published Friday, May 2nd, 2014

J.C. Penney store closing doors for final time in Hixson

  • photo
    Doris Parks looks at a lamp Wednesday in the final days of the clearance sale at the J.C. Penney store at Northgate Mall. The store that has operated in this location since 1972 will close Saturday.
    Photo by John Rawlston.
    enlarge photo

  • photo
    Kevin Martin carries a mannequin down the escalator Wednesday in the final days of the clearance sale at the J.C. Penney store at Northgate Mall. The store is closing.
    Photo by John Rawlston.
    enlarge photo

Wanda Threat of Chattanooga says she’s a longtime J.C. Penney shopper, and her children are as well.

“It’s a generational thing,” said Threat outside the Northgate Mall store that’s closing either later today or Saturday after 42 years in Hixson. “We love the store. We’re sorry to see it go.”

The Penney store is one of 33 the retailer announced in January that it’s shutting nationwide as the company tries to return to profitability. Penney, which will still operate units at Hamilton Place mall and in Dalton, Ga., and Cleveland, Tenn., is trying to win back shoppers after suffering a 25 percent plunge in sales following a failed effort to go upmarket.

Northgate Mall operator CBL & Associates Properties Inc. is in talks to find a new tenant or users of the Penney property, said CBL spokesman Dan Summerlin.

“It’s a large anchor. The potential and the opportunities as far what we could do with it are numerous,” he said.

CBL has experience repositioning anchor stores in its malls as old-line retailers such as Penney and Sears come under pressure by other businesses such as Walmart, Target and Kohl’s. In addition, online companies such as Amazon have taken a bite out of traditional brick-and-mortar retailers.

But Summerlin said the Chattanooga-based mall company, one of the nation’s largest, doesn’t own the Penney building, and neither does Penney. The 170,000-square-foot site is held by New York-based Corporate Property Investors, according to the Hamilton County Register of Deeds, which is a part of Simon Property Group.

Summerlin said CBL is in discussions with the owner about potential uses. He said those talks include a possible purchase by CBL, but the financial numbers “have to be right.”

“It would be bringing in one tenant replacement or multiple smaller shops,” he said. “It could be a very successful venture.”

Inside the Penney store, most of the merchandise has already been sold off. Workers this week were breaking down display racks while a skeleton staff of employees was selling goods at discounted prices.

Jeff Balsam, the acting store manager, said it will close late today if the retailer sells the remaining items. If not, the store will reopen Saturday, he said.

Shopper Ed Estes of Cleveland drove all the way to the Hixson store to try to find a deal, and he left with blue jeans that he said were “pretty cheap.”

Estes said he’ll continue to shop at the Penney store in Cleveland, noting he especially likes its “white sale.”

“I prefer Penney’s,” he said.

But Jody Dickens of Chattanooga said she left the Penney store without buying anything.

“Penney’s has always been too high,” she said, adding that the remaining merchandise for sale at the store cost more than what she’d pay at Walmart.

As an example of CBL’s efforts to reposition anchor space, Summerlin cited two Sears stores in other malls — CoolSprings Galleria in Nashville and Fayette Mall in Lexington, Ky.

At CoolSprings, CBL bought the Sears, renovated the space and is turning it into multiple shops and a restaurant, Summerlin said.

“It’s all going to be completely brand new,” he said.

At the Kentucky mall, Summerlin said, CBL did much the same, though it added onto one end of the former Sears. That created space for an H&M store and a Cheesecake Factory, he said.

“Aesthetically, it makes more sense. It’s almost like adding to a house,” Summerlin said.

For CBL, investing in repurposing makes financial sense. While anchors are a key part of a mall’s performance as the public often identifies a property based on name stores that generate a lot of customer traffic, the stores often own their units and may have long-term leases.

Therefore, rental rates for the anchors are much lower than those charged to smaller mall stores, according to CBL. For example, total rental revenues from anchors accounted for just 12.6 percent of the total from CBL properties in 2013.

CBL has already invested in Northgate since purchasing the property in 2011, sprucing it up, rebuilding and adding to an adjacent shopping center, and bringing in new retailers such as Old Navy and Burlington, which is to open this fall.

Also weighing into Northgate Mall’s future are competitive pressures in the Hixson area.

A $100 million mixed-use project in Hixson, dubbed Hillocks Farm, received a green light from the city earlier this year. That project, when fully built out, includes about 750,000 square feet of new retail and office space along with 280 apartments.

Nationally, CBL Chief Executive Stephen Lebovitz told analysts and investors this spring that the company expects other Penney stores in its sizable portfolio to close in the future. Three other Penney’s of the 33 announced closings are in CBL properties.

CBL has unveiled plans to sell off 21 of its malls, about a quarter of its nationwide holdings, to boost its income and upgrade its remaining properties.

Lebovitz said the malls identified for sale, which do not include Northgate or Hamilton Place, are generally lower-performing properties.

While CBL’s portfolio has sizable holdings of Penney’s and Sears, the CEO said both of those stores represent “exposure and greater opportunity.”

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.

about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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