E-commerce dominated during the pandemic.

But as customers become more expensive to acquire online, brands are looking to physical stores and wholesale as more cost-effective ways to attract shoppers.

How it works: Leap is described by its CEO as an operating system that helps build and scale brands' store strategies.

The company handles everything from signing the lease agreement to hiring and managing the store employees. The only thing the brand needs to supply is the merchandise and online capabilities, Tolia said.

While a store will look and feel like the brand, everything underneath is powered by Leap, he added.

State of play: Leap currently operates stores for brands such as Mack Weldon, ThirdLove, Something Navy, A Pea in the Pod and Naadam.

What's next: Leap intends to quadruple the number of stores it operates over the next two years, Tolia said. 

Leap springs into new markets

The company's stated goal is to quadruple locations.

Axios Cities

A mirror that can tell you what size you'd take in various clothing brands is starting to make its appearance in retail stores — potentially obviating a trip to the dressing room.

Why it matters: 80% of clothing returns are size-related. When people can try on garments virtually — either online or in front of a smart mirror in a store — they're less likely to return them and more likely to buy additional items.

Driving the news: While lots of apps let you input your measurements and see size recommendations, the FirstLook Smart Mirror from a company called MySize is one of a small but growing number of AI tools that will match your figure to particular sizes from particular brands.

First, you use the sensors in your phone to map your body contours and store a "MySize ID," which is private to you.

Then, you use your MySize ID to buy clothes online from participating manufacturers — like Levi’s, Lacoste, Nautica and Gant — or in a retail store that has the FirstLook Smart Mirror.

The mirror, introduced in February, is in more than 1,000 retail locations.

"The vision is to change the way people buy clothes," Ronen Luzon, CEO of MySize, tells Axios. 

It's especially useful for buying children's clothes, Luzon says: Parents can update their kids' measurements every few months.

The big picture: Clothing sizes vary from brand to brand, and retailers lose a lot of money taking back returns. Lots of AI companies are working on the problem by making tools that will pinpoint your fit.

Retailers like Warby Parker, Nike and Asos let you find the right size in their products online.

Augmented reality companies like Zyler let retailers offer virtual try-ons.

A company called Bold Metrics has patented a Body Data NFT, which uses proprietary AI body modeling technology and works in the real world and the metaverse.

"Shoppers with a Bold Metrics Body Data NFT in their Coinbase, MetaMask or other Ethereum wallets can instantly get apparel size recommendations" at Canada Goose's, Men's Wearhouse and elsewhere, the company says.

"One of the challenges at Canada Goose is that all their jackets fit differently, so you can be a medium in one jacket or a small in another," Morgan Linton, the COO of Bold Metrics, tells Axios. 

The Body Data NFT takes the guesswork out of buying a particular style — and lets you adjust for whether you prefer a looser or tighter fit.

The bottom line: "The dressing room is not going to die completely," Luzon predicts. "People still love going shopping, going to the malls — it's fun."

Smart mirror can guess your size

An AI tool stores your measurements for easy shopping.

A woman standing in front of a "smart" mirror

The FirstLook Smart Mirror. Photo courtesy of MySize

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

Private equity firm Ames Watson is levering portfolio company Lids with a new $250 million term loan to finance the private equity firm's acquisitions, it said Wednesday morning.

Why it matters: The new funding will help Ames Watson, which has a mix of long-term holdings as well as VC and PE investments, consolidate the retail and apparel industries.

Quick take: Goldman Sachs' global co-head of consumer retail Ben Frost predicted to Axios that both sponsor-driven transactions and apparel deals would both be prevailing themes in 2022.

Between the lines: Ames Watson tells Axios that the proceeds, more specifically, could be used for acquisitions of either add-ons complimentary to Lids or purchases of standalone platforms.

It gives the firm the ability to buy businesses with more than a billion dollars in revenue or a number of smaller companies.

Ames Watson focuses mainly on DTC, but is open to B2B opportunities, it added.

