Carson's State Street store closing

It is the end of an era—again.

By Sandra Jones
Tribune staff reporter

August 25, 2006, 11:14 PM CDT

Carson Pirie Scott will close its historic flagship store on State Street in the Loop, where it has been selling goods for more than a century, a victim of industry consolidation and changing shopping habits.

Bon-Ton Stores Inc., the department store operator that took over Carsons in March, said the giant store, which encompasses an entire downtown block and consists of nine conjoined buildings, was too expensive to operate. It doesn't make money and sales have been falling for the past two years, said Bud Bergren, president and CEO of the York, Pa.-based company.

The State Street store will stay open through the 2006 holiday season but will close by March 2007. Bon-Ton plans to look for another site in Chicago where it can build a more cost-efficient store, he said.

The 12-story Carsons building at 1 S. State St., a Louis Sullivan landmark, becomes the third recently mothballed Loop institution. The Berghoff closed its famous beer hall in February, and the hometown Marshall Field's takes on New York's Macy's moniker next month.

"I'm going to miss it," said Mary Pat Bitner, who works in the city and said she long appreciated Carsons' service and selection. "I've been shopping there for 20 years. I buy clothes for work and shirts for my husband. It's going to be awful. It's very sad."

Hard as it might be for many Chicagoans to accept these kinds of disappearances, the end of Carsons is more a reflection of rebirth than decline.

State Street is at the beginning of a renaissance, with many people moving into new condominiums and tourists flocking to the revived theater district and nearby Millennium Park, one of the nation's top urban attractions.

Experts say the Carsons building is better suited for a new generation of establishments than an old-line department store.

And Carsons' owners said it was not an option to stay.

"When we bought the company in March, it wasn't in our plans to do this, but it is the only Carsons store that is losing money," Bergren said. "Sales have been dropping quite a bit. It's not in the best shape."

The store would require a major overhaul to bring it up to standard. The floors are old and cracked, and the lights are dim. And maintaining the maze of elevators and escalators was cost prohibitive.

Shopper Jackie Sabado said she liked the bargains and merchandise at Carsons but not the store's decor.

"The lighting is horrid in there," Sabado said. "You can't tell the difference between black, navy blue and dark brown."

Bergren declined to disclose sales, but retail analysts estimate the store generates less than $50 million a year, down from nearly $80 million just a decade ago. The store suffered neglect after going through a 1991 Chapter 11 bankruptcy reorganization and several different owners.

"Over the years the amount of focus that store has gotten was in continual decline," said Anne Brouwer, senior partner at Chicago-based retail consulting firm McMillan Doolittle and a former Carsons executive. "A store like that requires a lot of attention."

Brouwer was vice president of merchandising at Carsons when it was owned by Milwaukee-based P.A. Bergner & Co. in the 1990s and recalls buyers were required to make regular trips to the store to make sure it was up-to-date. At that time the store boasted one of the largest-volume Coach businesses in the nation.

But shopping patterns have changed in the past decade. Short on time and eager for convenience, consumers have drifted away from department stores in favor of big-box and specialty stores.

That shift is one reason Carsons landlord Joseph Freed & Associates agreed to buy Carsons out of its lease, which didn't expire until 2022. Freed is planning to redevelop the 600,000 square feet and seven floors that Carsons operates, turning two floors or 250,000 square feet into retail and the remaining 350,000 square feet into office space.

Freed, which bought the 1 million-square-foot, block-long building for $19 million in 2001, already turned 400,000 square feet of the structure's upper floors into offices. The Illinois Department of Employment Security is one of the largest tenants. And the School of the Art Institute opened classrooms and offices there earlier this month.

Developers are keen on capitalizing on the Loop's transformation into a playground, bringing in more modern stores that appeal to a new generation of shoppers that have spurned department stores.

This is "an extraordinary opportunity for the development of a significant mass of retail," said Bruce Kaplan, president of Northern Realty Group Ltd.

"Everybody is excited to get into State Street," said Paul Fitzpatrick, managing director at Freed in charge of the Carsons project.

Fitzpatrick said he hopes to attract large tenants that can take an entire floor.

A grocery store is one possibility, he said, pointing to the increase in residents in the neighborhood. He declined to be more specific.

It is unlikely that another department store would take the space. J.C. Penney Co., Von Maur and Kohl's Corp. are the few department stores that are expanding.

Penneys is making a push into Chicago but is expected to stay in the suburbs. Kohl's recently opened a large store on the Near North Side. And while Von Maur would like to open a store downtown, the family-run department store favors the cachet of North Michigan Avenue.

