Old News: Goodbye to Gottschalks and Fortunoff

Isn’t it obvious it would turn out this way?

Gottschalks

On March 30, Gottschalks announced they were going to liquidate, extinguishing any hope the 105-year-old chain would continue to operate. We noted a few months ago that Gottschalks existed in a weird place–kind of a dowdy combo of Kohls and Macy’s, with mostly mall-based locations–and that their senior citizen-skewing product mix wasn’t likely to keep them afloat through their troubles. This all proved to be true, but another factor in their demise was some truly terrible bad luck: the store fleet for Fresno-based Gottschalks is concentrated most heavily in the areas most adversely impacted by the housing crisis of 2008. Central Valley cities like Modesto and Stockton have been struggling with year-over-year real estate declines upward of 50%, which is truly catastrophic for the families living there–try and imagine having your personal net worth decline by two or three hundred thousand dollars in just one year! I’m really not sure what I’d do in such a situation, but I can tell you one thing I probably wouldn’t do when faced with such a situation: go shopping at Gottschalks.

The double whammy for malls, of course, is that Gottschalks and Mervyn’s co-anchored many malls together. Some malls, such as Bakersfield’s East Hills Mall, didn’t even have another anchor aside from these two. This will spell doom for a great many of the centers lining California’s Central Valley, but also many other places throughout the west where both chains operated.

Fortunoff

The other story we forgot to follow up on–whoopsie!–is the equally-unsurprising failure of New York-based Fortunoff department stores. Like Gottschalks, we liked these guys just because they felt like a relic from another era, but “relic” and profitability don’t tend to go in the same sentence. The 2008 acquisition of the chain by NRDC Equity Partners–who helmed a successful turnaround of Lord & Taylor even in a bad economic environment (though this is now faltering, I’ve heard) and who also recently acquired Canada’s Hudson Bay Company–seemed to give these guys some hope. But ultimately their product mix and store fleet was perhaps too strange to survive in the current retail landscape. Their mostly mall-based, large stores leaned heavily towards housewares and jewelry but without any specific niche. They had neither the hip cachet of newer, smaller competitors like Crate & Barrell or West Elm nor the well-established legacy of larger old line stores like Macy’s or bargain prices of Best Buy and Wal-Mart, plus three of the four of their remaining stores were located in second-tier malls; one of them is even completely dead. What is sad about the loss of Fortunoff is that it’s a quirky regional chain that still remains well-loved; their imminent disappearance reminds me of New England losses from the ’90s and early 2000s like Apex, Ann & Hope, or Lechmere.

Midway Mall; Sherman, Texas

Midway Mall in Sherman, TX

Midway Mall, located in Sherman, Texas, is the only major shopping mall for a section of Texoma comprised of the cities Sherman and Denison, Texas, and Durant, Oklahoma.  With a population of about 150,000, Midway Mall’s trade area is located approximately 70 miles northeast of downtown Dallas; however, the mall itself as well as the Texas side of its trade area are technically located within the behemoth Dallas-Fort Worth Metropolitan Area.  With that said, the nearest of Dallas-Fort Worth’s malls are over an hour away, which should make Midway Mall a tier ‘A’ mall and successful, especially considering its size at 600,000 square feet with three anchors and several junior anchors.  However, this is not the case; Midway Mall is currently challenged by an alarming and rapidly increasing vacancy rate.  But why is this?

Midway Mall food court in Sherman, TX Midway Mall food court in Sherman, TX

The faltering probably isn’t due to the mall’s location. Midway Mall’s location is ideal, situated on Texoma Parkway smack dab in between the cities of Sherman and Denison, and only half an hour from Durant, Okla. as well as the booming sprawlburg of McKinney.  In addition to being located in between all the population centers in its trade area, Midway Mall is also adjacent to US 75, a major north-south freeway connecting Dallas and its suburbs to Oklahoma and points north.  Also nearby is Sherman Town Center, located along US 75, featuring Wal Mart, Target, Home Depot, and 30 other stores, as well as a JCPenney which relocated from Midway Mall in 2007. 

Midway Mall in Sherman, TXRecent problems may have also arisen due to competition.  Although Sherman and Denison are some 70 miles north of downtown Dallas, the suburbs of Dallas-Fort Worth start in McKinney, which is just 30 miles south of Sherman.  Although McKinney doesn’t have a traditional mall of its own, per se, it has nearly every store under the sun along the US 75 corridor, including many upscale options.  In addition, several of the DFW Metroplex’s best malls are in Plano, Frisco, and north Dallas, and they are all approximately an hour away from Sherman and Denison.  Also, Sherman’s own Sherman Town Center, an outdoor strip mall, appears to have more retail activity than Midway Mall, and in 2007 the Town Center stole the mall’s JCPenney.  Whoops.

