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Herberger’s shifting focus in Twin Cities

By Jim McCartney

MINNEAPOLIS — When Herberger's bought three former Montgomery Ward stores in the Twin Cities more than a year ago, it marked a departure from its traditional focus on smaller store sizes and markets.

Herberger's was founded in St. Cloud, Minn., in 1927, and had long stuck to its roots: small cities and rural markets. Even today, most of the chain's 40 stores are in small communities sprinkled throughout Colorado, Montana, the Dakotas, Nebraska, Wisconsin and Minnesota.

"The Twin Cities has a little different personality than our out-of-state markets," acknowledged Max Jones, president and chief executive of Herberger's. "More people work in offices, and it's a bit more cosmopolitan. In our smaller markets, farming is king, and it's a different lifestyle."

The Montgomery Ward stores, at an average size of about 150,000 square feet, were about twice as big as the typical Herberger's stores, which range from 75,000 to 90,000 square feet. And the new locations included a prime spot at Rosedale Shopping Center in Roseville, one of the area's largest regional malls, and two power centers — Southtown Center in Bloomington and Midway Marketplace in St. Paul.

But Herberger's is not the first small-market retailer to be lured to the upscale fashion and affluent customers of the bigger markets, said Sid Doolittle, a Chicago-based retail consultant with McMillan & Doolittle. He cited Des Moines-based Von Maur department stores, which has been entering such markets as Chicago and the Twin Cities.

What's more, Herberger's retail strategy has broadened a bit since the chain was bought four years ago by Knoxville, Tenn.-based Proffitt's Inc. (Proffitt's has since bought Saks Fifth Avenue, changed its corporate name to Saks Inc., and moved its headquarters to Birmingham, Ala.) Saks Inc., with 360 stores and $6.7 billion in annual sales, typically operates its retail chains under their original names; these include Younkers, Carson Pirie Scott and Parisian, although the company does not break out their sales separately.

Finally, Herberger's saw the three vacant Ward locations as an opportunity to become a new force in department store retailing in the Twin Cities, said Mike Scott, a retail broker with United Properties, a Bloomington, Minn.-based commercial real estate company. Herberger's spotted a void in the Twin Cities left by Carson Pirie Scott, which vacated the market in 1995 (Carson's later was bought by Proffitt's, and is now a sister chain to Herberger's.)

The Carson's departure left no conventional department stores in the Twin Cities to compete with Dayton's, which has 10 Twin Cities locations here. Most players in this niche just have single stores, such as Nordstrom and Macy's, which each have a department store at the Mall of America.

Carson's officials were anxious to get back to the Twin Cities market ever since the company sold its stores here as part of its bankruptcy reorganization plan, according to Doolittle. So they couldn't resist when three prime store locations became available through Chicago-based Montgomery Ward's bankruptcy reorganization plan.

It was "not that big of a stretch" for Herberger's to buy the three large urban stores, Jones said. After all, the company already had stores at St. Croix Mall in Stillwater and Signal Hills Shopping Center in West St. Paul, both St. Paul suburbs; and a store in Apache Plaza in the Minnesota suburb of St. Anthony, along with nearly a dozen others elsewhere in Minnesota.

Jones said he felt the new stores would play well to those Twin Cities customers who already know the Herberger's name. The retailer knows the Minnesota consumer well — for instance, he said, Herberger's was one of the first in the area to recognize the casual dress trend in the Upper Midwest.

As much as anything, Herberger's saw the three new locations as a way not only to expand, but also upgrade its Twin Cities operations.

Herberger's existing Signal Hills and Apache Plaza stores were both older, smaller stores in need of expansion and upgrading. Herberger's had held off from investing in those properties because those malls are in transition, and last fall it pulled out of Signal Hills after both sides failed to agree on a lease.

So far, the retailer is pleased with its new stores, and retail analysts concur that they seem to be doing well.

"They have a good combination of price, selection, sizing and styling, much like Carson's had before it departed," Scott said. "I suspect they're doing well in their niche."

But Scott points out that while Herberger's may have filled a void, success in the Twin Cities market will not come easily. After all, even if full department store competitors are few, it must also do battle with Kohl's, Sears and JC Penney, which carry competing lines of merchandise, and appeal to similar shoppers.