Chattanooga's old Kmarts are being repurposed as discount retailer fades away
September 25th, 2016in Business Around the RegionRead Time: 4 mins.
F. Scott Fitzgerald famously said, "There are no second acts in American lives."
But the Jazz Age novelist wasn't talking about Kmart in Chattanooga. New life has been breathed into old Kmart buildings here.
For example, Mt. Canaan Baptist Church moved from its urban location on North Chamberlain Avenue into a former Kmart at 4801 Highway 58. And B&B Discount Sales sells furniture, electronics and other household goods inside a former Kmart off Signal Mountain Road behind Burger King.
The discount department store chain announced this past week that it will close its Big Kmart store on Highway 153 near Hixson Pike — the last remaining Kmart inside Chattanooga city limits — as it sheds 64 stores in 28 states. (Kmarts are still in operation in Fort Oglethorpe and Dalton, Ga.)
That news disappointed loyal customers, including Sandy Kirk, who lives nearby.
"I don't do Wal-Mart," Kirk said, as she pushed her shopping cart out of the soon-to-close Big Kmart last week. "Everybody's nice here. It's clean. They have what I need."
At its peak a quarter century ago, Kmart had at least 14 stores in Chattanooga and surrounding cities. In 1991, Kmart was so bullish on Chattanooga that the retail giant launched a $20 million plan to replace, expand and upgrade area stores as part of a $2.65 billion nationwide renovation meant to protect its turf against rival Wal-Mart.
Kmart then held the top-selling position in the Chattanooga market and planned to close its smaller Chattanooga stores on Hixson Pike and Lee Highway to open stores more than 100,000 square feet in size in Hixson and East Brainerd.
"This has always been a Kmart kind of town," Tom Winn, Kmart's then area merchandise and marketing coordinator, said in announcing the new store investments in 1991. "Chattanooga has been very good to Kmart."
Kmart tried to battle Wal-Mart
But the effort to stave off Wal-Mart didn't work. Wal-Mart displaced Kmart as the biggest retailer in the Chattanooga market and today operates 29 stores in a 50-mile radius of Chattanooga.
Kmart may not have enough money to stay in business long, analysts at Moody's Investors Service warned this month. Sears and Kmart, which merged in 2005, have an annual negative cash flow of $1.5 billion, Moody's estimates.
Sales at Sears dropped from $41 billion in 2000 to $15 billion in 2015, Business Insider reports, while Kmart has seen its sales fall off from $37 billion in 2000 to $10 billion last year.
Kmart has to rely on outside infusions of cash, Moody's said, or the sale of assets, such as real estate, to survive.
As the lights — and blue light specials — have gone dark at Chattanooga-area Kmart stores, a number of the Troy, Mich.-based chain's sprawling buildings have been repurposed.
For example, the Hamilton County Sheriff's Office west side annex opened in an old Kmart on Dayton Boulevard near Highway 153. Hamilton County also keeps microfilm records there.
"We moved into that building probably 15, 20 years ago," Sheriff Jim Hammond said. "It's an ideal location, and it has plenty of parking, which is all good thing."
In fact, it's been so good, the sheriff said, "We're about to outgrow it. We're about to get to the point where we're going to outgrow the facility."
Since the ceiling is so high inside the old Kmart building, Hammond has wondered if it would be possible to build a second floor inside.
"I would have no problem staying there, if you could add onto it, or build in that second floor. But that's something that the architects and [county] commissioners would have to respond to," Hammond said. "My focus right now is on the new jail that has to be built. That [annex expansion] will not be on the radar for some years to come."
Hixson Kmart could be reused, not retrofitted
While a number of former Chattanooga Kmart stores here have been repurposed, some Chattanooga commercial real estate professionals say Hixson is such a good retail market it wouldn't be surprising if the Highway 153 Kmart was reused, not repurposed, with a new big box store sliding into the old Kmart space.
"That location is a great location. I think it could be refilled," said Bill Raines, president and founder of the Raines Group commercial real estate company. Raines predicted, "There'll be a user rather than a retrofit."
Jeff Jennings, a broker at NAI Charter Real Estate, said that the Highway 153 Kmart is a "superior" location.
"A lot of good things are going on in Hixson right now," Jennings said.
The Hixson Kmart building is roughly midway on Highway 153 between Northgate Mall, which has been renovated by its owner, Chattanooga-based CBL & Associates Properties, Inc. and Hillocks Farm, a $100 million planned retail and residential development with 500,000 square feet of commercial space and 280 apartments on a 190-acre site near Boy Scout Road.
Kmart officials have been tight-lipped about its latest round of downsizing, but Raines said one reason it may have chosen the Highway 153 site is because a Sears store is nearby in Northgate Mall.
"They're owned by Sears, who's already in the market," Raines said. "[Kmart] was a replication of what their customers would be looking for."
"I think it's time to operate out of the Sears location," he said. "Every time I came by the [Kmart] parking lot, it looked pretty sparse. I would think Northgate, collectively, with all the stores there, would be doing better."
Contact staff writer Tim Omarzu at email@example.com orwww.facebook.com/MeetsForBusiness or twitter.com/meetforbusiness or 423-757-6651.