Alco acquired by private equity firm
ABILENE, Kan. — Argonne Capital Group LLC, a private investment firm based in Atlanta, Ga., has entered into a definitive merger agreement with Alco Stores, which will allow Argonne to acquire all outstanding shares of the broad-line retailer’s common stock for $14 per share in cash.
This price represents a premium of approximately 63% to Alco’s share price on July 24, 2013, the last trading day prior to Alco’s announcement of the transaction contemplated by the merger agreement. The cash price for Alco shares in the proposed transaction totals approximately $47 million.
The independent members of Alco’s board of directors have unanimously approved the merger agreement and recommended that the retailer’s shareholders approve the transaction.
"Argonne Capital is very selective in its acquisition process and focuses on companies that have strong growth potential," Royce Winsten, chairman of the board of Alco, stated. "We are proud of Alco CEO Rich Wilson and his management team, and how they have positioned the company for growth. We believe Argonne will help Alco grow and achieve the goals management and the board have established for the company."
"Alco Stores has a unique model for providing an attractive merchandise selection and exceptional value to consumers in underserved communities in small-town America,” added Wilson. “Our associates are supportive of the new brands, variety and value we offer shoppers — as well as the operational improvements behind the scenes. Alco looks forward to partnering with Argonne, and we believe the support they will provide will accelerate the company’s plans for sustained growth."
The merger, which is expected to close later this year, is subject to approval from Alco’s shareholders and other customary closing conditions.
William Blair & Company, L.L.C. is serving as financial adviser to the company, and Norton Rose Fulbright and Lathrop & Gage LLP are serving as legal advisers to the company. Sagent Advisors, LLC is serving as financial adviser to Argonne, and King & Spalding LLP is serving as legal adviser to Argonne.
Founded in 1901, Alco Stores are primarily located in small, underserved communities across 23 states. The company operates 213 stores that offer both name brand and private label products. ALCO has its distribution center in Abilene, Kan., and is in the process of moving its headquarters from Abilene to suburban Dallas, Texas.
Argonne operates or franchises more than 775 restaurants under brands such as Iho, Applebee’s, Krystal and Stevi B’s Pizza. Argonne’s real estate investment platform, RCG Ventures, LLC, owns more than 60 shopping center assets across 18 states with a focus on value-add opportunities.
Another mixed message on BTS outlook
LOS ANGELES —With the back-to-school season well underway, a new spending forecast from e-commerce platform provider PriceGrabber conflicts with other recent studies and highlights the danger of placing much credence in what shoppers say about their spending intentions.
Shoppers’ spending intentions can differ materially from their actual behavior.Results of the survey indicate that 68% of consumers plan to spend up to $500 this back-to-school shopping season compared to 63% in 2012 and 48% in 2011. Additionally, 17% of respondents plan to spend between $500 and $1,000, and 15% of shoppers said they have no back-to-school shopping budget this year. Conducted from June 17 to July 8, 2013, the survey includes responses from 2,191 U.S. online shopping consumers.
“The outlook for the back-to-school shopping season remains positive. With [the] unemployment rate dropping from 8.2% in June 2012 to its current rate of 7.6%, shoppers are more inclined to spend than they were in the last couple of back-to-school seasons,” said Rojeh Avanesian, SVP marketing and sales of PriceGrabber. “However, instead of spending on the newest gadgets, shoppers are looking for ways to get the most for their money by looking for deals, as well as reusing already owned items before purchasing new ones.”
Highlights from the survey are detailed below.
Classic school supplies and clothing top shopping lists
Consumers are planning to purchase practical items, putting basic school clothing and supplies at the top of their back-to-school shopping lists. When PriceGrabber survey respondents were asked to select all of the items they plan to purchase this back-to-school shopping season, 72% selected general school supplies, such as notebooks, binders and pencils. Sixty-eight percent of consumers plan to send their children back to school in style with new clothing; 42% said they plan to purchase a backpack or tote bag; and 36% of shoppers said they plan to purchase books.
In the electronics category, computers topped back-to-school shopping lists with 17% of respondents selecting laptop computers, and 11% citing an electronic tablet purchase. Computer accessories received 10% of the vote, cell phones received 9%, and only 5% selected a desktop computer.
