The retailer is likely to build more stand-alone locations.
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A Sears store may not be coming to Toledo's struggling Southwyck Shopping Center, and that could jeopardize national mall giant Westfield America Trust's purchase of the South Toledo mall.
The potential for problems is likely to send shock waves through Toledo's retail community, casting the future of the regional mall in doubt and possibly delaying or ruining Westfield's bid to dominate the local market by acquiring the second of the metro area's four malls in less than two years.
Westfield said in February it planned to buy Southwyck by early June, about a year after it gained control of what had been Franklin Park Mall, the area's premier shopping center. It said it would spend up to $60 million to redevelop Southwyck, but its plan was conditioned on Sears Roebuck & Co.'s following through on its publicly announced plans to have a 140,000-square-foot department store and auto center in the 30-year-old mall.
But it now appears that Sears won't commit to a deal in Southwyck at least until 2005, and possibly never.
Sears changed its mind about Southwyck in late March, just before the start of a retail deal-making convention in Las Vegas sponsored by the International Council of Shopping Centers, sources familiar with the arrangement told The Blade. The sources spoke only if they were not identified.
As a result, Westfield, which hoped to control more of the local mall market under its Westfield Shoppingtown name, faces limited choices. It either can wait indefinitely for Sears, find a replacement anchor, or buy the mall and hope to redevelop it with only Dillard's as an anchor. Prospects of finding a replacement anchor are not good, industry experts say, which could prompt Westfield to abandon the Southwyck deal.
A Westfield spokesman said Southwyck negotiations are ongoing but declined further comment. The owner of the mall on Reynolds Road at Glendale Avenue, Kansas City, Mo., businessman and developer Sherman Dreiseszun, also would not comment on the status of negotiations.
Retail analysts, however, said such a purchase by a financially strong firm like Westfield would not take this long unless a major obstacle had popped up.
``... My guess is this deal is not likely to happen because if there was an existing [replacement retailer] out there ... Westfield would have a deal by now,'' said George Rosenbaum, chief executive officer of Leo J. Shapiro and Associates, a retail market research firm in Chicago.
``Westfield has probably kept the appearance of negotiations going on a lot longer so they could have the opportunity to find another anchor for that spot, probably someone like Kohl's,'' he said. ``But whether they can make a deal with a Kohl's or a Costco or even a BJ's [Warehouse] and still make their minimum return on their investment is probably what they're trying to decide.''
Despite its clout and resources, Westfield probably can't find a replacement anchor for Sears because nearly all department store chains are delaying plans for openings, opening smaller stores, or closing stores, Mr. Rosenbaum said.
For example, in the past two weeks, May Department Stores Co. announced it would close 32 Lord & Taylor stores, and Federated Department Stores, owner of chains including Macy's and Bloomingdales, said its second-quarter earnings fell 57 percent from a year ago.
Diane Detterline of Sylvania checked out a shoe sale last week at the Sears store at Toledo's Westgate.
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The few retailers that are turning profits and expanding are discounters like Wal-Mart, Target, and Kohl's.
Linda Campbell, who bought the Southwyck Coney Island restaurant last year and is one of just a handful of locally owned retailers left in Southwyck, said about 20 retailers have moved out of the mall since the first of the year.
``The rest are all chains,” she said. “I knew in May and July things would be tough here. But we are so empty we're not even getting school shoppers in here.''
The fact that Sears apparently shelved its plans will make attracting shoppers tougher, she said, suggesting she might not have come to the mall had she known Sears might back out.
Sears, based in Hoffman Estates, Ill., near Chicago, has not said publicly that its Southwyck plans are dead. But the veteran department store retailer has said little about Southwyck since March, 2002. That was when a Sears attorney came before Toledo city council and promised to spend $10 million to renovate the now-vacant Montgomery Ward store at Southwyck, hire 100 employees, and ring up $20 million in sales if council would ease a living-wage law restriction and provide property tax abatement.
Sears' promise looked solid in February when Westfield, a U.S. unit of an Austrailian company, said it would buy Southwyck and add two anchors, one of which was expected to be Sears.
The plan was a huge lift for Southwyck, which has struggled for years, its plight worsening when Montgomery Ward closed a few years ago. Last month the Dillard's for the Home store closed, leaving the Dillard's department store as the mall's only anchor. Many smaller shops in the mall are vacant.
But the Sears prospect apparently was dimmed as early last fall, unbeknownst to local merchants and residents and perhaps even to Westfield. Sears' chief executive officer, Alan Lacy, told Wall Street analysts in October that the company did not see its future stores going into malls but instead they were likely to be stand-alone stores, like many Target and Kohl's stores.
The retailer has three new stores this year that will be in malls but has none planned for next year, and it is moving forward with five pilot stores with a new concept. Called Sears Grand, they are to be built on stand-alone sites and are to be much larger than its local Westgate outlet.
Three pilot stores, in Utah, Illinois, and Nevada, are to open by early next year, and two more are to be opened by 2005. The first opens in October in suburban Salt Lake City and will look a lot like an amalgam of Target, Home Depot, Wal-Mart, and The Andersons. It will be one story, with 210,000 square feet, and will carry the usual home electronics, appliances, hardware, home improvement items, and apparel lines as well as greeting cards, magazines, milk products, dry grocery goods, household cleaning supplies, compact discs and digital video discs, health and beauty products, a year-round toy section, and a garden center with plants.
“What we learn from those pilots will be what we use to develop our eventual prototype store,'' said company spokesman Linda Blakley. ``We plan to continue to improve our existing mall-based locations. But when you look at where new retail is going, it isn't to the malls.”
George Whalin, head of Retail Management Consultants, of San Marcos, Calif., said Sears knows its future is no longer in malls. “They're just not going to build any more mall stores,” he added. “They're just not profitable for them.''
It wouldn't surprise him, he said, if Sears tried to buy or merge with Kmart, becaise the Troy, Mich.-based retailer has excellent free-standing locations. The Sears move away from malls occurs as Wal-Mart and Target have put stores in malls, he noted, but it is unclear whether those are smart moves.
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