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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.

The Bridgeton Kmart was built in 1991, per St. Louis County tax records
The Bridgeton Kmart was built in 1991, per St. Louis County tax records

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)

For now the Big K store on Manchester in St, Louis remains open. But for how long?
For now the Big K store on Manchester in St, Louis remains open. But for how long?

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)

The Bridgeton Sports Authority on April 24th had a sign indicating only this location was closing, the others in the region were staying open
The Bridgeton Sports Authority on April 24th had a sign indicating only this location was closing, the others in the region were staying open

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

I’m Opposed To Sales Tax For Zoo, Expand Zoo-Museum District And/Or Charge Admission

St. Louis Zoo
St. Louis Zoo

Two mornings a week admission to the Missouri Botanical Garden is free to those who live in St. Louis city & county — who pay property taxes to the Zoo-Museum District. The rest of the time admission is charged. The zoo, however, is free.

In 1972, the Metropolitan Zoological Park and Museum District – the Zoo Museum District – was formed. Through the District, the citizens and taxpayers of St. Louis City and County make possible the extraordinary quality of five institutions that are essential to life in St. Louis: the Zoo, Art Museum, Science Center, Botanical Garden and History Museum. (Zoo-Museum District)

Limiting the district to city and county made sense, that’s where the bulk of the population lived:

In 1970, the large majority of St. Louisans came together to save the cultural institutions. Today, less than half of the citizenry is left to carry the tax burden that fulfills the dream. There are actually 220,000 fewer residents today than there were in 1970 within the combined borders of the city and county, while the metropolitan area has grown by more than 400,000. (St. Louis Magazine, March 2009)

Yes, in 2009 the population of city & county is less than what it was at formation of the district.

St. Louis and St. Louis County residents already pay property taxes that raise more than $70 million a year for the region’s five cultural institutions. The zoo gets $20 million a year, as does the St. Louis Art Museum. The Missouri Botanical Garden, Missouri History Museum and St. Louis Science Center each receive about $10 million annually. (Post-Dispatch, October 2013)

From last month:

Zoo lobbyists are now working in Jefferson City to get legislation passed. The bills would allow county councils to put the tax on county ballots, perhaps as early as next spring.

But a variety of regional leaders have asked the zoo to consider an entry fee for nonresidents instead.

Charging St. Louis and St. Louis County residents with two taxes is unfair, said Ben Uchitelle, a former board member of the Zoo-Museum District, which collects and distributes the existing property tax. He’s also worried about accountability with a new tax. The Zoo-Museum District “carefully studies and holds accountable” the five regional institutions, including the zoo, that receive property tax dollars. Who would collect the new tax? Who would monitor its use? (Post-Dispatch)

In the non-scientofic Sunday Poll a majority supported a sales tax in five counties.

Q: The St. Louis Zoo may propose a 5-county 1/10th of a cent sales tax. Support or oppose?

  • Strongly support 10 [27.78%]
  • Support 8 [22.22%]
  • Somewhat support 2 [5.56%]
  • Neither support or oppose 0 [0%]
  • Somewhat oppose 3 [8.33%]
  • Oppose 5 [13.89%]
  • Strongly oppose 7 [19.44%]
  • Unsure/No Answer 1 [2.78%]

Support was 55.56 % to 41.66% for opposition. Count me among the opposition. We already have a good model for regional cooperation, we just need to expand it the way population has.

— Steve Patterson

Sunday Poll: Support or Oppose a Regional Sales Tax for the St. Louis Zoo?

Please vote below
Please vote below

In the news last month was the idea of a 5-county sales tax to support the St. Louis Zoo:

The chief executive of the St. Louis Zoo says a regional sales tax is the right way — and perhaps the only way — to preserve the zoo and its animals for years to come.

President Jeffrey Bonner, in an impassioned argument for a five-county sales tax, said the zoo needs money to repair sewers, roofs and animal exhibits on its 100-year-old Forest Park campus. And it can’t consider operating a proposed 300- to 400-acre conservation breeding site without the new tax.

An admission fee is not the answer, Bonner said. Charging nonresidents for entry would create long lines, discourage attendance, reduce visitor spending and cost the zoo an estimated $50 million in turnstiles, ticket booths and the like. (Post-Dispatch)

The tax, if passed, would be collected on sales in the following counties: Franklin, Jefferson, St. Charles, St. Louis, and the independent City of St. Louis. Currently, the Zoo receives about $20 million annual from a property tax in St. Louis city & county.

