Coke buys a coffee chain, setting the stage for competition with Starbucks
The Coca-Cola Company has made the largest acquisition in its history — and its first involving a retail chain.
The soda giant has agreed to acquire U.K.-based Costa Limited for $5.1 billion. Costa operates nearly 4,000 coffee cafes across 32 countries, a coffee vending operation, for-home coffee formats and a state-of-the-art roastery. It also operates Costa Express, which offers “barista-quality” coffee in a variety of on-the-go locations, including gas stations, movie theaters and travel hubs.
Costa ranks as the leading coffee company in the United Kingdom and has a growing footprint in China, among other markets. The acquisition puts Coke in direct competition with Starbucks across global markets. Both Costa and Starbucks are particularly focused on expansion in China.
The deal gives Coca-Cola a significant presence in the global coffee market, whose growth is outpacing that of soft drinks. Global coffee sales, including instant coffee, are forecast to grow 15.6% by 2022, according to market researcher Euromonitor.
Costa also provides Coca-Cola with strong expertise across the coffee supply chain, including sourcing, vending and distribution, the company said. This will be a complement to existing capabilities within the Coca-Cola system.
“Costa gives Coca-Cola new capabilities and expertise in coffee, and our system can create opportunities to grow the Costa brand worldwide,” said Coca-Cola president and CEO James Quincey. “Hot beverages is one of the few segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market with a strong coffee platform.”
The deal is expected to close in the first half of 2019. Upon closing, Coca-Cola will acquire all issued and outstanding shares of Costa Limited, a wholly owned subsidiary of Whitbread.
TravelCenters exits C-store business
TravelCenters of America has sold its freestanding convenience stores.
The company has entered into an agreement to sell its Minit Mart convenience store business for approximately $330.8 million to EG Group, privately held convenience store retailer based in the United Kingdom. The Minit Mart portfolio includes 225 standalone convenience stores and certain other related assets.
The agreement marks EG’s latest expansion move in the United States. In April, it completed its $2.15 billion purchase of Kroger Co.’s convenience store business, and established a North American headquarters in Cincinnati.
TravelCenters said the sale, which is expected to be completed in the fourth quarter of 2018, will enable it focus on its core travel center business. The company plans to use the net proceeds from the deal to reduce leverage and/or invest in travel center growth initiatives.
“We expect some of these growth initiatives may include expanding our industry leading truck service program and growing our nationwide network of travel centers, including investing in our recently announced TA Express travel center format and pursuing new franchising opportunities,” said Andy Rebholz, CEO, TravelCenters.
The Minit Mart stores have been a part of TravelCenters’ business for about five years.
The Minit Mart portfolio generated earnings before interest, taxes, depreciation and amortization, or EBITDA, of approximately $24.5 million during the 12 months ended June 30, 2018.
TravelCenters of America operates in 43 states and in Canada, principally under the TA and Petro Stopping Centers travel center brands and the Minit Mart convenience store brand.
Big Lots Q2 misses Street
Big Lots’ earnings fell short of analysts’ expectations for the second quarter in a row.
The close-out retailer reported income of $24.2 million, or 59 cents per share, for the second quarter ended Aug. 4. This is a drop compared to last year’s second quarter income of $29.1 million, or 67 cents per share. It also missed analyst forecasts of 67 cents, and the company’s own guidance of 60 to 70 cents a share.
Net sales rose to $1.22 billion from $1.21 billion from the same period last year, with the increase in comparable store sales partially offset by a lower store count year-over-year. However, this was still slightly below analyst estimates of $1.23 billion.
Comparable store sales increased 1.6%, compared to the company’s guidance of flat to 2% growth.
The results come mere days after Big Lots named Bruce Thorn as president and CEO. Thorn was most recently the president and COO of Tailored Brands, parent company of Men’s Wearhouse, Jos. A. Bank, and Joseph Abboud. He replaced David Campisi, who retired in April.
As part of the company’s ongoing focus on capital structure, Big Lots extended its current $700 million five year unsecured credit facility. The credit facility now covers a new five year period (expiring August 2023), and maintains a similar structure and financial covenants as the retailer’s previous facility.
Looking ahead to the third quarter, Big Lots expects a comparable store sales increase of 2% to 4%, and income of 4 cents per diluted share to a loss of 6 cents per share, compared to adjusted income of 6 cents per share for the same period last year.
For the full year, Big Lots estimates that comparable store sales will increase by approximately 1%. Income will be in the range of $4.40 to $4.55 per diluted share, compared to fiscal 2017 adjusted income of $4.45 per share.