Business

Dillard’s closing clouds future of Hutchinson Mall

Days after Dillard’s announced it will close its full-line department store in Hutchinson, local officials and fellow Hutchinson Mall retailers can only speculate what the decision will mean.

The economic impacts are the easiest to envision through the loss of jobs, tax receipts and changing property values, though hard numbers aren’t immediately available.

The bigger question, and one more difficult to foresee, is the impact on the mall itself and other retailers remaining in the declining 27-year-old structure.

Hutchinson officials wrote Friday to both Dillard’s corporate headquarters in Little Rock, Ark., and to mall owner Rubloff Development, to ask for a meeting, but chances of reconsideration appear slim.

Mall’s future

“I’m afraid,” said Courtney McKinney, a sales associate at GNC. “It’s scary for the mall in general. There’s an older mall in Kansas City where Macy’s and Sears are the only ones there; all the other interior stores are gone. My worst fear is that the mall will shut down.”

“I give the mall a year,” said David Wiens, an associate at Radio Shack, which itself will be leaving the mall next week, relocating into the former Hollywood Video store on East 17th Avenue. “Without that anchor (store) there’s not enough support. It’s barely keeping open now.”

While Radio Shack is itself “doing fine” in the mall, Wiens said, “when we move, it will get better.”

A dozen retailers in the mall willing to discuss the issue agreed the loss of Dillard’s will cut down on mall foot traffic, though they had a range of opinion on how much and what the result would be. Opinions also were split on whether the mall could survive.

Most Dillard’s shoppers use that store’s exterior doors to enter and exit the store, without ever going into the mall itself, said Darlene Shank, owner of Angels Among Us, so she wasn’t sure how much traffic past her store will drop.

“There’s a lot of people who shop there we never see,” she said. “I’m more concerned about all the stores opening on 17th Avenue. That will hurt us more than Dillard’s closing. I just hate to see the store leaving. I don’t know why they can’t make it a clearance store.”

Tommy Nguyen, manager of Nails N’ Spa, said is clientele are generally there by appointment and aren’t walking in from within the mall. But many also like to visit Dillard’s while waiting for an appointment.

“We have a steady clientele,” Nguyen said. “I’m not worried about my store. We’ve increased 30 percent a year. But I’m worried the whole mall will close.”

The loss of traffic also would have a minimal impact where he works, said Pete Stewart, assistant manager at shoe store Finish Line.

“But I think it puts a dagger in the mall,” Stewart said. “It’s taking a big hit.”

The biggest direct impact, said J.C. Penney store manager Melanie Block, may be a drop off in people, particularly seniors, who visit the mall from rural areas around Hutchinson who will have one less reason to come.

“It is huge. It is going to be tough on Hutchinson,” Block said. “But we’re still here. We still have our goals. We’re working to become America’s favorite store.”

At Christopher and Banks, which recently absorbed the inventory of its sister store across the mall, CJ Banks, sales are looking up, said Manager Melissa Theel.

“I don’t know what else will happen,” with the Dillard’s closing, Theel said. “I can see other people leaving, but whether they do or not, I don’t know. People can shop in Wichita and other places, and we don’t have the stores to attract them. So traffic will be slower. I don’t want to be a ‘Negative Nancy,’ but I just don’t see Sears and Penney’s being big enough chains. Sears closes at 8 p.m. now, and we’ve already lost that traffic.”

“I really think they’re going to have to move us,” said Lakayla Smith, a sales clerk at Bath and Body. “It’s a little scary.”

Wages and taxes

The economic impact, obviously, will include lost wages and lost tax revenues.

With a retail establishment, however, it’s harder to gauge the direct economic loss because “there’s a lot of substitution,” said Jeremy Hill, director of Wichita State University’s Center for Economic Development and Business Research.

“It’s easy to start another retail store,” in comparison with a manufacturer or other industry, Hill said. “And people already come to Wichita from the surrounding area to shop, so it’s difficult to prove the loss.”

An analysis of retailers already in the Hutchinson market shows, for a community of Hutchinson’s size, the city is actually currently “over served” by clothing and jewelry stores, Hill said. So, though the Hutchinson store has sales estimated at about $16 million year, with its closure, shoppers could easily shift some of those sales to other local or regional retailers.

“Reno County has a pull factor of just over 1,” Hill said, meaning though it loses some shoppers to Wichita, it also draws in enough others from the surrounding area to more than offset that loss. How much the closing of Dillard’s would impact that balance isn’t clear.

With the anticipated opening of a new Kohl’s store on 17th Avenue, a lot of the sales will likely shift there, Hill said, though it wouldn’t grow sales like it would if both stores were in competition. That will also put even more pressure on the mall going forward.

“That’s probably a part of the decision by Dillard’s” to close, he said.

