Cherokee Shopko to close in February Company cites profitability, sales trends

Friday, December 7, 2018
A corporate decision has been made to close the 3-year old Cherokee Shopko Hometown Store in February, 2019. Shopko owners cited profitability issues due to consumer sales trends, multiple competitors, and online buying.
Photo by Denny Holton

The news reverberated throughout the Cherokee area this week as word that its Shopko Hometown Store, barely into its third year in a newly constructed facility on U.S. Highway 59 North, would be closing, along with two other Iowa stores in Webster City and Eldora.

Officials with Shopko Stores Operating Company in Green Bay, Wisconsin have announced that three Shopko Hometown stores in Iowa will be closing their doors in February. Company officials said the closing is based on long-term profitability, sales trends and potential growth not coming in.

The Cherokee Shopko Hometown opened in 2015 in a $3 million 25,000 square foot store. It employs about 20 full and part-time staffers. In 2014, developers were close to signing a lease or buying the long vacant Harley Davidson facility on U.S. Highway 59 North, but for some unannounced reason(s) that deal fell through and Shopko purchased nearby highway frontage property and built their own, free-standing facility.

At just three years old, that baby will now be up for adoption.

In October in its bankruptcy filing, Sears Holdings announced that the Cherokee KMart was one of many KMarts to be closed sometime after the first of the year, although no firm date has been announced. The Cherokee Bomgaars Store will relocate into the former KMart building if and when KMart shuts the doors. Bomgaars purchsed the Cherokee KMart building last January.

Shopko’s history also saw it purchase troubled or closed Pamida Stores and revamp them into Shopko Hometown Stores. Pamida did much the same in years prior by acquiring many former Gibson Discount Stores.

Shopko operates approximately 360 stores in 25 states. The liquidation sales at the three affected stores will begin this week, according to company officials. (See full list of all 39 closings in accompanying article).

Shopko was founded in Green Bay in 1962. In 2005, the retailer partnered with Sun Capital Partners. The investment firm specializes in buyouts, debt and private equity. The Wisconsin-based, rural retailer, which runs stores throughout the Central, Western and Pacific Northwest regions, has hired consultants to explore strategic alternatives.

Shopko earlier this year sold some pharmacy customer lists for almost $6 million as part of an effort to mitigate costs. Privately owned since 2005, the company reported revenue of $652 million for the quarter ended Aug. 4, down from $679 million in the year-ago quarter. The company is also saddled with debt, and Spirit Realty Capital, which now owns much of its real estate, in January provided a $35 million term loan due 2020 with a 12% interest rate sharing collateral with its $784 million asset-backed lending facility.

“Shopko used to be a great regional company," said one consultant. "I doubt the internet (online buying) had much to do with it. It’s tough to be a small guy in the world of 4,500 Walmart's and 15,000 Dollar General stores."

Industry leaders also point to Shopko’s place in rural America, in areas too small to support a Walmart store, as being problematic. Being on a short leash by owner Sun Capital, there is little investment in stores. Uncompetitive prices and same or similar brands being consumed by dollar and convenience stores on one end and the giant retailers on the other have combined to cripple the small-town stores.

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