Sears to close its store at Southridge Mall

Sears will close its department store at Southridge Mall, becoming the second anchor this year to announce that it will abandon the sprawling shopping center in Greendale.

The Sears store will close in mid-September, Howard Riefs, spokesman for Sears Holdings Corp., said Thursday by email. The nearby Sears Auto Center will shut down late next month.

The news is a blow to Southridge. Just three months ago, Kohl's Corp. announced that it will leave Southridge, probably in late 2018, in favor of a smaller location in a shopping center being developed in Greenfield.

That means two of the five Southridge anchor stores could be dark by the end of next year. And the remaining anchors — J.C. Penney, Macy’s and Boston Store — all are beset by the issues troubling department stores nationwide as consumers increasingly migrate online and spend less on apparel.

"Malls — not all of them, but many of them — are in danger," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York City.

But a commercial real estate industry source said the Southridge situation may not be as dire as some might think.

Seritage Growth Properties, which owns the Sears building, already has deals pending to fill some of that space with new tenants, said the source, who asked not to be identified.

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The impending closing of Sears can’t be considered shocking news. Sears Holdings, which also operates Kmart, is probably the most troubled big retailer in the U.S., and it has been closing stores at a rapid pace as it seeks to turn around its prospects. The company hasn’t posted a profitable year since 2010.

“The big impact will be the traffic that Kohl’s will pull out of the center, more so than Sears,” said Anne Brouwer, a senior partner with Chicago-based retail consultant McMillanDoolittle and a Milwaukee-area resident familiar with Southridge.

Another possible problem for the mall: Other retailers may be able to break or modify lease agreements if anchors leave. Such terms can be part of lease agreements, Brouwer said. She stressed that she doesn’t know whether that’s the case with any leases at Southridge.

Among the remaining anchors at the mall, Boston Store parent Bon-Ton Stores Inc. appears to face the greatest financial struggles. The retailer, which has dual headquarters in Milwaukee and York, Pa., has lost money for six consecutive years, including a loss of $63.4 million in fiscal 2016.

Penney's reported flat sales in its just-completed fiscal year but generated a $1 million profit. Earlier this year, however, the company announced plans to close as many as 140 stores.

Macy’s has remained profitable, but sales have decreased. The company said in January that it would close 68 stores in 2017 — including locations in La Crosse and Eau Claire — and plans to shutter about 30 more stores over the next few years.

Southridge is owned by Indianapolis-based Simon Property Group. Simon spokesman Les Morris said the company had no immediate comment on the Sears announcement.

Simon describes Southridge as Wisconsin’s largest shopping center, but Mayfair, in Wauwatosa, which expanded to add a Nordstrom department store in late 2015, may now be bigger.

Mayfair owner GGP Inc. says Mayfair has 1,265,396 square feet of retail space. Simon’s most recent annual report lists Southridge at 1,177,783 square feet of gross leasable area.

Sears anchors the mall’s northern end on two levels. The Kohl’s store is nearby.

The space being vacated at Southridge will almost certainly have to be leased to someone other than a large retailer, said Burt Flickinger, managing director of SRG Insights, a retail consulting firm in New York City.

“Very few retailers are adding stores,” Flickinger said.

Southridge already has made moves to branch out beyond retail. The Marcus “BistroPlex,” an eight-screen cinema with in-theater dining in every auditorium, along with a separate lounge, is to open on an out-lot next week.

Earlier this year, the Explorium Brewpub opened in the mall proper.

John C. Melaniphy, president of the Chicago-based retail and real estate consulting firm Melaniphy & Associates Inc., said the closing of Sears "actually represents an opportunity for mall ownership to repurpose the space and generate a higher rent."

"There are many opportunities out there depending on the demographics of the mall's trade area to add more productive uses," he said. "They likely aren't going to be new department stores. They are going to be entertainment, restaurants, off-price discounters."

Flickinger, too, sees at least some reason for optimism.

“It’s not the death of all hope," he said. "With some creativity from the city, the county and the state, it could be repurposed. 

“It’s such a big mall.”

Sears will begin its liquidation sale on June 30.

Journal Sentinel reporters Tom Daykin and Alan Hovorka contributed to this report.