Big Box Blues: Sears, Kmart, & Sports Authority

I remember trips to Sears with my mom in the early/mid 1970s, plus I’d look through the Sears catalog at home. Much of my early wardrobe was from Sears. I also remember trips to the same Sears with my dad to buy/replace Craftsman tools.  My parents had our new house built in 1965  — the same year the 160,000+ sq ft Sears store was built 2.2 miles away (map).  That Sears store is still open, and isn’t on the recent list of Sears/Kmart closures.

One Kmart in the St. Louis region was on the list last month, the Bridgeton location at 11978 St Charles Rock Rd.

A few years ago the Bridgeton Walmart moved to just East of this Kmart. But the Sears/Kmart closures are part of a bigger trend for these retailers:

Trying to cut its way to profitability, troubled Sears Holdings announced Thursday that it will close 68 Kmart and 10 Sears stores this summer in its latest move to cut losses.

Sears’ (SHLD) move (see the list of the stores) comes atop a previous announcement that it will close 50 other stores. Sales have been falling and Sears had a disappointing holiday sales season.

“The decision to close stores is a difficult but necessary step as we take aggressive actions to strengthen our company, fund our transformation and restore Sears Holdings to profitability,” said Sears Holdings CEO Edward Lampert in a statement. (USA Today)

From February:

Sears said Thursday that its same-store sales fell 7.1% in the fourth quarter and revenue dropped 9.8% to $7.3 billion. 

The company reported a quarterly loss of $580 million, or $5.44 per share, compared with a loss of $159 million, or $1.50 a share, the previous year. (Business Insider)

Retailing is competitive. but many put part of the blame on the libertarian leader: Eddie Lampert. From July 2013:

Every year the presidents of Sears Holdings’ many business units trudge across the company’s sprawling headquarters in Hoffman Estates, Ill., to a conference room in Building B, where they ask Eddie Lampert for money. The leaders have made these solitary treks since 2008, when Lampert, a reclusive hedge fund billionaire, splintered the company into more than 30 units. Each meeting starts quietly: When the executive arrives, Lampert’s top consiglieri are there, waiting around a U-shaped table, according to interviews with a half-dozen former employees who attended these sessions. An assistant walks in, turns on a screen on the opposite wall, and an image of Lampert flickers to life.

The Sears chairman, who lives in a $38 million mansion in South Florida and visits the campus no more than twice a year (he hates flying), is usually staring at his computer when the camera goes live, according to attendees.

The executive in the hot seat will begin clicking through a PowerPoint presentation meant to impress. Often he’ll boast an overly ambitious target—“We can definitely grow 20 percent this year!”—without so much as a glance from Lampert, 50, whose preference is to peck out e-mails or scroll through a spreadsheet during the talks. Not until the executive makes a mistake does the Sears chief look up, unleashing a torrent of questions that can go on for hours. (Bloomberg)

Why does he manage this way? From December 2013:

Once upon a time, hedge fund manager Eddie Lampert was living a Wall Street fairy tale. His fairy godmother was Ayn Rand, the dashing diva of free-market ideology whose quirky economic notions would transform him into a glamorous business hero.

 
For a while, it seemed to work like a charm. Pundits called him the “Steve Jobs of the investment world.” The new Warren Buffett. By 2006 he was flying high, the richest man in Connecticut, managing over $15 billion thorough his hedge fund, ESL Investments.

Stoked by his Wall Street success, Lampert plunged headlong into the retail world. Undaunted by his lack of industry experience and hailed a genius, Lampert boldly pushed to merge Kmart and Sears with a layoff and cost-cutting strategy that would, he promised, send profits into the stratosphere. Meanwhile the hotshot threw cash around like an oil sheikh, buying a $40 million pad in Florida’s Biscayne Bay, a record even for that star-studded county.

Fast-forward to 2013: The fairy tale has become a nightmare.

Lampert is now known as one of the worst CEOs in America — the man who flushed Sears down the toilet with his demented management style and harebrained approach to retail. Sears stock is tanking. His hedge fun is down 40 percent, and the business press has turned from praising Lampert’s genius towatching gleefully as his ship sinks. Investors are running from “Crazy Eddie” like the plague.

