Southwest Parkway Kroger (College Station, TX) potentially closing

[architect]

Honestly, this closure isn't surprising. This Kroger has been unable to pull decent traffic for years, despite being just down the street from the A&M campus and a heavily trafficked HEB. I think that a lack of renovation simply hurt the store and prevented it from being able to compete.

Except they did remodel around 2002 to what it is now, which should've put it up to par with the Rock Prairie store and the new H-E-B store down the road. Problem is, they didn't care about it, they left old and mismatched tile throughout the store and didn't update the facade to anything that looked nice or fit the rest of the store. As a result, it just became dated and dirty very quickly.

Honestly, I don't see Kroger abandoning College Station, even if their store count remains at only two stores for the foreseeable future. Both the Rock Prairie and Bonneville locations pull good volume, and the local economy is going to continue to grow if A&M continues on the trajectory they are taking. Also, BCS is on a logical path geographically between the Dallas and Houston markets, making these stores relatively easy to service from a distribution standpoint. The only reason I could see Kroger leaving is if they received a substantial offer to buy their remaining stores in BCS, which is unlikely considering they are one of the strongest players in the Texas market.

Boonville was very well-performing from what I've heard and is in no danger of closing without replacement. I can imagine some sort of "store swap" between Albertsons and Kroger, but I don't think that would ever happen (though stranger things have happened in the industry).

However, as for "a logical path geographically", remember that Houston and Dallas split divisions and have always had separate distribution centers (Kroger's Dallas distribution barely extends outside Dallas, there's only a few places where Kroger, H-E-B, and Albertsons co-exist south of Dallas).

Did the Boonville store struggle when it first opened? It's hard to imagine that now, but I can see how that could have been the case considering that area of Bryan wasn't nearly as developed when it first opened.

Also, even though the Southwest Parkway store was renovated in 2002, the renovation failed to refresh many areas of the store which were still clearly in need of attention. Even considering their improvements back then, the last renovation occurred 14 years ago, an eternity in the grocery world today.

[pseudo3d]

Honestly, this closure isn't surprising. This Kroger has been unable to pull decent traffic for years, despite being just down the street from the A&M campus and a heavily trafficked HEB. I think that a lack of renovation simply hurt the store and prevented it from being able to compete.

Except they did remodel around 2002 to what it is now, which should've put it up to par with the Rock Prairie store and the new H-E-B store down the road. Problem is, they didn't care about it, they left old and mismatched tile throughout the store and didn't update the facade to anything that looked nice or fit the rest of the store. As a result, it just became dated and dirty very quickly.

Honestly, I don't see Kroger abandoning College Station, even if their store count remains at only two stores for the foreseeable future. Both the Rock Prairie and Bonneville locations pull good volume, and the local economy is going to continue to grow if A&M continues on the trajectory they are taking. Also, BCS is on a logical path geographically between the Dallas and Houston markets, making these stores relatively easy to service from a distribution standpoint. The only reason I could see Kroger leaving is if they received a substantial offer to buy their remaining stores in BCS, which is unlikely considering they are one of the strongest players in the Texas market.

Boonville was very well-performing from what I've heard and is in no danger of closing without replacement. I can imagine some sort of "store swap" between Albertsons and Kroger, but I don't think that would ever happen (though stranger things have happened in the industry).

However, as for "a logical path geographically", remember that Houston and Dallas split divisions and have always had separate distribution centers (Kroger's Dallas distribution barely extends outside Dallas, there's only a few places where Kroger, H-E-B, and Albertsons co-exist south of Dallas).

Did the Boonville store struggle when it first opened? It's hard to imagine that now, but I can see how that could have been the case considering that area of Bryan wasn't nearly as developed when it first opened.

Also, even though the Southwest Parkway store was renovated in 2002, the renovation failed to refresh many areas of the store which were still clearly in need of attention. Even considering their improvements back then, the last renovation occurred 14 years ago, an eternity in the grocery world today.

The Boonville store opened in 2006 and was a reasonable success. It was/is the only Kroger in town, having replaced an older Family Center-era store closer to the center of town. If they had done the renovation right, then it could have done okay until now. The H-E-B was renovated last year, and that was the first renovation it ever got (it sported all of its original 2002 décor), save for some relatively minor rearrangement and merchandise changes in its first few years, like its short-lived video game department.