This is the subject of today’s poll:

The poll is open until 8pm.

— Steve Patterson

 

The St. Louis Region Should’ve Planned For Commuter Rail A Century Ago

In thinking about transit in other regions compared to ours, it is clear to me that natural geography and historic development patterns play a role in transportation planning in the 21st century. Decisions made a century ago, good & bad, still affect us today.

One hundred years ago St. Louis hired a 26 year-old civil engineer, Harland Bartholomew, to be its first planner. During the previous 151 years it developed organically, without planning, He quickly proposed widening many public rights-of-way (PROW) to make room for more cars.

Franklin Ave looking East from 9th, 1928. Collection of the Landmarks Association of St Louis
Franklin Ave looking East from 9th, 1928. Collection of the Landmarks Association of St Louis

St. Louis city invested heavily in widening streets like Natural Bridge, Jefferson, Gravois.

More than three decades after arriving in St. Louis, Bartholomew got a Comprehensive Plan officially adopted (1947). His plan was all about remaking St. Louis because it would have a million residents by 1960 — or so he thought!

Here’s the intro to the Mass Transportation section:

St. Louis’ early mass transportation facilities consisted of street car lines operated by a considerable number of independent companies having separate franchises. Gradually these were consolidated into a single operating company shortly after the turn of the century. In 1923 an independent system of bus lines was established but later consolidated with the street car company. Despite receivership, re-organization and several changes of ownership the mass transportation facilities have been kept fairly well abreast of the city’s needs. Numerous street openings and widenings provided by the first City Plan have made possible numerous more direct routings and reduced travel time.

Approximately 88 per cent of the total area of the city and 99 per cent of the total population is now served directly by streetcar lines or bus lines, i.e., being not more than one quarter mile walking distance therefrom. Streetcar lines or bus lines operate directly from the central business district to all parts of the city’s area. There are also numerous cross-town streetcar lines or bus lines, operating both in an east-west and north-south direction. 

No mention of a regional need for commuter rail. Some might point out this was the city’s plan, not the region’s. That would be a valid point if it weren’t for the regional nature of the next section: Air Transportation:

It is reasonable to assume that the developments in air transportation during the next few decades will parallel that of automobile transportation, which really started about three decades ago. St. Louis must be prepared to accept and make the most of conditions that will arise. Provision of the several types of airfields required must be on a metropolitan basis. The recently prepared Metropolitan Airport Plan proposes thirty-five airfields. See Plate Number 27. These are classified as follows:

  • Major Airports – for major transport 3
  • Secondary Airports – for feeder transport 1
  • Minor Fields – for non-scheduled traffic, commercial uses and for training 15
  • Local Personal Fields – for private planes 13
  • Congested Area Airports – for service to congested business centers 3
     
    [Total] 35

Of these, two major, eight minor, twelve personal and three congested area airports would be in Missouri. Lack of available land in the City of St. Louis limited the number within the corporate limits to two minor, one personal and two congested area airports. The selection of sites for the latter involves great cost and should await further technological developments in design and operation of various types of aircraft, including the small high powered airplane, the autogyro and the helicopter.

The three airports within the city are:

  • A Minor Field at the southern city limits east of Morganford Road.
  • A Minor Field in the northern section of the city between Broadway and the Mississippi River. (Since the publishing of the above report this field has been placed in operation by the city.)
  • A Local Personal Field in the western section of the city on Hampton Boulevard north of Columbia Avenue.

The latter is of special significance because of the great concentration of potential private plane owners in fairly close proximity. The northern minor field is adjacent to a large industrial area. The southern minor field would also serve a large industrial area as well as a considerable number of potential private plane owners.

So the region should have 35 airports but no commuter rail service? It should have numerous new highways but no commuter rail? Here’s the visual of the region with 35 airports:

Bartholomew's 1947 plan called for 35 airports un the St, Louis region!
Bartholomew’s 1947 plan called for 35 airports un the St, Louis region!

Thirty-five airports but no plan for mass transit beyond bus service?

