Chandler-based Bashas’ will close 14 more stores in Arizona, including seven in the East Valley, as part of its Chapter 11 reorganization. See a map of the closing stores
Bashas’ Supermarkets’ plan to close more stores is expected to devastate numerous shopping centers across the East Valley.
On Monday, the Chandler-based company announced it will shutter 14 more stores in Arizona by Oct. 10, including seven in the East Valley, as part of its Chapter 11 reorganization. One Bashas’ store in Mesa, two in Chandler and one in Gilbert; two Food City stores in Mesa and one AJ’s store in Chandler are facing closure.
Bob Kammrath, a Phoenix-based retail consultant, said the future looks dim for the shopping centers that house the stores.
“For every Bashas’ that closes, basically you’re killing that shopping center,” he said. “As far as the numbers of stores going broke, you can take Bashas’ times 10 … unless a replacement is quickly found.”
The outlook may be a little brighter for shopping centers that opened “a little prematurely” in areas that were growing before the economy went south, Kammrath said.
“You might find somebody else who’s willing to go in there if it was one of the Bashas’ stores,” he said. “If it’s an AJ’s, I don’t see anybody taking that over. You wouldn’t find a Fry’s or a Safeway interested because they’re (AJ’s) just too small.”
Shelly Allen, assistant economic development director in Mesa, is concerned about more job losses and struggling shopping centers as Bashas’ closes stores in that city.
“We will be looking to see how we can assist, to try and fill those empty spaces,” she said. “That’s going to be a tremendous job loss for each of the areas that the stores are in. Our objective is to keep as many businesses viable, up and running, as possible.”
James Smith, Chandler economic development specialist, said the city is concerned about finding replacements to help the smaller businesses in those shopping centers that will be vacated by Bashas’.
“We’ve made it a part of our marketing program to proactively go out and search for those tenants and try to do ongoing information campaigns so people are aware of what’s available in Chandler and hopefully interest them in the city,” he said. “We’ll certainly try to assist with the development community in refilling those spaces.”
The retail vacancy rate across the Valley already is at a 15-year high, and the store closings will drive that rate even higher, Kammrath said.
“In a handful of cases, maybe somebody will come in, another grocery store, but if you convert the empty Bashas’ over to a (thrift store), that completely changes the complexion of the shopping center, and most of the existing merchants will go broke,” he said. “You get the pawn shops, and the secondhand this and secondhand that.”
Mesa is doing everything it can to recruit businesses, Allen said.
“We will assist any businesses that want to come in and create opportunities for those employees,” she said. “There are always new businesses looking to come into Mesa.”
Smith said the struggling economy and credit crisis are making it harder to recruit retailers, but “we do hear of businesses that are interested in coming into this area.”
“In general, our retail space is pretty healthy,” he said. “There are areas along Arizona Avenue and Alma School Road that are struggling a little more than others. Every city is facing its challenges, and we certainly have ours as well.”
Under Chapter 11, Bashas’ can ask the court to terminate leases and contracts that are seen as financially detrimental to its survival, according to the company. As part of the restructuring, a team of internal and external experts has been reviewing each of the chain’s stores to determine its viability now and going forward.
“Part of the bankruptcy reorganization law allows us to reject leases, and we need to present all of those leases within 120 days of filing,” said Mike Proulx, Bashas’ president and chief operating officer. “So this is one of the first steps we’re doing in our short-term plan to restructure and to come out of bankruptcy as quickly as we can.”
The court expects Bashas’ to reduce its operating expenses, strengthen its balance sheet and improve cash flow, “and with these closings we’re confident that we’re on that path,” Proulx said.
The stores involved in this latest round of closures were selected because of their lease agreements, lower sales volume, and therefore high overhead expenses, Proulx said.
“These stores are not profitable,” he said. “A lot of these stores are in new developments, and with the economy and the stagnation of growth here in Arizona, a lot of those new areas are not growing. And from our assessment near-term and … down the road we don’t see enough growth potential there to justify keeping those locations open today.”
After the closures, the 77-year-old chain will still have more than 130 stores in Arizona, Proulx said.
Bashas’ has yet to determine how many employees will be affected by the closures.
“We are making every attempt at transferring our members in these effected stores to other locations, especially our long-term, full-time members,” Proulx said. “We’ll probably lay off our short-term members and part-time members. And those that we lay off we’ll provide with a severance package as we’ve done in the other locations we’ve closed.”
Overall, the company lists about $195 million in secured debt and close to $50 million in unsecured debt, against about $200 million in assets.
“There could be some more closures coming,” Proulx said. “It just depends on our negotiations with the other leases, the other landlords on those leases.”