Ironically, competition somewhat recently favored Midway Mall, as it opened directly up the road from another mall, the Sher-Den Mall.  Sher-Den Mall opened during the 1960s, which was anchored by Montgomery Ward and JCPenney (anything else?).  Despite extensive renovations in the 1980s to compete with the larger Midway Mall, Sher-Den Mall closed with a whimper when Montgomery Ward went bankrupt and closed in 2001; it was torn down in 2004.

Perhaps the most telling statement of trouble is the condition of Midway Mall, which is amazingly dated in terms of decor and atmosphere.  The entire one-level mall can best be described as cavernous, and the dimly lit corridors suggest slumber rather than the brightly-lit exuberance found in most modern, successful shopping centers.  Perhaps not utilitarian nor functional by modern standards, the mall’s corridors do evoke a certain sense of the past, with bland carpeting, giant palm trees, sterile marble planters and three circus-like tents which puff up some 50 feet toward the sky at three spots/courts throughout the mall, and are a sight to see.  So, too, are the mall’s maze-like corridors, which zig and zag and even double back on each other, and the nearly empty food court.  Since there are few shoppers, there are fewer kiosks, too, and frequently lots of open space throughout the mall. 

Midway Mall Bealls in Sherman, TX Midway Mall in Sherman, TX

Midway Mall directory in Sherman, TXWe visited Midway Mall on a recent Monday night and discovered that the mall’s online directory was way out of date, having missed the departures of Mervyns, JCPenney, Goody’s, the movie theatre, and probably some in-line stores as well.  Bealls, Dillard’s, and Sears remain, and Mervyn’s has been replaced by Burlington Coat Factory.  JCPenney moved to nearby Sherman Town Center in 2007, and Mervyn’s and Goody’s exited the market only to close outright some time later.  Also, junior anchor Famous Labels has taken what was obviously an Old Navy space, and the mall was so dark and drab.  There weren’t many shoppers, either, and the fact that the Day By Day Calendar Company kiosk boy was spaced out and listening to headphones while sitting on a nearby planter is probably telling as well (see pictures).  Did we mention how dark it was?

Midway Mall is a dim, dank, outdated mall with an amazing layout.  We were shocked at not only the mall’s condition, but at the alarming rate of vacancies; we expected this to be a much more typical, modern successful mall and not a cavernous maze.  Being retail historians, we of course found this to our liking, but we feel kind of bad for the citizens of Sherman, Denison, and Texoma.  We’d like to think they could use this; their population supports it, but it must be choosing to drive down to Dallas and its suburbs or to the outdoor strip centers rather than to patronize – or at least update – this mall.  We’ll put it on deathwatch for now and keep our eyes peeled. 

Midway Mall Dillards in Sherman, TX Midway Mall vacant Goodys in Sherman, TX Midway Mall Bealls in Sherman, TX

Midway Mall BCF former Mervyns in Sherman, TX Midway Mall Sears in Sherman, TX Midway Mall in Sherman, TX

Midway Mall Burlington Coat Factory in Sherman, TX Midway Mall Burlington Coat Factory in Sherman, TX Midway Mall Burlington Coat Factory in Sherman, TX

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Midway Mall in Sherman, TX Midway Mall Bealls in Sherman, TX Midway Mall in Sherman, TX

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Midway Mall vacant JCPenney in Sherman, TX Midway Mall in Sherman, TX Midway Mall in Sherman, TX

Midway Mall in Sherman, TX Midway Mall Sears in Sherman, TX Midway Mall in Sherman, TX

Midway Mall in Sherman, TX Midway Mall Food Court in Sherman, TX Midway Mall Old Navy in Sherman, TX

Midway Mall dead movie theatre in Sherman, TX Midway Mall food court in Sherman, TX Midway Mall food court in Sherman, TX

Midway Mall food court in Sherman, TX Midway Mall food court in Sherman, TX Midway Mall food court in Sherman, TX

Midway Mall in Sherman, TX Midway Mall in Sherman, TX Midway Mall Dillards in Sherman, TX

Midway Mall Dillards in Sherman, TX Midway Mall in Sherman, TX Midway Mall in Sherman, TX

Midway Mall in Sherman, TX Midway Mall in Sherman, TX Midway Mall Famous Labels in Sherman, TX

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Midway Mall GNC in Sherman, TX Midway Mall in Sherman, TX

 

Gottschalks Sinking Fast; Filene’s Basement in Trouble

Gottschalks

Yikes. They only just announced a Chapter 11 filing last week, but Gottschalks is on the fast track to oblivion. Inside Bay Area notes that Gottschalks needs a buyer now “or else:”

Gottschalks Inc. intends to find a buyer by mid-March or it might proceed with a complete liquidation of its assets, according to court papers filed by the bankrupt department store operator.