Bartholomew left St. Louis in 1953 to chair the National Capital Planning Commission, where he created the 1956 plan for 450 miles of highway in the capital region.

During the 1960s, plans were laid for a massive freeway system in Washington. Harland Bartholomew, who chaired the National Capital Planning Commission, thought that a rail transit system would never be self-sufficient because of low density land uses and general transit ridership decline. But the plan met fierce opposition, and was altered to include a Capital Beltway system plus rail line radials. The Beltway received full funding; funding for the ambitious Inner Loop Freeway system was partially reallocated toward construction of the Metro system. (Wikipedia)

A book written by a partner of Bartholomew revises history to suggest he pushed for Washington’s Metro — see Chapter 10.

https://www.stlouis-mo.gov/archive/harland-bartholomew/HBaACh10.pdf

Washington has fewer miles of freeways within its borders than any other major city on the East Coast.” Thirty-eight of the planned 450 miles would have routed through D.C. proper; today, there are just 10. Instead, after a wrenching and protracted political battle, they write, “the Washington area got Metro—all $5 billion and 103 miles of it.” (Slate)

In 1945, as a paid consultant, Bartholomew said “the density of population of the Washington area would never be sufficient to warrant a regional rail system.” (Lovelace P141, chapter 10 p3). Most likely he felt that way about the St. Louis region. Though the city was quite dense during his decades here, the surrounding suburbs were low-density, still are.

But what if he had guided the region to develop boulevards to the North, West, & South of downtown with streetcars in the median? Today that right-of-way could be used for light rail. Cleveland, for example, is fortunate that Shaker Blvd & Van Aken Blvd  were planned as such, providing room for their Green Line & Blue Line, respectively.

Bartholomew was highly influential — the one person in the region that might have been able to lay the ground work for better mass transit in the 21st century. It wasn’t feasible like lots of highways & airports.

My point is when we think about future transportation infrastructure, and we look at other regions, we must keep in mind their planning & development decisions a century ago. Many still think we should’ve put light rail down the center of I-64 during the big rebuild — failing to realize there wasn’t a way to get a line into the center and it wouldn’t work well if we could since the housing along the route wasn’t developed around transit.

We were able to leverage rail tunnels under downtown and a rail corridor to get light rail to the airport. Other former rail corridors exist for new light rail lines, such as North along I-170 out of Clayton into North County. We do have excessively wide boulevards in the city & county, but cutting up the street pattern after the fact by putting light rail down the center and significantly reducing crossing points is similar to building a highway — it separates.

Moving forward with plans for new regional transportation infrastructure we must recognize we simply don’t have the advantages many other regions enjoy.  We can’t go back and undo decisions Bartholomew & others made a century ago.

— Steve Patterson

Panel To Discuss ‘Where We Stand 7th Edition: The Strategic Assessment of the St. Louis Region’ Report

Locust Street entry to the Central Library, with the Shell Building in the background
Locust Street entry to the Central Library, with the Shell Building in the background

Today’s post is about a potentially interesting panel discussion, from the email I received:

St. Louis Public Library – Central Library Auditorium
Wednesday, October 14, 2015 6:30–8 p.m. 

In today’s media, rankings are everywhere—from best ballpark food to top 10 vacation spots to most loved Harry Potter character—they can be fun and eye-catching. Rankings also inform citizens, politicians, businesses, and the media. Rankings are used to direct investments, drive competition, affect perceptions, and build a local, regional, and national narrative.

How does the St. Louis region measure up according to the numbers? Does perception match reality? How should we use rankings to tell our story? Join us for the first of three conversations to explore these questions and share your perspective.

On October 14th, St. Louis journalists Andre Hepkins (KMOV), Maria Altman (St. Louis Public Radio), Deb Peterson (St. Louis Post-Dispatch), and Alex Ihnen (NextSTL) will consider how we talk about St. Louis and rankings from East-West Gateway Council of Government’s Where We Stand 7th Edition: The Strategic Assessment of the St. Louis Region.

Check out the report before the event online at www.ewgateway.org/wws.

Brought to you by East-West Gateway Council of Governments, FOCUS-St. Louis, UMSL School for Public Policy and Administration, and the St. Louis Public Library.

I’ll be out of town so I won’t be able to attend.

— Steve Patterson

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