"We would certainly entertain taking a space in Chicago," said Jim von Maur, president of the Davenport, Iowa-based company. "But the place to be is on Michigan Avenue."

A store such as Zara, a European cheap-chic retailer that is expanding in the U.S., is a more likely candidate, according to retail brokers.

Carsons first opened there in 1903 and stands at the place once dubbed the busiest intersection in the world.

Though State Street has seen a huge redevelopment surge of late, the famous corridor has lost a number of big department stores over the years as customers were lured to sprawling suburban malls. At one time, Chicago shoppers had six huge, full-service department stores to choose from on the street. Now there are only two: Marshall Field's, soon to become Macy's, and Sears, Roebuck and Co., which came back to State Street a few years ago. Sears has struggled to make money at that store and generated far less in sales than it had expected.

"This is in line with the changing character of State Street," said John Russick, curator at the Chicago History Museum. "Chicagoans have struggled with the question of a city that tears itself down and rebuilds itself whenever it needs to. We lament these things, but as time moves on, Chicagoans are amazingly adept at adapting to changing times."

Bon-Ton's Bergren said he is shopping for a new downtown location for Carsons. He has considered Chicago Place, the struggling Mag Mile mall, but at the same time noted the space as "difficult to work with."

Real estate brokers point to the Lord & Taylor store at Water Tower Place, which is expected to close, and the yet-to-be-built Block 37 project from Mills Corp. across from Marshall Field's on State Street as other possibilities.

Bon-Ton spokeswoman Mary Kerr said that Chicago's recently passed big-box ordinance, requiring stores over 90,000 square feet to pay a living wage, "did not play a role in our decision" to close the flagship. But the new law "will certainly be a factor as we look at a return on investment a [new] location would produce."

In a letter to Mayor Daley dated Aug. 24, Bergren said, "To be frank, our plans for a new Chicago store will be affected by the big box ordinance."

Carsons plans to keep open its other 25 department stores and five furniture stores throughout the Chicago area.

Carsons has gone through numerous ownership changes. Most recently, Saks Inc. sold it as part of a group of about 300 regional department stores to Bon-Ton for $1.05 billion.

"The Carsons store has been a fixture at State and Madison for over 100 years and we'll be sorry to see it close," Mayor Richard Daley said. "But shopping habits have changed over the years and downtown Chicago will adapt to this as it has to so many other changes in the business environment."

Tribune reporters Susan Diesenhouse and Ofelia Casillas contributed to this report

smjones@tribune.com

Copyright © 2006, Chicago Tribune

Carson's store leaving State Street

August 25, 2006

BY SANDRA GUY Business Reporter

Carson Pirie Scott & Co. will vacate its flagship store at 1 S. State St. in early 2007, the company said Friday.

The store is a masterpiece of architect Louis H. Sullivan's that Carson's has occupied for 102 years. Ironically, Carson's replaced a defunct retailer, Schlesinger and Mayer, when it occupied the space, according to a history of the building.

The company cited "negative sales trends, net operating losses from rising operating costs and the incentive of payments from the owner of the building, who has plans for future redevelopment of the landmark site."

Twenty-five Carson's department stores and five furniture stores will remain open throughout the metro area, including two in the Chicago city limits.

Jeff Renkert, vice president of marketing for the owner of the Carson's building, Joseph Freed and Associates LLC, didn't return calls seeking explanation of what redevelopment plans are in the works.

Middle-market department stores such as Carson's are considered dinosaurs because shoppers are flocking to discounters like Wal-Mart and Target and to specialty and luxury stores.

The Sun-Times reported a year ago that Carson's would reduce its selling space at the store and that the building's owner would lease out newly opened space at much greater prices. Carson's selling space totals 600,000 square feet.

Rumors are flying that the building will be turned into retail space tailored for college students.

Chicago's Loop has become the biggest "campus town" in Illinois, hosting some 52,000 students who would like new and cheaper places to eat, shop and park, according to a study released in January 2005 by Regional Economic Applications Laboratory at the University of Illinois.

The School of the Art Institute recently started leasing the 12th floor of the Carson's building - 54,000 square feet - for administrative offices and studios for its new master's degree programs in Architecture, Interior Architecture and Designed Objects.

The latest reports about the Carson's building followed Bon-Ton's announcement Thursday of a second-quarter loss of $19.8 million, or $1.20 a share - bigger than its year-ago loss of $1.4 million, or 9 cents a share.

Copyright © The Sun-Times Company