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Sears calls it quits at Owings Mills

THE BALTIMORE SUN

Sears, Roebuck and Co. might be "Where America Shops," as the chain's former slogan goes, but the retailer has discovered after just two years that Owings Mills shops elsewhere.

That led to Sears' decision this month to close its store in Owings Mills Town Center, a move that will leave a gaping vacancy along with an uncertain future at one of the Baltimore area's top regional malls.

Though mall owner Rouse Co. says it plans to aggressively pursue potential tenants for space that's crucial to drawing mall traffic, the job is expected to be especially tough.

"It's going to be a serious blow to Owings Mills mall, and very hard to replace Sears as a tenant," said Mark Millman, president of Lutherville-based Millman Search Group Inc., a national retail consulting and executive search firm. "It will hurt the traffic in the mall, which will hurt other stores there. There are not many tenants left that you can put in there that can be successful."

Sears moved into the new, 130,000-square-foot department store, built as part of a mall expansion that also added a new wing of stores, a Lord & Taylor department store, a megaplex theater and free-standing restaurants, in 1998.

Sears' pullout after such a short time could make other retailers leery of moving in, Millman said.

And the list of potential department store replacements is limited, if only because the mall already has three major chains: Hecht's, Macy's and J. C. Penney. Saks Fifth Avenue, an original anchor of the mall, which opened in 1986 as a high-end fashion center, proved too upscale for the area and shut its doors in 1996. Saks was replaced in 1997 by Penney.

Even the new movie megaplex turned out to be too "upscale." In September, General Cinema Theatres decided to convert its three-screen Premium Cinema to conventional screen space and do away with the Premium's big leather chairs, free popcorn, gourmet bistro and accompanying higher ticket prices.

"Owings Mills was at its best the day it opened, and it has gone through ups and downs since then, and clearly is going through a retrenching right now," said David Fick, a managing director of Legg Mason Wood Walker in Baltimore. "This is one of the worst markets to try to retrench a mall. Anchors have pulled back; specialty retailers went through a rough holiday season and are not thinking about expansions."

Rouse officials had said they planned the 1998 expansion to fit in with a strategy of reinvesting in and renovating mall properties that can dominate some segment of the market. By anchoring malls such as White Marsh, Columbia and Owings Mills with five department stores, Rouse hoped to deter other developers from building centers nearby.

The additions at Owings Mills brought the center to 1.2 million square feet. Mall management had said that booming residential growth, with a large influx of first-time homebuyers and families, was prompting the mall to turn its attention to family shopping habits.

"I don't think at this point we're planning any drastic changes," Chuck Crerand, the mall's general manager and a Rouse vice president, said last week. "We're disappointed Sears is leaving, but we look at it as an opportunity to bring in another merchant that can be successful in that space. We will aggressively look for a replacement for the Sears space."

The mall needs an anchor that reflects the mall's more moderate focus as opposed to a high-end anchor - possibly even a nondepartment store tenant such as Kohl's or Target, analysts said.

Owings Mills was the wrong market for Sears because the region's Sears shoppers tended to go to either Hunt Valley Mall or Cranberry Mall in Westminster, Fick said.

"Owings Mills is more of an elderly and upscale market where they are not buying kids' clothing and don't buy a lot of tools, and there are alternative places in that market to buy appliances" - all of which are three big categories for Sears, Fick said.

"We always thought it was a strategic mistake [for Sears] to go into that market. Clearly this was an experiment at Rouse's expense. They built the store and gave Sears the right to leave if it didn't do well. In my opinion, it was a predictable mistake."

Yet the "upscale" shoppers sometimes bypass Owings Mills mall as well, heading instead to boutique shops or to the Nordstrom at Towson Town Center, further adding to the mall's struggle to find its niche, Fick said.

Despite its struggles, Owings Mills mall is among the half-dozen centers in the region Fick categorizes as long-term, high-quality survivors, along with White Marsh Mall, Towson Town Center, The Mall in Columbia, Annapolis Mall and the new Arundel Mills.

Owings Mills mall "will be around, and there is a need for it," Fick said. "It's just that it is never going to be the best performer in the market."

The Owings Mills Sears is one of 89 underperforming stores - including only three other full-line department stores - that Sears will close in the next few months in the wake of poor performance during the 2000 holiday season. Sears plans to close 53 National Tire and Battery stores and 30 of its smaller-format hardware stores.

"All four of the department stores were underperforming and really had no realistic expectation of being competitive over the long term," said Jan Drummond, a Sears spokeswoman.

When choosing new sites, Sears typically looks at factors such as market density, customer base and competition, she said.

"We do a fairly rigorous review in site selection," Drummond said. "Every once in a while it doesn't work."

Part of the decision to close such a new store stemmed from a new corporate strategy, she said.

"Management may simply be attuned to making decisions more quickly on nonperforming assets," Drummond said. "The company's strategy is to continue to grow, but our new CEO, Alan Lacy, has said the growth has to be profitable. It can't come at the expense of shareholder value. One of the elements is to look at how investments are performing and make sure we're invested in the highest-return markets."

Drummond said she did not know when the Owings Mills Sears will close.

"It will be a question of what will be done with the merchandise," which will either be shipped to other stores or put on sale, she said.

Several managers at the mall's specialty stores said they were not worried about the impending loss of Sears.

"I don't think Sears [leaving] will affect our business," which has been up, said Gloria Little, a manager at the Select Comfort bedding store in the 2-year-old Sears wing. "We weren't getting business from Sears. Sears wasn't helping us as far as flow coming through."

She said the other department stores generate more traffic in their ends of the mall.

Several mall shoppers said Sears has not been their primary draw.

Sudha Rajasekaran of Cockeysville said she usually shops in Hunt Valley, but stops at Owings Mills occasionally and will continue to do so after Sears closes.

"Macy's is here," she said.

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