That’s what happens when Ayn Rand is the basis for your business plan. (Salon)

Next to the Bridgeton Kmart is another retailer that’s closing: Sports Authority. Two more St. Louis area locations were to close: St. Peters & Fenton.

From March:

The retailer filed for Chapter 11 protection in federal bankruptcy court in Delaware in a move aimed at helping it shed much of its debt and clean up its balance sheet. A successful revamp would let Sports Authority improve its brick-and-mortar, perhaps with in-store boutiques similar to the Under Armour and Nike shops that have been so fruitful for rival Dick’s Sporting Goods.

Sports Authority, whose name adorns the stadium of the Denver Broncos, has been saddled with boatloads of debt ever since a $1.3 billion leveraged buyout a decade ago. At the time, the Colorado-based retailer and Dick’s  DKS -1.79%  were similar in size with annual sales of $3 billion. But since then, Dick’s has invested in its in-store experience and in-store tech, which have helped propel the retailer’s sales past Sports Authority’s. Analysts are forecasting total 2015 sales of $7.3 billion for the Pennsylvania-based company, compared to almost $3 billion at Sports Authority. (Fortune)

In early April it looked like the bankruptcy might work:

Embattled retailer Sports Authority has finally received a bit of good news: it looks to have settled a dispute with consignment suppliers that could resolve around 160 lawsuits.

The suits centered around $85 million-worth of winter gear currently being sold at the sporting goods retailer’s stores, and suppliers who had sold these products on consignment wanted them back in the wake of Sport Authority’s Chapter 11 bankruptcy filing in March.

Now, if the settlement is approved by Judge Mary Walrath of the U.S. Bankruptcy Court in Delaware, Sports Authority will be able to sell this gear throughout the bankruptcy proceedings, according to the Wall Street Journal. (Fortune)

End of April:

Vendors, however, didn’t like seeing the merchandise they had consigned sold off in liquidation sales without reimbursement, and they sued. Sports Authority countersued.

Landlords also were upset that the company filed for bankruptcy protection one day after March rents were due, stiffing them out of $27 million.

“They didn’t get very far into this before they hit snags with their suppliers. That tells me they weren’t that close to getting the reorganization done,” said Dan Schniedwind, a credit analyst and retail specialist with Denver Investments.

In the end, creditors weren’t willing to allow the company to continue making large purchases, something required to keep stocking the shelves in even a reduced number of stores. (Denver Post)

By mid-May:

Sports Authority Holdings Inc. will head to auction next week with bids in place from two groups of liquidators plus smaller offers from rivals Dick’s Sporting Goods Inc. and Modell’s Inc., according to people familiar with the situation.

However, the bids from Dick’s and Modell’s were considered “disappointing” and for fewer stores than initially expected, one of the people said. Dick’s, which one equity analyst said could make an offer for 180 stores, instead placed a bid for less than 20 stores; Modell’s made an offer for a small handful of stores, the person added. (Wall Street Journal)

Heres’s a list of the St. Louis area locations, the first three were announced in March:

1. 11982 Saint Charles Rock Rd Bridgeton , MO 63044
2. 4025 Veterans Memorial Pkwy, Saint Peters , MO 63376
3. 788 Gravois Bluffs Blvd, Fenton , MO 63026
4. 8340 Eager Rd, Brentwood, MO 63144
5. 4445 Lemay Ferry Rd, Saint Louis , MO 63129
6. 1205 S Kirkwood Rd, Kirkwood , MO 63122
7. 15907 Manchester Road, Ellisville , MO 63011
8. 6298 Ronald Reagan Dr, Lake Saint Louis , MO 63367
9. 6575 N Illinois St, Fairview Heights , IL 62208

From November 2014:

New retail tenants are moving into the space in Ellisville Square in Ellisville that Kmart vacated earlier this year.

