Monday Business Briefing: GEA wants Sears to return its appliances; Papa John’s golden parachutes; Ford gears up for 2020 Escape; and more

Welcome to the Nov. 5 Monday Business Briefing, your weekly business intelligence digest from Insider Louisville.

GE Appliances wants its stuff back from Sears

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GE Appliances has asked a judge to order Sears to return a “voluminous” amount of appliances the appliance maker had shipped before the retailer declared that it was bankrupt.

The venerable retailer had filed for bankruptcy protection in the Southern District of New York on Oct. 15, and GEA asked Friday that Sears be ordered to please return all the merchandise it received from the Louisville-based appliance maker within 45 days before the bankruptcy filing.

“The Reclamation Goods were sold and delivered by GEA in the ordinary course of GEA’s business while Debtors were insolvent,” GEA’s attorney, Laura M. Brymer, of Louisville-based Fultz Maddox Dickens, wrote in a letter to Sears officials and attorneys.

Brymer wrote that GEA would not publicly disclose details about the amount of goods it is trying to reclaim because it is “voluminous” and would reveal confidential information.

A spokeswoman told Insider via email, “Like a number of Sears vendors, GEA is seeking all the protection it is entitled to under the bankruptcy laws, and has made this standard filing.”

GEA is among more than 70 businesses that have filed such claims. Others include Propel Trampolines, 20th Century Fox Home Entertainment, mattress maker Serta, Jif and Crisco maker Smuckers and GEA rivals Electrolux and Whirlpool. —Boris Ladwig

Papa John’s expands golden parachute, moving closer to possible acquisition announcement

A Papa John’s store in Durham, N.C. | Courtesy of Wikimedia Commons

Late Friday afternoon, Louisville pizza chain Papa John’s revealed that it’s taken a significant step that typically foreshadows a merger or acquisition by amending its severance pay for executives.

Such changes are referred to as golden parachutes, which award certain executives a windfall of compensation should they be fired following a change in control of the company. Humana has taken similar steps in the past amid rumors that it is trying again to merge with another company following its failed attempt to merge with Aetna.

The parachutes provide an inducement for the executives to stay until at least the deal is complete. If let go amid a change in control, such as an acquisition, “key employees” — including President and CEO Steve Ritchie, CFO Joseph Smith and Chief Operating and Growth Officer Michael Nettles — will receive pro-rata bonus payouts based on their length of service, according to Papa John’s filing with the U.S. Securities and Exchange Commission. The updated severance packages are valid for two years and only if the executive is terminated without cause.

Ritchie would receive 36 months’ worth of base pay, or $2.5 million, based on the most recent proxy statement, while Nettles and Smith would get 24 months’ worth, or $1.2 million and $700,000, respectively.

According to the filing, employees ranking senior vice president and higher will garner nine months worth of base pay and continued COBRA coverage if terminated without cause.

Reuters reported last week that private equity firms KKR & Co. and Roark Capital, as well as hedge fund Trian Fund Management, has all expressed interest in Papa John’s. The chain’s current leadership has made it clear that the company is open to acquisition or investment offers, including hiring Bank of America and Lazard to explore a sale.

An analyst with Stifel wrote on Oct. 11 that “we are conflicted in our view of (Papa John’s) because fundamentals remain poor, but we believe this performance has likely motivated the company to move quickly to take advantage of a white-hot restaurant M&A market.”

Analysts have likely been keeping a close eye on Papa John’s, which is slated to release its third-quarter earnings Tuesday.

General expectations are that Papa John’s third-quarter earnings will reflect the continued negative impact from comments made by founder John Schnatter and the bad publicity the company has received since, including its ongoing fight with Schnatter.

The company reported during its second-quarter earnings release that its same-store sales in July decreased by about 10.5 percent, predicting a 7 percent to 10 percent decline for the full year. Stifel analyst Chris O’Cull said back in September that if same-store sales didn’t start turning around that Papa John’s could be forced to close 150 and 250 stores, according to CNBC

The same CNBC story also quoted a different report that Papa John’s had lost 5 percent of its market share in the past year to competitors Domino’s and Pizza Hut. —Caitlin Bowling

Ford Escape sales fall; Louisville plant gears up for new model

Graphic by Boris Ladwig

Ford’s Escape sales are slipping, even as some rivals — Nissan Rogue, Toyota RAV 4, Jeep Cherokee — are posting gains.

Ford said its overall sales in October fell 2.5 percent from a year earlier, but sales of the Escape were down 11 percent, which followed a 20 percent decline in September. It was the first time in at least three years that the SUVs year-over-sales fell by more than 10 percent in two consecutive months.

And for the first time since at least 2015, Ford will sell fewer than 300,000 Escapes this year. Meanwhile, competitors are gaining some ground. While Nissan’s overall sales are down 6.5 percent this year, demand for the Rogue has improved 3.2 percent over the first ten months of 2017. The company already has sold more than 337,000 Rogues this year. And Toyota already has sold nearly that many RAV 4s this year, with sales that model having improved 2 percent over last year. And while Honda CR-V sales are down 1.1 percent compared to 2017, the Japanese carmaker has sold more than 300,000 of the SUV this year.

