Sears to close flagship State Street store
BY SANDRA GUY AND FRAN SPIELMAN Staff Reporters January 21, 2014 4:36PM
Updated: February 23, 2014 6:38AM
Sears will close its flagship store in the Loop in early April, a spokesman said Tuesday.
Most of the store’s 160 employees are part-time hourly, but those eligible will get severance and be able to apply for openings at other local Sears and Kmart stores, the company said.
The store, which a Sears spokesman said “has lost millions of dollars since opening,” will start liquidating merchandise on Jan. 26. The store opened about 13 years ago, on May 23, 2001, with $13.5 million in city tax-increment financing support.
Sears will keep 150 employees who work in e-commerce and information technology on the fourth floor of the building at 2 N. State St., spokesman Howard Riefs said. The lease calls for those employees to occupy 20,000 square feet with an option to expand to 30,000 square feet.
“I’m in shock,” said Carol Mycio, 49, who lives downtown and did some shopping at Sears on Tuesday evening.
“I come here all the time. We bought a vacuum cleaner here. Where else would we go for a vacuum cleaner downtown?” Mycio said. “It’s basic and affordable and it’s been in Chicago a long, long, long time and the customer service is impeccable.”
Hoffman Estates-based Sears, already reeling from years of sales declines and worsening financials, “can no longer continue to support the store’s operating losses,” according to the company’s news release issued Tuesday. Sears said the store’s operational performance “has been poor through much of its existence.”
The store’s closing is part of Sears’ efforts to cut expenses and rely more heavily on its Web-based sales and operations. The future of the store, which occupies the building’s lower level and the first three floors, came into doubt in December when the Chicago Public Schools announced it was moving its headquarters into the building in the fall to save money. CPS will occupy a ground-floor lobby entrance at 1 N. Dearborn, all of the second and third floors and a portion of the ninth floor for school board offices — a total of 160,000 square feet, which is about one-third its existing space at 125 S. Clark.
Sears Holdings, the parent company of Sears and Kmart, has suffered revenue losses every year since 2005, when company Chairman Edward S. Lampert, a hedge-fund billionaire, merged the two retailers. Lampert’s supporters expected him to quickly sell off prime real estate, but he waited and instead sold off assets gradually. Sears’ most recent spinoffs are its Lands’ End apparel business and a chain of more than 700 auto service centers.
Analyst Gary Balter, in a note to investors titled “Sears Holdings Running Out of Options,” again raised the question of Sears’ future.
“If the [company’s] assets have so much value, why does Sears Holdings continue to operate given it is losing about $1.2 billion per year through operations,” he wrote in the Jan. 10 note.
Steve Koch, deputy mayor for economic development, said the city will work with Sears on the retailer’s long-term plans and will help “in any fashion possible” as Sears determines the best future for its Chicago stores and its employees.
Marty Stern, board chairman of the Chicago Loop Alliance, said he’s “sorry to lose” Sears and particularly sorry for Sears employees who have “lost jobs for the moment.”
But Stern categorically denied that the troubled retailer’s decision to pull up stakes is a long-term blow to State Street.
“I see this as the natural growth of a retail area. We’re getting rid of a weaker retailer and replacing it with stronger ones,” said Stern, executive vice president and managing director of U.S. Equities Realty.
“All of the fundamentals of State Street are strong. Target is new. The Gap has expanded. There’s a strong mix of tenants that attract purchasers. Office workers, students, people who live downtown and tourists all have made the State Street shopping district strong. Retailers want to be where the people are. To the extent there is retail space available after Sears vacates, it will be in great demand.”