Brixmor Property Group, the New York-based commercial real estate company that owns Ellisville Square, said the space will be filled by three new tenants: a 40,000-square-foot Sports Authority, a 19,000-square-foot Michaels and a 16,000-square-foot Party City. The stores are slated to open in the third quarter of 2015, Brixmor officials said in a statement. (St. Louis Business Journal)

The Ellisville location was announced in January 2015:

Three new stores — Michaels, Sports Authority and Party City — will be opening soon at the site of what was a K-mart store at Clarkson and Manchester roads in Ellisville (Post-Dispatch)

The Sports Authority in Ellisville opened on Saturday August 8th, 2015.

Earlier we discussed the Sears/Kmart CEO, but why did Sports Authority fail?

Once one of the largest sports retail chains in the country, Sports Authority has now slipped behind outlets like Dick’s Sporting Goods and REI. These chains have positioned themselves more successfully in the market through establishing strong relationships with their suppliers, developing the leverage to keep prices low that their competitors have had difficulty matching, Rory Masterson, an industry analyst at IBISWorld, told the Los Angeles Times in April. They’ve also adapted more sucessfully to the online marketplace. Online sales at Dick’s climbed at a compounded annual rate of 39 percent from 2010 to 2015.

While Sports Authority may be faltering, the sporting goods industry as a whole is growing. It accounts for an estimated $150 billion per year globally. In 2014, the most recent year available for figures, the industry was worth $63.7 billion in the United States, an increase of 24 percent since 2009 and a jump of 2 percent from the year before.  

Sports Authority faces tough competition from traditional sports retail outlets, yet its financial struggles point to the increased diversification of the sports retail market.  A wide array of more specialized competitors have entered the field, providing both traditional sports garments and “athleisure”, or casual wear inspired by workout clothing that has exploded in popularity over the past few years. (CSM)

The Bridgeton Kmart & Sports Authority are both part of Hill Top Plaza.

Hilltop Plaza Redevelopment Area Tax Increment Financing Redevelopment Plan – Hilltop Plaza Community Improvement District; analysis of the eligibility for TIF and CID, and the planning and financial projections for the redevelopment of the 70% vacant portion of Hilltop Plaza, formerly a destination shopping area on St. Charles Rock Road. (EDR)

I was at the MetroBus stop on St. Charles Rock Rd in 2013 — had no idea at Kmart & Sports Authority were close. Was wasn’t/isn’t any pedestrian access. Even between Kmart & Sports Authority there’s no pedestrian route! I know the lack of pedestrian access didn’t cause these stores to close, but it didn’t help them either. Pedestrians do exist in the area — there are sidewalks along St. Charles Rock Rd and the parallel internal road — they just don’t connect the businesses to transit or each other.

As Gen Y moves to the suburbs they may expect a Walkscore higher than 56.

— Steve Patterson

Zoning Should Not Be Used To Force Washington Ave To Become A Retail Street

There are some who envision one mile of our Washington Ave (from 4th to 18th) as being a retail street like the Delmar Loop or Chicago’s Magnificent Mile along Michigan Ave. One person even wants to use a proposed form-based code overlay to mandate a retail use on the ground floor. Yes, the idea of using a form-based code to regulate uses is illogical. The whole point of moving from use-based zoning to form-based zoning is to get the form correct.

Recognizing uses change more often than the physical form of buildings.

It was a December announcement that prompted this push for a retail street:

LockerDome, which currently has 45 employees, moved to a 6,800-square-foot storefront on Washington Avenue in 2012 but has outgrown that space, said its chief executive and co-founder Gabe Lozano.

After a 120-day build-out set to begin in the second half of 2016, LockerDome’s employees will move to occupy an 18,000-square-foot building a block away at 1314 Washington. (Post-Dispatch)

LockerDome is a St. Louis-based tech company.

Both have the form right, both have windows we can see into day & night. Some think a gym is an acceptable use on a retail street — but a high-tech firm is not. I personally don’t care what’s going on behind the facade. I can see into the windows when I pass by.

But one person would prevent LockreDome from occupying the ground floor of this building — he doesn’t want offices on ground floors. Yet, firms want to be located on Washington Ave. because it is the most vibrant part of Downtown/Downtown West. With the upper floors converted into residential there are too few options for large offices. For that matter, there are too few spaces for a larger retailer like a CVS/Walgreen’s.