A 2017 Ford Escape. | Photo by Boris Ladwig.

Some of the decline in consumer interest in the Ford SUV may be a result of model fatigue: While the Escape received a redesign for 2016, it hasn’t had a major overhaul in five years.

But that’s changing for next year, when the automaker will debut the all-new 2020 Escape.

And Louisville Assembly Plant, the only North American facility to make the vehicle, is undergoing some significant retooling to prepare for new version of the popular SUV.

Workers recently were moving processes — expending some and contracting others — as the plant gears up for the all-new model. The UAW Local 862 could not be reached Friday, but a Ford spokesman had told Insider that the plant was adding workers in the paint department, for example.

A spokeswoman told Insider via email that the company does not discuss future products, but the vehicle is expected to be bigger than the current model and get a different facade.

Auto enthusiast magazine Car and Driver, which has revealed spy shots of the new Escape, said the new model would be based on a new platform, which should improve its crash test rating, and come available with a hybrid engine.

The 2020 Escape is expected to arrive in showrooms this spring. —Boris Ladwig

No sugar-coating October performance for local stocks

Graphic by Boris Ladwig

No matter how much candy folks collected on Halloween, there was no sugar-coating the bitter performance of local stocks last month.

Just three of 15 companies tracked by Insider posted share price gains in October, and four — Churchill Downs, Stock Yards Bancorp, Texas Roadhouse and Apellis Pharmaceuticals — suffered double-digit declines.

Watch for market reactions this Tuesday, when Papa John’s posts earnings, and on Wednesday, when Humana and Turning Point Brands report third-quarter results. —Boris Ladwig

Churchill Downs news flood excites investors

After Churchill Downs investor saw the value of their holdings fall by 10 percent in October, they reacted favorably on Thursday to the company’s third-quarter earnings report, planned stock split, acquisition, dividend increase and share buyback.

But the company wasn’t done: In an investor presentation on Friday, the company said that after a record-setting 2018 Kentucky Derby and having invested $170 million at Churchill Downs since 2010, it had long-term plans that include a hotel — though it provided no details about size or timing. The company also said that it could add 1,100 additional gaming machines at the racetrack or its new Derby City Gaming facility.

Investors reacted favorably on Friday, too. While the Dow Jones industrial average and the S&p 500 fell, CHDN rose nearly 2 percent. —Boris Ladwig

MESA kitchen launches incubator, catering

Chef Kendall Sheppard is one of roughly 100 chefs who have appeared at MESA. | Photo by Jose Morones Vergara

The calendar for MESA, A Collaborative Kitchen is stuffed with cooking demonstrations and other events, but owners Bobby and Ysha Bass have still managed to find room for other offerings.

MESA is starting its own incubator program of sorts. The owners will rent MESA’s kitchen to aspiring chefs and business owners to use for catering, menu development and pre-opening events for new restaurants, allowing them to test their concept, according to a news release.

Already, the demonstration kitchen has its first company, The Elderberry Co. Owner Jenny Watson is renting the kitchen on certain days to make homemade elderberry products, the release states.

In addition to the incubation program, MESA is now open to businesses and private groups for catered lunch or dinner, with menus customized based on budget and food preference. Those interested in renting the space as an incubator or for a catered event can reach out to MESA through its website—Caitlin Bowling

LEGO event returning to Louisville for third year

Part of a LEGO city display | Courtesy of Michael O. Howard/BrickUniverse

BrickUniverse, a convention for LEGO fans, will return to Louisville next year on Jan. 19 and 20. The Kentucky International Convention Center downtown will host the event.

Founded in 2015 by then-14-year-old Greyson Beights, BrickUniverse got its start in Raleigh, N.C., but since, it has expanded to 10 cities.

“BrickUniverse Louisville has grown to become one of the largest and most exciting LEGO events in the United States,” Beights said in a news release. “BrickUniverse Louisville 2019 is going to be big; we have some special things planned for attendees.”

During the January event, professional LEGO artists from around the world will showcase their work, including more than 30 displays from Jonathan Lopes and more than 50 LEGO models of well-known landmarks from Rocco Buttliere.

Tickets are on sale and are $15. The event is expected to sell out again this year.

Related, the LEGO store at Oxmoor Center will open sometime before the holiday shopping season. A specific date hasn’t been announced. —Caitlin Bowling

In Brief

The South Central Regional Library scored another accolade shortly after celebrating its one-year anniversary. The new 40,000-square-foot facility located near the Jefferson Mall recently received a 2018 AIA Kentucky Honor Award — the highest recognition given by the Kentucky Society of Architects.

Frost Brown Todd was rank among the top law firms in the country, according to U.S. News & World Report’s 2019 rankings. The firm received National Tier rankings in 18 practice areas, including corporate law and environmental litigation, and 140 Regional Tier rankings.