[pseudo3d]

The reason I think the other two Kroger stores are skating on thin ice is not because their market share has continued to sink, but because they keep dragging their feet on another Kroger. Someone at the RP Kroger told me that they still were going to build on 2818 north of Holleman, much like the rumor I heard last year. Supposedly, plans are finalizing and it will ground break Feb. 2017. Problem is, it's owned by the University, and while they have been working with private developers, a chance at a Kroger Marketplace would be something for the rumors to go harder and the TAMU PR department would be crowing over it. If that was all true and groundbreaking was six months away, then it would make sense to keep the Kroger at SW Parkway open until then, to keep jobs, taxrolls, and at least give the landlord to shop around. That isn't happening, instead we have two stores and a rumor.

[storewanderer]

Keep your eye on what happens to the existing stores. Are they spending money on those stores? Are those stores receiving upgrades of any kind? As long as they are spending money it appears they have accepted they will not be a market leader but at the same time they do want to keep the current stores viable. If you start seeing them not do remodels, stop advertising, etc. that is the sign they are thinking about leaving the market.

One problem is a new store that ends up losing money could be bad enough that it tanks the other 2 stores also. Larger markets have higher store counts to absorb potentially unprofitable new stores for a while after they open.

Kroger seems to not focus much on building new stores in markets where they aren't a market leader at the present time. The current Kroger strategy on new stores seems to be to build them in markets where they are already the leader or a strong second. Note how many new stores you see them build lately in the midwest and in Arizona and how few you see them build on the west coast.

The thing is my market used to be one that Kroger did not care about and just sort of sat in a holding pattern with fifth or sixth place market share. Little advertising, no community involvement, poor quality reputation, poorly run stores and pretty indifferent and very far away management, limited store upkeep with 2 1980's stores and 1 mid 1990's store that saw no capex ever other than some paint in the mid 90's. Somehow we still got new stores in 1997, 2003ish, and 2006ish. I figured they would eventually leave the market. A point came about 10 years ago where someone took notice that the 1997 and 2003ish build stores were doing really well in this market (mainly due to lack of competition since they built in lower middle class areas that experienced high growth that other operators were not interested in). Ever since then they have been on a steady process of remodeling (small and large projects), adding more features to the stores be it new displays or upgrading deli to Boar's Head, and a number of small projects that have expanded delis or seafood departments or produce departments. But new stores don't seem to be on the horizon.

If the existing store was losing money and the lease was over, and it also sounds like it was a really poorly run store, it sounds like it is a store that probably needed to just go. No use drawing things out any longer than necessary.

[pseudo3d]

Keep your eye on what happens to the existing stores. Are they spending money on those stores? Are those stores receiving upgrades of any kind? As long as they are spending money it appears they have accepted they will not be a market leader but at the same time they do want to keep the current stores viable. If you start seeing them not do remodels, stop advertising, etc. that is the sign they are thinking about leaving the market.

One problem is a new store that ends up losing money could be bad enough that it tanks the other 2 stores also. Larger markets have higher store counts to absorb potentially unprofitable new stores for a while after they open.

Kroger seems to not focus much on building new stores in markets where they aren't a market leader at the present time. The current Kroger strategy on new stores seems to be to build them in markets where they are already the leader or a strong second. Note how many new stores you see them build lately in the midwest and in Arizona and how few you see them build on the west coast.

The thing is my market used to be one that Kroger did not care about and just sort of sat in a holding pattern with fifth or sixth place market share. Little advertising, no community involvement, poor quality reputation, poorly run stores and pretty indifferent and very far away management, limited store upkeep with 2 1980's stores and 1 mid 1990's store that saw no capex ever other than some paint in the mid 90's. Somehow we still got new stores in 1997, 2003ish, and 2006ish. I figured they would eventually leave the market. A point came about 10 years ago where someone took notice that the 1997 and 2003ish build stores were doing really well in this market (mainly due to lack of competition since they built in lower middle class areas that experienced high growth that other operators were not interested in). Ever since then they have been on a steady process of remodeling (small and large projects), adding more features to the stores be it new displays or upgrading deli to Boar's Head, and a number of small projects that have expanded delis or seafood departments or produce departments. But new stores don't seem to be on the horizon.

If the existing store was losing money and the lease was over, and it also sounds like it was a really poorly run store, it sounds like it is a store that probably needed to just go. No use drawing things out any longer than necessary.