What makes a credit union/bank lobby ok, but not a creative office?

It’s the non-creative offices that are the buzz kill…

Regulating uses is arbitrary — which is why I want the city of St. Louis to abandon old-fashioned Euclidean use-based zoning and adopt form-based zoning. Form-based zoning, however, can be used to regulate the form – largely windows & doors at the ground level where pedestrian activity it to be encouraged.

Many ground floor offices downtown keep their blinds closed 24/7 — that’s something a form-based code could/should address. We need uncovered windows where we can see activity going on inside. But could Washington Ave become a retail street like the Delmar Loop or Magnificent Mile?

No — both of those were built for retail purposes.

This mile of Washington Ave has had many uses over the decades — the middle part included sweatshops where immigrants manufactured clothing, shoes, hats, etc. Items sold in stores all over the country, possibly in the Sears catalog. It wasn’t a retail street then.

Today Washington Ave is largely a restaurant street, with the occasional niche retail merchant. Besides bars/restaurants the other common “retail” use is hair salons.

Another problem are the many gaps in continuity.

Get the form right — including being able to look into ground floor spaces. Don’t fret about the users.

— Steve Patterson

A Look At A TargetExpress In Chicago’s Streeterville Neighborhood

The following post was originally published on UrbanReview | CHICAGO:

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As chain big box stores go, I’ve long-favored Target. But few Target stores stray from the typical suburban big box. Many years ago I visited the 2-story Target in NW Seattle, a decade ago a new Target replaced an older Target in the City of St. Louis with parking below the store.  Better, but big with lots of free parking.

In July 2012 a CityTarget opened in the former Carson Pirie Scott department store building at State & Madison, designed by Louis Sullivan in 1899.   It’s a terrific store — smaller than most Targets but it covers the basics well. Zero parking. Still, it’s 1.3 miles from the condo where we stay while in Chicago. Too far to stop by quickly for a few things.

In October 2015 the new Streeterville TargetExpress opened at 401 E Illinois St, Chicago, IL — just 4/10ths of a mile away — under a 10 minute walk.

The space had previously been occupied by organic grocer Fox & Obel, which closed in October 2013:

In court filings last month, Fox & Obel said that it planned to shut down permanently and sell all assets after its heavy debt made it impossible to maintain operations. The grocer said it received notice that its electricity would be shut off, forcing it to file for Chapter 11 bankruptcy.

Fox & Obel closed for a time earlier this year after at least a half-dozen failed health inspections.

Despite its trouble, the store still had a loyal following. (Chicago Tribune)

Fox & Obel closed before we began staying in Streeterville. Besides, for a nearby market we like Treasure Island Foods at 680 N. Lake Shore Drive.  In July 2014 Whole Foods announced it would open a Streeterville location — it opened in late January 2015. The grocery market it good.

It’s not the biggest, nor the fanciest, but it’s very convenient. It’s the ideal Target for the neighborhood.

— Steve Patterson

‘Indulge In Urban Living’ At Streets of St. Charles

I had 20 years to eat at Noah’s Ark restaurant in St. Charles before it closed in 2000, but I never did.  With a lot of land and a highly visible location developers were interested. New Urbanist developer Greg Whittaker, of New Town at St. Charles, bought the site. He hired Duany Platter-Zyberk (DPZ) to plan a New Urbanist project to be called Plaza at Noah’s Ark.

December 2006:

The multi-use development is planned on 26.8 acres occupied by the former Noah’s Ark restaurant and motel and a small subdivision. The area was developed in the 1960s, but the restaurant closed in 2000 and the hotel two years later.

Plans include an 18-story high-rise residential complex, an outdoor ice rink, a movie theater, a 150-room upscale hotel, restaurants and a parking garage that could include 1,827 spaces. (Post-Dispatch)

March 2007:

The 26.8-acre high-density development is planned for the site of the former Noah’s Ark restaurant and motel at the southeast corner of the Interstate 70 and South Fifth Street interchange. Plans call for an 18-story residential building with a minimum of 518 units costing about $250,000 each, retail shops, a movie theater, a 10- to 14-story hotel, an outdoor ice rink and a multilevel, vertical parking garage. (Post-Dispatch)

November 2011:

The site plan allows for 17 buildings, as many as 12 of which would be one or two stories tall. None would be taller than six stories.