It plans to deploy over $250 million on acquisitions in 2022 with at least $20-$30 million on passive investments. 

Of note: Information also not included in the announcement is JPMorgan arranged the syndicated loan, while Wachtell, Lipton, Rosen & Katz served as  the legal adviser.

Details: Ames Watson tells Axios that Lids has $1 billion in revenue, which is double what it was three years ago.

It plans to grow that business by hundred of stores over the next two-to-three years.

The firm, owned by Lawrence Berger and Tom Ripley and founded four years ago, now generates $1.6 billion in total revenue.

Portfolio companies include Lids, Fanatics Lids College and South Moon Under.

Past passive investments include Fanatics, Watchbox, Hungry and The House of LR&C.

The bottom line: "We are very much a Berkshire Hathaway model, so the goal is to grow, generate cash and use that cash to purchase interesting businesses that we can transform and grow," Ames Watson said in an emailed statement, adding that it's a long-term investor that doesn't expect to exit businesses.

Richard Collings authors the new Axios Pro newsletter on retail deals. Subscribe at AxiosPro.com.

Ames Watson lines up $250M for deals via Lids

Ames Watson raised $250 million to finance the acquisitions.

NBA player Karl-Anthony Towns signs autographs at a Lids store.

Checkers and Rally's, backed by private equity firm Oak Hill Capital Partners, "hopes" to refinance its debt within a year, conditioned upon stable markets, CEO Frances Allen told Axios.

Why it matters: The beleaguered burger chain is making headway under Allen, who was brought in to turn around the business in early 2020.

By the numbers: Revenue from Jan. 1 through late October of 2021 was $271 million, up 8% compared to the same period a year prior, she said.

EBITDA is projected to improve to $60 million by 2025 from just under $40 million currently, Allen added.

What's next: Once Checkers improves its EBITDA by 50%, the company can then talk about an exit.

Oak Hill bought the business in 2017 for $525 million and then injected it with extra $20 million in cash about a year ago.

Between the lines: The drive-thru specialist overhauled its kitchens, which allows it to introduce new products such as chicken tenders.

The company is also rolling out a new artificial intelligence (AI)-powered voice assistant to take orders, alleviating labor shortages.

Catch up fast: Considered a "top market concern loan" by Fitch Ratings, the credit rating agency lists the company as having nearly $247 million in loans. 

Moody's Investors Service, which reviewed the restaurant operator's Caa2 corporate rating last March, said a year ago Checkers had $211 million in first- and second-lien term loans.

The rating agency also noted at the time the company incurred a limited default by converting a $52 million second-lien loan into series C payment-in-kind (PIK) preferred equity.

The other side: Allen described the debt as "old baggage" and "old news" and as something she plans to "readdress."

She pointed out that price wars instigated by McDonald's and then Burger King in 2017 caused EBITDA to "go backwards," and it's how the burger flipper ended up on distressed watchlists.

Of note: The chain's fries have been voted best in the business three times since 2017, Allen claimed.

The bottom line: While many restaurant chains were negatively impacted by the pandemic, Checkers had already perfected contactless food service over the past 37 years via its double drive-thrus.

Checkers hopes to serve up a turnaround and then a refinancing

Revenue from Jan. 1 through late October of 2021 was $271 million, up 8% compared to the same period a year prior.

The drive-thru window of a Checkers fast-food restaurant.

Restaurants

Axios Pro: Deals

With the Omicron variant hitting foot traffic and causing labor shortages, several banners are being closely watched by rating agencies for a potential default.

Why it matters: Fitch has previously said that the leveraged loan default rate for the retail sector was projected to fall to its lowest level since 2016. 

Across the board, large bankruptcies dropped to 121 last year from 245 in 2020, according to Bloomberg

Yes, but: Not all retail merchants are out of the woods, thanks to that swirl of factors.  

Retailers of concern

Retailers improved in 2021 but headwinds persist, and for some, credit concerns remain.

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