After nearly four decades in Springfield, Dillons will officially close its Queen City stores around the first of the year. The exit comes on the heels of significant investments in recent years by megaretailer Wal-Mart Stores Inc. (NYSE: WMT) and others, and underscores a changing landscape for shoppers in an age of choices.
On Nov. 4, Dillons – a division of Cincinnati, Ohio-base grocery chain The Kroger Co. (NYSE: KR) – announced it would shut down its four Springfield stores and hand over what’s left to Price Cutter. The closures, which cap a local run that dates back to the late 1970s, have allowed Springfield-based employee-owned chain Price Cutter to purchase the stores and equipment for an undisclosed amount.
It is unclear just how Price Cutter will utilize the associated assets.
Erick Taylor, president and CEO of Price Cutter parent company Pyramid Foods, declined Springfield Business Journal’s interview request but said in a statement officials still are considering how they should move forward.
“We are currently assessing new store concepts, conducting market research and evaluating community needs. At this time, no decisions have been made,” Taylor said in the statement. “Our priority is to create what is most beneficial to our community, our customers and our employees.”
Taylor, who acknowledged the competitiveness of the local market in his statement, said Dillons officials approached Price Cutter with the transaction proposal.
“Within two years, our community has acquired several new grocery stores including several Wal-Mart Neighborhood [Market] stores and a Hy-Vee,” he said.
“Once Dillons approached us of their intent to vacate the Springfield market, as president of Price Cutter, I felt it was my responsibility to our 2,600 employees to keep our company looking forward and explore the opportunity to purchase the Dillons real estate.”
A Dillons spokeswoman said its Springfield stores had garnered disappointing sales for some time, though she declined to quantify its revenue fall. She said the last day for employees would be Jan. 3, but an official closing date had yet to be determined.
“This is a regrettable, but necessary step following the regular assessment of our supermarket operations. Even with the best efforts of our teams, the Springfield market has remained underperforming for some time,” spokeswoman Sheila Lowrie said in an email.
Cindy McMillian, executive director of the Ozark Empire Grocers Association, said she was surprised to hear Dillons was closing so soon, but she wasn’t shocked the chain was exiting the competitive Springfield market.
“I am not surprised because we have five Neighborhood Markets and they’re trying to build more,” McMillian said, adding she had heard rumors Dillons’ days were numbered after Hy-Vee came to town in 2011. “We have a grocery store on almost every corner. And when you have that many, you aren’t really generating any extra sales. You’re just trading dollars from one store to the other.
“There are only so many pieces of the pie to go around.”
Three years ago last month, West Des Moines, Iowa-based Hy-Vee opened its first Springfield store, a $17 million facility, at 1720 W. Battlefield Road, directly across from Dillon’s south Springfield location.
A year later, it secured a zoning change on East Sunshine Street for a $12.7 million store that would be just blocks west of Dillons on Sunshine. In January, a Hy-Vee spokesperson said construction wouldn’t begin before October, but he provided no timeline or explanation for the delay beyond multiple design changes.
Hy-Vee Inc. officials did not respond to multiple interview requests.
Wal-Mart is preparing to open its fifth grocery-centered Neighborhood Market in town at East Sunshine and Blackman Road around the time Dillons leaves for good. In 2012, Wal-Mart opened four Neighborhood Markets.
But a sixth Neighborhood Market is on hold as parties embroiled in a zoning lawsuit tied to Wal-Mart’s center city plans remain poised for battle. Springfield attorney Jason Umbarger, who represents a group of petitioners that moved to send the controversial zoning issue related to store plans to voters, said the Missouri Supreme Court could decide by the end of the month to take the case won by the city at the appellate level. An attempt to have the case reheard was denied in August, according to court records.
McMillian said the recent moves are consistent with a larger cycle of grocery consolidations following a period of expansion.
“I believe we will see consolidations. We are already seeing it,” McMillian said, pointing to Price Cutter’s 2012 acquisition of Summer Fresh Supermarkets Inc. “The times are changing.”
Challenges to the bottom line in the form of rising health care costs and expenses tied to debit and electronic benefits transfer processing — as well as protecting against potential data breaches — are a reality for the grocers in southwest Missouri, she said.
“The costs are going up,” McMillian said. “It’s getting harder for the independent retailers in this area to survive.”
Ozark Empire Grocers Association serves mostly independent grocery retailers representing about 275 retail locations within a 100-mile radius of Springfield, according to McMillian. Members include Murfin’s Market, Woods Supermarket and Harter House.
McMillian said she expects to see more mergers and store closures over the next five years. She pointed to an announcement last month that Wommack’s Market on North Grant Avenue was planning to shut down after 22 years in business.
While certain customers living near one of the four Dillons locations might be sad to see their store go, “There’s still a lot of choices out there,” she said.[[In-content Ad]]