Consumers plan to use numerous money-saving methods while back-to-school shopping
When PriceGrabber survey respondents were asked to select all of the ways they plan to save money while back-to-school shopping this year, visiting discount stores ranked in first place with 50% of the consumer vote. Forty-six percent of consumers said they plan to search for school supplies they already own, such as pens, pencils and glue sticks before buying new items. Consumers indicated they will readily use online shopping sites, as this money-saving option ranked third place, receiving 45% of vote; 37% of consumers plan to take an inventory of their kids’ closet to see what items can still be worn and which items need to be replaced before going shopping; and 33% plan to visit retailer websites to print coupons.
Discount stores and online-only retailers score big with consumers
When respondents were asked to select all of the types of stores they plan to shop at for back-to-school items, 80% selected discount stores. Online-only retailers were voted second place, receiving 54% of the consumer vote, and wrapping up a close third place, office supply chain stores were selected with 44%. It is noteworthy to mention that 42% plan to shop at traditional department stores, and 24% plan to shop at electronics stores this back-to-school season.
Back-to-school mobile device purchases expected to rise
Many back-to-school shoppers indicated they will continue to shop electronically this year to take advantage of the latest and greatest back-to-school shopping deals. When PriceGrabber survey respondents were asked to select all of the methods in which they plan to purchase back-to-school items this year, 13% answered they plan to shop using their mobile phone (compared to 6% in 2012), and 16% said they planned to make purchases via an electronic tablet device (versus 8% from last year). Sixty-nine percent of shoppers said they plan to make back-to-school product purchases online; 58% indicated purchases at a brick-and-mortar store; and only 11% noted a potential purchase from a printed catalog.
Free shipping, sales and coupons incentivize back-to-school shoppers
Consumers continue to look for ways to stretch their dollar and take advantage of retailer incentives to save money. According to the survey, 72% of consumers chose free shipping as the top retailer tactic that would entice them to make a back-to-school purchase this year. When asked to select all retailer tactics that would encourage them to make a back-to-school shopping purchase, sales came in a close second place with 71% of the vote; 69% cited coupons; 43% selected online promotions; 41% noted rebates; and 38% selected free items with a purchase.
Most back-to-school shopping will take place in August
According to PriceGrabber survey data, 50% of consumers plan to start their back-to-school shopping in August; 34% plan to start shopping in July; 7% noted June; 6% cited September, and only 3% selected October.
Looking good down on the farm
Tractor Supply solidified its positioned as the nation’s leading operator of farm and ranch stores during the second quarter with the opening of 26 stores and a better than expected 7.2% same store sales increase which prompted an increase in full year guidance.
The company has opened a total of 48 new stores this year, pushing its total to 1,223 units in 46 states and making it the unrivaled leader in a unique segment of the retail industry. Tractor Supply focuses on serving the lifestyle needs of recreational farmers, ranchers and rural residents with a product assortment that includes a wide range of animal suppliers, hardware and tools and power equipment, seasonal products and apparel and footwear.
It is an effective combination. The company said its sales increased 12.7% to $1.46 billion from $1.29 billion during the second quarter ended June 29, and same store sales increased 7.2% on top of a prior year gain of 3.2%. The sales strength was said to be broad-based and driven by categories such as consumables, seasonal merchandise and a category Tractor Supply defines as “usable and edible” products.
Strength of lower margin consumable products caused the retailer’s gross margin rate to decline slightly to 34.8% from 34.9%, but expenses were considerably lower at 21.2% of sales compared to 21.8% of sales, resulting in a corresponding improvement in overall profitability. Net income increased 15.9% to $123.6 million, or $1.75 a share, compared to $106.6 million, or $1.45 a share.
"We anticipated a late start to spring this year, and entered the second quarter well-positioned to take advantage of the seasonal shift,” said Greg Sandfort, Tractor Supply’s president and CEO. “As a result, we delivered a solid increase in store traffic, strong same-store sales growth across geographic regions and double-digit EPS growth.”
The better than expected results prompted the company to increase its full year outlook, bumping its same store sales forecast to a range of 4% to 5% from an earlier range of 3% to 5%. The profit outlook was increased to a range of $4.36 to $4.44, compared to its previous guidance of $4.32 and $4.40.
"Our performance in the first half of 2013 again demonstrated the continued strength of our core businesses, as well as our ability to manage through seasonal variances,” Sandfort said. “We place great rigor into better understanding and serving our customers’ evolving needs, while seeking to introduce new customers to the Tractor Supply brand. We believe our company has a great opportunity ahead of us to grow the business, while continuing to deliver value to our shareholders."