Sears closing raises concern of vitality of Military Circle

NORFOLK

City officials knew for years that Sears was struggling.

They monitored declining sales of the national department store chain and consumer shopping trends. "By and large, Americans have begun to go to other places," said Charles Rigney, acting director of the Norfolk Department of Development.

So, when parent company Sears Holdings Corp. decided last month to close its store at The Gallery at Military Circle, among 80 Sears and Kmart locations to be shut down nationwide, Rigney saw it as no reflection on the health of the Norfolk mall or the retail corridor where it sits.

"The illness is not unique to Military Circle," Rigney said. "It's still a great location for retail."

Others agree that the Sears store in Norfolk had problems likely unconnected to the mall that it anchored.

"Retail is not as robust as it once was," said Yul Lim, who owns Lim's clothing store at Military Circle among a dozen Lim's and Basix locations in Virginia, North Carolina and South Carolina. "Maybe this is a correction."

Sears Holdings announced just after Christmas that weak holiday sales would prompt it to close as many as 120 Sears and Kmart stores. It released a list of the first 80 closings on Dec. 29.

The company has declined to provide any specific information about when the stores would close or the number of employees at each.

Owners of The Gallery at Military Circle also have declined requests for comment.

Sears in Norfolk opened in what was then Military Circle Mall in 1999.

The store was an "infill" for Sears, said H. Blount Hunter, a retail and real estate consultant based in Norfolk. The retailer wanted to plug a market gap between Pembroke Mall in Virginia Beach and the Greenbrier Mall store in Chesapeake, and capture Norfolk customers who weren't traveling to those cities. Norfolk hadn't had a Sears store since one closed at Southern Shopping Center in 1993.

In 1999, the city gave the owners of Military Circle a performance-based grant in exchange for their $18 million investment to build out the Sears space, which the retailer leases, and the multiscreen Cinemark movie theater and make other renovations. For any increase in revenues for the city over the amount the mall generated in 1997, the city granted a certain percentage back to the owners. The mall generated total revenues for the city of $339,446 in 2010 - 20 percent less than in 2007 - of which the city returned $222,842.

As an infill store, the Sears at Military Circle was smaller and carried a narrower scope of products than its full-scale counterparts in Virginia Beach and Chesapeake. Norfolk shoppers, including Lim, couldn't find products they'd see at the other local stores.

"If Sears has lost traffic everywhere, then it's going to hit their smaller stores, their low-traffic stores hardest," Hunter said.

Sears also has stores at Chesapeake Square and Newmarket Fair Mall in Newport News.

Angelia Williams, the City Council member who represents neighborhoods around Military Highway, said she believes the pending departure of the Military Circle store is another sign of deterioration at the shopping center. As a teenager in the 1980s, she loved shopping at Military Circle, she said.

Back then, Hofheimer's Shoes and Thalhimers department stores had the best footwear selections and anchored Military Circle, she recalled. The future councilwoman worked for Wilsons Leather at the mall for one of her first jobs.

Hofheimer's and Thalhimers are long gone. Wilsons and other stores Williams liked have left as well.

"The stores, in my opinion, don't necessarily cater to middle-class working America," Williams said of the current mix at Military Circle. "It makes me very sad when I think of what has become of that mall, because I remember what it used to be."

Williams agreed with Rigney that the demographics of the Military Circle shopping area are strong. Consumers in the surrounding neighborhoods have money to spend but many choose to shop at competitors - not only other malls but big-box stores such as Home Depot and Old Navy, she said.

From 2007 to 2011, retail sales at The Gallery at Military Circle and the immediate surrounding area dropped almost 24 percent, according to a report from the Norfolk Commissioner of the Revenue's Office, which tracks sales for business corridors in the city based on tax revenues submitted for each fiscal year, ending June 30.

The Military Circle area encompasses all businesses - including the Costco wholesale club and David's Bridal - between Military Highway and Interstate 64 and Poplar Hall Drive and Virginia Beach Boulevard.

In the same five-year period, retail sales at nearby Janaf Shopping Yard, on the other side of the boulevard, fell 10 percent. At MacArthur Center - the downtown Norfolk mall and the only other enclosed shopping center in the city - retail sales decreased 6 percent over the five years.

The loss of Sears will cut some traffic for Military Circle's remaining stores, but Sears' sales trouble in recent years shows that it already wasn't driving traffic as a mall department store ideally would, Rigney said.

"Any time you have an anchor that is not performing at its peak, it's a drag on the rest of the facility," he said. "Certainly you want a strong and vibrant store to draw people in."

Sears shoppers often visited for tools or appliances and left without going to other mall stores, Lim and Hunter agreed.

"The mall merchants may not suffer as much as they fear," Hunter said. He added, though, that remaining anchor stores JCPenney and Macy's could begin to question the mall's viability and their own future there.

Military Circle could benefit from a major overhaul, a near-demolition with a new, non-traditional shopping area built around the strongest current tenants, Hunter said. "I would create an outdoor shopping and dining experience that clings to the success of the movie theater and retains Penney and Macy's," he said.

He compared the possibility to the reinvention of Coliseum Mall in Hampton, where Peninsula Town Center now stands with retailers and restaurants arrayed around several storefront blocks and parklike squares.

Rigney said he sees Sears' departure as an opportunity and believes that Military Circle's current owners, New York real estate firm Thor Equities LLC, will give the property needed attention. Another chance for refurbishment stands across Military Highway from the mall, in the increasingly empty Best Square shopping plaza, where longtime local clothing and accessories store Altschul's closed on Christmas Eve.

"You can't wring your hands over what's happened in the past," Rigney said. "We've been talking about what a great opportunity this would be for redevelopment."

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com