More Oppose Extended Stay America Deal
The investors fighting to stop a $6 billion takeover of hotel chain Extended Stay America have added more punch with a major shareholder advisory firm concluding that the deal should be scuttled.
Institutional Shareholder Services Inc. recommends that shareholders oppose Extended Stay America selling to Blackstone Real Estate Partners and Starwood Capital Group, noting that investors could get more by waiting as the hotel industry recovers from the financial difficulties inflicted by the pandemic.
Tarsadia Capital, which owns 3.9% of the chain’s stock, has been pushing for shareholders to reject the deal announced in mid-March. In a March letter to shareholders, Tarsadia said $19.50 a share was a “grossly inadequate price” and would end Extended Stay America's seven years as a public company at a price below its original initial public offering price, which was $20 per share.
The investor said the right leadership and board "can generate much better value for shareholders than the $19.50 per share the Board accepted after its seemingly hasty negotiations” with Blackstone and Starwood. Their deal “appears to have come together in less than five weeks, right as the economy begins a recovery,” Tarsadia said.
Hawk Ridge Capital Management joined Tarsadia in opposing the deal. Southern Asset Management, Cooke & Bieler and River Road Asset Management have also said they would oppose it. In all, they represent roughly 13% of outstanding shares.
Barry Sternlicht, Starwood’s CEO, has been a fan of extended-stay hotels, saying during a webinar in April with financial services firm Walker & Dunlop he believed that such properties would recover faster than others in the hotel industry. That month, Starwood bought an 8.5% stake in Extended Stay America at an average price of $9.05 per share.
Extended Stay America’s share price had dropped below $7 in April 2020 when stay-at-home orders prevented travel. But such hotels, particularly those with economy pricing, fared relatively well when economies started reopening in May and leisure travel picked up.
In the company’s first quarter ended March 30, its average occupancy hit 75% across 627 hotels, a 4.3% increase over the comparable period last year.
Big Lots Scores Another Strong Quarter
Discount retailer Big Lots, which is looking at adding new stores this year, kicked off 2021 with a record quarter following a record year in spite of the pandemic.
On Friday, Big Lots reported $1.62 billion in sales for its first fiscal quarter ended May 1, a 13% increase over the same time last year. Those months included the early days of the pandemic.
But the quarter also was higher than the $1.26 billion the Columbus, Ohio-based company reported in its first quarter of 2019.
Net income hit $94.6 million, up from $49.3 million last year. CEO Bruce Thorn told investors on its earnings call the performance marked the best quarter ever for the company.
The quarter followed its best-ever fiscal year. Big Lots was among those allowed to stay open during lockdowns because it sells groceries. Furniture, kitchen appliances, cookware and electronics played a bigger role in its performance.
Lawn and garden sales were a boon for the retailer during the quarter, Thorn said. He also noted that another around of stimulus checks fueled sales.
During the pandemic, Big Lots shifted to curbside delivery to make it easier for customers to shop. And like a lot of retailers, the chain beefed up its online sales.
Big Lots set up 47 stores around the country to serve as shipping locations to ensure two-day shipping. The retailer has said that it plans to add 50 to 60 stores, 20 of which will include relocations to bigger space so they can sell furniture.
Personal Income Declines
With government benefits running out, personal income decreased in April, but personal consumption still increased, just not as much as the previous month.
The Commerce Department reported Friday that personal income decreased 13.1%, following a 20.9% gain in March from February. Congress passed a $1.9 trillion relief package proposed by President Biden in March. It included $1,400 in direct payments to qualifying Americans.
Personal consumption increased 0.5%. In March, spending had risen 4.7% from the previous month.
The same report showed the core personal consumption expenditures price index increased 3.1%, excluding a food and energy, in April, exceeding forecasts of roughly 2.4%. The index is another measure of inflation.
In March, the index rose 1.9% following three consecutive months of 1.4% increases.