Updated at 12:05 p.m., Friday, October 4, 2002
J.C. Penney to close three stores
By Andrew Gomes
Advertiser Staff Writer
The Plano, Texas, department store retailer will close its department stores at Ala Moana Center, Pearlridge Center and Hilos Prince Kuhio Plaza.
An official with the retailer said he could not discuss the future of the company's fourth Hawaii store at Queen Ka'ahumanu Center on Maui.
About 460 employees, who were informed of the decision this morning, will be affected by the closures. Another 100 to 125 estimated employees work at the Maui store.
"Basically, the stores have been unprofitable for some time and we dont see a turnaround coming in the near future," J.C. Penney spokesman Tim Lyons said this morning. Lyons said he could not say anything about the future of the Maui store or whether it also is unprofitable.
Scott Crockford, real property vice president for Ka'ahumanu Center general partner Maui Land & Pineapple Co., said he expects J.C. Penney will continue to operate the Maui store, "although we are in discussions about the long-term future of the store."
The decision by the nations second-largest department store chain to shut the three Hawaii stores will create a hardship for employees, opportunities for other retailers and a mix of challenges and opportunities for shopping centers.
"Its certainly big news for Hawai'i, but its not really a surprise," said Roger Lyons, retail services vice president at commercial real estate firm CB Richard Ellis Hawai'i Inc. "We have gone from few department stores to fewer."
At a time when the retail industry is struggling in the Islands, the closures will put about 500 people out of work and dump almost 400,000 square feet of empty space on the market nearly as much space as all of Kahala Mall.
Perhaps the biggest opportunity in the store closures is for Seattle department-store retailer Nordstrom, which for a decade has tried to find a way to put an outlet into Ala Moana Center.
The company has been kept out by competing department stores Liberty House and its successor Macys, which enforced a lease provision giving them veto rights over adding stores outside existing mall walls. At 181,000 square feet, the Ala Moana J.C. Penney space is big enough for Nordstrom, retail analysts said.
John Bucksbaum, chief executive of Ala Moana owner General Growth Properties Inc., said the company continues talking with Nordstrom but is weighing its options, which also include carving up the space for several retailers.
Nordstrom spokeswoman Deniz Anders said: "We still look forward to having a full-line store in Honolulu. Were still reviewing all of our options with General Growth."
Lyons of CB said Pearlridge and Prince Kuhio Plaza will have more difficulty finding replacement tenants.
The Pearlridge store is 131,000 square feet. J.C. Penney will turn the space back over to the mall. At Prince Kuhio Plaza, where J.C. Penney owned its 72,000-square-foot space, mall owner General Growth will buy the space for an undisclosed amount.
J.C. Penney entered Hawaii at Ala Moana in 1966, followed by Pearlridge in 1972. The Maui store opened in 1994, followed a year later by the Hilo store.
Over the past three years, the retailer has struggled to reverse sales declines and has closed more than 10 percent of its stores nationwide, which today number just over 1,000.
Mark Bratton, an agent with local commercial real estate firm Colliers Monroe Friedlander, said department stores in general have had difficulty competing with specialty stores and have struggled to reinvent themselves to survive.
Penney, which targets Middle America households with annual incomes between $30,000 and $80,000, has made improvements to its bottom line, but continues to reviews underperforming stores.
"Its not a top-line fashion department store," Bratton said. "Theyre mid-market, which means easy to copy; not unique."
Local retail analyst Stephany Sofos was more blunt: "Penney's is considered a tired concept, no disrespect to them."
Advertiser reporter Frank Cho contributed to this story. Reach Andrew Gomes at firstname.lastname@example.org or 525-8065.