Based on the county’s average wage for retail employees — estimated at just over $22,100 a year according to the Hutchinson / Reno County Chamber of Commerce annual wage survey — the closure would result in more than $1.43 million in lost wages.

The good news about Kohl’s, Hill said, is that many Dillard’s employees losing jobs could find success being hired at Kohl’s, minimizing the impact.

“Here’s the problem: it’s an anchor to the mall,” Hill said. “I don’t have numbers for any specific examples in mind, but once you lose an anchor, sometimes that can be devastating to a mall. Less so your size community than a larger one, but the tumbling effect could have a big impact.”

The city receives about $11 million a year from sales taxes, which is about 20 percent of total revenue from all operating funds. Using Hill’s sales number, if all of the Dillard’s sales were lost, that would mean more than $150,000 in reduced sales tax collections, or about 1.3 percent less a year.

While City Manager John Deardoff said he isn’t able to discuss tax figures specific to the store, he noted it likely won’t just be taxes on Dillard’s sales that are lost, but those from other stores where people who come to Hutchinson to shop spend money.

“It’s pretty significant,” Deardoff said. “I’ve heard that people from here go to Wichita to shop at Kohl’s. If they’re Dillard’s shoppers, they’ll go to Wichita to go to Dillard’s.”

Another financial consideration, said county appraiser Lori Reedy, is the lost tax value of the mall.

The county just appraised the property in January, so the closing won’t affect this year’s property tax revenue. But if the store is vacant next January, the county may have to reassess the valuation of the mall.

To determine value, they look at its value to an investor who might buy it, Reedy said. With less space rented, value decreases.

The mall has an appraised value of nearly $15 million, or an assessed value of $3.875 million. Its total tax assessment this year was $674,425.

The Dillard’s store is more than 72,000 square feet, which accounts for just over 26 percent of existing occupied space in the mall, and about 12 percent of total space.

“A space that large will be difficult to fill,” Reedy said. “The odds are not likely.”

Options

Dillard’s officials have not given a specific reason for the decision to close the Hutchinson store.

“We occasionally look at the footprint of our stores and close locations here and there,” Julie Bull, investor relations with Dillard’s, said. “Most of our stores closures are underperforming locations. It isn’t that unusual for us to close a unit, and it’s usually underperforming.”

Asked if lease issues or other problems were involved in the decision, Bull said she’d have to check what the company might want to reveal about its decision. He didn’t call back with further comment.

Hutchinson Mayor Ron Sellers said he thought there were probably two issues — sales revenue and “the mall situation.”

“As you and I both know, the mall continues to deteriorate,” Sellers said. “I can’t help but think that was part of the Dillard’s long term decision.”

The city and chamber drafted a letter on Friday to the Dillard’s corporate offices and Hutchinson Mall owner Rubloff Development Group, seeking a face-to-face meeting with the two companies to see if anything can be done to keep Dillard’s in the Mall.

“I’m not sure we can be too effective once a company like that has made up its mind,” Sellers said of Dillard’s.

Also, Rubloff Development, which bought the mall from Simon Property Group in the summer of 2004, has been unresponsive “the last five years” to city and chamber efforts to help promote and improve the mall property, Deardoff said.

“We’ve had conversations with the chamber and they have reached out to try to get the right audience,” Deardoff said. “But I’m not sure what’s come of it.”

“We’ve been open to helping them with recruitment and just haven’t got anywhere with them,” he said. “And I think that’s because Rubloff is a big company. They have a lot of holdings and this is probably just a small piece of what they have, and it’s not a priority.”

The Hutchinson City Council earlier this year voted to give Kohl’s just over $400,000, spread over six years, for building and opening a new store at 17th and Lorraine. The grant will come from the projected increase in sales and property taxes from the project.

Several mall merchants suggested the city make a similar pitch to Dillard’s, but Sellers and Deardoff both expressed some skepticism it would have success.

“I think we have to look at each opportunity,” Sellers said. “But economic incentives for retail are not the deciding factor on whether someone is here or not. Sales and the ability to produce profit is the main factor.”

“(Kohl’s) shows that it’s something we’re willing to consider for the right project,” Deardoff said. “But I’m not able to answer that.”

“This situation doesn’t push us into panic mode,” Deardoff said. “But it does open the wound more.”

Staci Garrett, owner/operator of the small independent White Lily Boutique in the mall, had two suggestions on how the community should respond.

Look at the mall if considering opening a retail space, she said, and shop locally.

“It would be great if more local interest came in,” she said. “The mall is really not that worn down. It just needs more tenants. And it’s really affordable. Not for major corporations or franchises that have higher lease rates and more overhead, but it is for a small store like mine. If you’re a small business it’s worth checking into, and things are negotiable.”

“Shop locally and it will go a long way to keeping the mall open,” she said. “Start in your own town before you travel, and you’ll see the impact.”

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