An earlier plan called for 27 buildings ranging from one to 18 stories and set aside 374,200 square feet for commercial space and 759,600 for residential units.

Under the current plan, commercial square footage will range from 561,575 to 1,147,275. Residential square footage can be from 505,000 to 602,000, with an average unit size of 971 square feet.

Construction of the second building is expected to begin sometime in 2012, Buralli said. The 300,000-square-foot building would include the site’s 196 residential units. Cullinan doesn’t plan to sell any of the residential units for now. (Post-Dispatch)

April 2013:

Peoria, Ill.-based Cullinan bought the property in January 2007 from Whittaker Homes, which had acquired the site for a project then called the Plaza at Noah’s Ark. Cullinan renamed it and reached a new development agreement with the city, but the recession delayed construction. The City Council in January 2010 approved $40 million in bonds to help get it going, and in July 2011 approved a revised plan calling for more commercial square footage, less residential space and fewer buildings than Whittaker proposed. (Post-Dispatch)

A few years ago I saw it after the first building was completed, earlier this month I returned when we were in the area.  My reaction is best described as mixed.

Drury plans a 180-room hotel.

As I said, I have mixed feelings on this project. As a 25+ year resident of the City of St. Louis, their slogan “Indulge in Urban Living” is laughable to me. But I know I’m not their target market. To most residents of St. Charles County this is more urbanity than they ever thought they’d see on their side of the Missouri River.

A decade or more ago this site would’ve been developed as a big box with an even bigger parking lot. Smaller buildings would’ve dotted the perimeter. Visitors would’ve been expected to arrive via car and to drive to reach other buildings on the site.  From my brief observations, it appears the planners have made sure pedestrians can reach every building via a sidewalk.

While I’m not going to give up my downtown loft to live here, it’s an improvement over old-school development patterns.

I’d love to visit in my wheelchair so I could experience it as a pedestrian. It appears I can catch the St. Charles Area Transit’s I-70 Commuter bus at North Hanley, which I’ll do in the coming month or two. A few hours exploring the site, touring a model apartment, having lunch will give me a better feel of the project.

— Steve Patterson

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Porano Pasta Is Just What Downtown Needed

The closing of two long-time downtown restaurants last month got a lot of media attention, so did the new restaurant that opened: Porano Pasta.

News of this restaurant broke a year ago:

Chef Gerard Craft of Niche and its affiliated restaurants will open a fast-casual concept called Porano Pasta & Gelato at the Mercantile Exchange downtown. Porano will draw on the food served at Craft’s Clayton restaurant Pastaria and follow what he calls the “Chipotle format.”

[snip]

Porano will be open for lunch and dinner. Diners will build their meals by choosing a base (organic semolina pasta, gluten-free pasta, farro, focaccia or lettuce), a protein (slow-roasted beef brisket, pork shoulder, pork meatballs, grilled free-range chicken, Calabrian-spiced tofu or roasted seasonal vegetables) and a sauce (pomodoro, pomodoro with smoked pork or roasted red pepper) or salad dressing.

Diners can further customize their meal with such toppings as cheese, anchovies and pickled chiles. Pastaria gelato will be available in single-serve cups (complete with wooden spoons).

Porano will take over the space at 634 Washington Avenue previously occupied by Takaya New Asian. Craft projects a summer opening date.

They didn’t make their original schedule — it has only been open for a few weeks. Right now they’re only open for weekday lunch, but hours will soon be extended into the evening and weekends.

Fast casual pasta has been tried downtown before — remember 10th Street Italian or Pasta House Pronto!? Both of those were failed concepts, but Porano Pasta has nailed the concept. While $8.95 isn’t cheap, the same meal on good china with metal silverware would cost twice as much and take at least twice as long.

The location is ideal, lots of daily foot traffic. With a great mix of restaurants & a theater, the MX is a happening spot. Soon the Blues Museum will open across the street.

My one suggestion is a new sign over the recycling bin that has images of what can be recycled.

— Steve Patterson