As Sears falters, shadows darken over American malls

More try to survive without an anchor

CALUMET CITY, Ill. - To say that the River Oaks Center, a sprawling mall in this blue-collar suburb of Chicago, has seen better days is an understatement.

When it opened 50 years ago, it was one of the first big malls in the Chicago area. And as recently as a few years ago, it boasted four major department stores — Carson Pirie Scott, J.C. Penney, Macy’s and Sears.

But in 2013, Carson’s and Sears shut their doors at the mall near the Illinois-Indiana border. And the two remaining anchors — Macy’s and J.C. Penney — are facing strong headwinds. Both retailers have announced plans to close dozens of stores around the country in 2017.

With Sears warning investors Tuesday of “substantial doubt” about its ability to stay in business, the once vibrant River Oaks provides a dour portrait of the tough road ahead for malls across the country in an increasingly disjointed retail landscape. As department stores lose out to online retailers, more malls may have to cope with trying to survive without a coveted anchor — creating not only a visual reminder of failure, but the loss of a draw to bring shoppers to smaller stores as well.

“We recognize that these are perilous times for malls and shopping centers,” said Pete Saunders, Calumet City’s economic development coordinator, who added that sales tax revenue has plateaued in the community in the aftermath of Carson and Sears closures even as the regional economy has improved. “The most successful malls these days are in the highest income areas, and we’re firmly a working class community and that has definitely had an impact on us for sure.”

Battered by growing preference for e-commerce as well as competition from discount retailers like T.J. Maxx and Marshalls, there has long been uncertainty about the health of American malls. Now that a once American-stalwart like Sears nears a financial precipice, the storm clouds are only darkening.

Sears Holdings Corp. operates 10 full-line Sears department stores in Wisconsin shop-

ping centers. Among them are locations at Brookfield Square and at Southridge Mall in Greendale.

About 25 Sears Hometown, appliance and hardware stores in Wisconsin are owned by a separate company. That firm, Sears Hometown and Outlet Stores Inc., also has been losing money but hasn’t signaled that it may not be able to continue in business.

Edward S. Lampert, who owns about half of Sears Holdings’ shares, owns 57% of Sears Hometown and Outlet Stores stock.

Shopping centers like the Macon Mall in Georgia, constructed in 1975 in the midst of the golden age of mall building, are bracing for the impending closure of its J.C. Penney — one of 138 the company plans to shutter. Last year, the mayor of Akron, Ohio, asked residents to stay away from the abandoned Rolling Acres Mall — another shopping center built in 1975 with Sears as its anchor and that once was a regional destination — or face potential prosecution for trespassing.

Analysts, such as the commercial real estate firm CoStar, have projected that nearly 25% of American malls are in danger of losing their anchors. Following a missed $144 million loan payment by the second-biggest U.S. mall owner last year, anxiety about the health of U.S. shopping malls has only grown.

Even before Sears’ dire announcement that there is “substantial doubt” about its financial viability, the company, based in Hoffman Estates, Ill., had announced plans to shutter about 150 of its Sears and Kmart stores. The company is closing its Kmart stores in Platteville and Racine.

In Calumet City, the former outer entry of Carson’s remains boarded up, and all signs of Sears presence in the mall are long gone.

Bob Patel, who owns a small beauty care kiosk in the mall, said he’s seen business decline by perhaps as much as 15% in the last year.

“It’s a struggle, but we have a small business and our expenses are manageable,” he said. “We can survive. I don’t know how the bigger businesses do it.”