The retailer, whose operations include department stores in Antioch, Stockton, Tracy, Santa Rosa and Capitola, said it hopes to complete an auction by March 17 that would lead to a sale of the company. Fresno-based Gottschalks operates primarily in malls located in suburban and rural markets in California, Washington, Oregon, Nevada, Idaho and Alaska.

Absent a buyer, Gottschalks would move toward a liquidation during the spring, company filings with the U.S. Bankruptcy Court in Delaware shows.

Like I said the other day, poor Gottschalks has seemed like a weaker player for some time. Their stores are like relics from another era, straddling a funny line between Kohl’s and Macy’s and with locations in rural malls and second-tier markets. Their loss would be a very major one for many malls in smaller western markets.

At the same time, Filene’s Basement is closing 11 stores with leases they were apparently unable to negotiate. This may be a bad sign for the overall health of the once-storied chain. Filene’s Basement has been close to the brink before in the late ’90s after a zealous overexpansion and a dilution of their brand equity, after opening scores of suburban stores that were too similar to TJMaxx, Marshalls, and Ross to differentiate. The smaller chain retrenched of late, however, and began to trend upscale by offering high-end designer goods at significantly marked down prices; a nod to its beginnings as the clearance basement under the original flagship Filene’s store in Boston. That store, which is notable for hosting its annual “running of the brides” bridal clearance event, has been closed for several years while the site is being redeveloped. Many in Boston wonder if it will ever re-open, and this latest news seems to cast even more doubt on the prospect.

Coming soon: a post about a mall that actually has a Gottschalks in it! Neat!

Macy’s Closing 11 Stores; Goody’s Says Goodbye Forever

Macy's in Madison, WI which is NOT closing

Macy’s, like many other stores in the country, didn’t make it through the holiday season with a surplus of cash; in fact, Macy’s has emerged from the holiday season – a time when many stores report up to 50 percent of annual sales – badly beaten and in need to purge some of its stores.  The following 11 locations will begin closing sales immediately:

  1. Bellevue Center, Nashville, TN.  Former Hecht’s.
  2. Ernst & Young Plaza (7+Fig), Downtown Los Angeles, CA.  Former Robinson May.
  3. The Citadel, Colorado Springs, CO.  Former Foley’s.
  4. Westminster Mall, Westminster, CO (Denver area).  Former Foley’s.
  5. Palm Beach Mall, Palm Beach, FL.  Former Burdine’s.
  6. Mauna Lani Bay Hotel, Big Island of Hawaii*
  7. Lafayette Square, Indianapolis, IN.  Former L.S. Ayres.
  8. Brookdale Center, Brooklyn Center, MN (Minneapolis area) Former Dayton’s and Marshall Field’s.
  9. Crestwood Court (Formerly Crestwood Plaza), St. Louis, MO.  Former Famous Barr.
  10. Natrona Heights Plaza, Natrona Heights, PA (Pittsburgh area).  Former Lazarus.
  11. Century III Mall Furniture and Clearance Center, West Mifflin, PA (Pittsburgh area).  Former Kaufmann’s.

* What on earth?!  Macy’s was in a hotel?  It must have been small, as it only had 3 employees.  Was this a Liberty House that Macy’s “inherited” in the 2001 acquisition of that store, I wonder?

This news most certainly isn’t welcome for many of the centers listed above, as they are teetering on becoming dead malls or are already there.  Losing Macy’s will almost certainly put some of them on life support or will cause them to close outright. 

Also, note that every store, with the exception of the hotel store, was a May company regional nameplate which got eaten by Macy’s in 2005-2006.  Count on Macy’s and many other chains to continue to “trim the fat” and eliminate underperforming locations of stores this year in order to stay afloat.  Hopefully, Macy’s didn’t bite off more than it could chew with the enormous May acquisition coming so soon before a major economic recession.      

Goody's Goody's

In other retail news, Goody’s Family Clothing, a Knoxville, Tenn. based chain of over 380 anchor and mini-anchor sized stores in the Southern and lower Midwest states is closing all of its stores for good.  This news sadly comes as the first liquidation of 2009, but don’t look for it to be the last.  Liquidation sales should begin by January 9, 2009, and wind down by April 1st.  These closures are definitely more powerful and far-reaching than the Macy’s closures, as many malls and power centers throughout the south are either anchored by or contain a Goody’s store.  Not good-y. 

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