The situation is that College Station-Bryan sits on an isolated island away from the Houston Division, which is doing great and expanding. They have a few stores in Louisiana and one in Huntsville (directly up I-45, where their competition consists of a Brookshire Bros. and a tiny H-E-B, and I believe this store is being/has been replaced). Otherwise, no other stores exist until the Dallas area, 130 miles north.

The Southwest Parkway store wasn't particularly badly run. It wasn't all that big (found a leasing document that puts it at 46k square feet), it was dated (the Millenium décor, but put up in a way that made it seemed old and run-down almost immediately), the deli-bakery was small (no Boar's Head), the produce wasn't very good, and the demographics weren't like they used to be (aging apartment complexes instead of benefitting off of the vast student population closer to the H-E-B). Supposedly, it had unprofitable for several years, and Kroger did nothing to try to save it.

The other two stores are located off the highway and each have the 2012 décor I've seen elsewhere. The southern Kroger (2000) in College Station faces an H-E-B a few exits down, while the northern Kroger (2006) benefits from having little competition save a P-Fresh Target, especially seeing how it's in a nicer part of town. From what I've heard, this store does very well.

I suppose that since the other two still turn a profit, then Kroger would probably keep them, considering there are no real alternatives to sell them off to. There's no way H-E-B would keep the Rock Prairie store open, they'd probably just squat on the lease. Randalls might work (Randalls trucks do go through the area en route to Austin), but Kroger isn't going to sell to their biggest competitor, and selling to an independent would just dramatically raise prices and end up running them into the ground (as well as providing a backdoor to Albertsons).

Whether Kroger will actually follow through on their promises on a new third store is a mystery, though. I am not convinced that groundbreaking is six months away, unless I see something surprising in the New Development lists today.

[pseudo3d]

Nothing new recently. Also, wanted to mention that it was 2001, not 2002 when Kroger remodeled (in a 34 year history, they only remodeled once...)

The longer time goes on, the less likely Kroger will build that Marketplace, and the two profitable stores will remain in a holding pattern for the foreseeable future.

[storewanderer]

Do you know if they own the real estate on the other two stores?

Slowly these holding pattern stores get capital but it seems to come in small ongoing doses. Tonight I found the Carson City, NV Smiths (an owned freestanding store) just got its parking lot reasphalted. First time in a long while.

I see a 2009 photo of the Bryan store (in Ralphs decor) and it has a tortilla department. Is that still there?

Looks like it was a really nice store in 2009...

[architect]

Do you know if they own the real estate on the other two stores?

Slowly these holding pattern stores get capital but it seems to come in small ongoing doses. Tonight I found the Carson City, NV Smiths (an owned freestanding store) just got its parking lot reasphalted. First time in a long while.

I see a 2009 photo of the Bryan store (in Ralphs decor) and it has a tortilla department. Is that still there?

Looks like it was a really nice store in 2009...

I am not sure if the tortilla department is still there, but both the Bryan and remaining College Station stores are quite nice, and have been well-maintained. Based on a check of the tax records, the Bryan Kroger property is owned by the company itself, while the College Station location on Longmire is owned by Brixmor Management out of Frisco. In an ironic twist though, the recently-opened Kroger convenience store across from the Longmire location on Rock Prairie is actually owned by Kroger. No other "potential store" land holdings show up on the tax rolls, though Kroger could also be purchasing property under an anonymous holding company to prevent speculation (HEB is currently pulling this trick all over DFW).

[pseudo3d]

Do you know if they own the real estate on the other two stores?

Slowly these holding pattern stores get capital but it seems to come in small ongoing doses. Tonight I found the Carson City, NV Smiths (an owned freestanding store) just got its parking lot reasphalted. First time in a long while.

I see a 2009 photo of the Bryan store (in Ralphs decor) and it has a tortilla department. Is that still there?

Looks like it was a really nice store in 2009...

I am not sure if the tortilla department is still there, but both the Bryan and remaining College Station stores are quite nice, and have been well-maintained. Based on a check of the tax records, the Bryan Kroger property is owned by the company itself, while the College Station location on Longmire is owned by Brixmor Management out of Frisco. In an ironic twist though, the recently-opened Kroger convenience store across from the Longmire location on Rock Prairie is actually owned by Kroger. No other "potential store" land holdings show up on the tax rolls, though Kroger could also be purchasing property under an anonymous holding company to prevent speculation (HEB is currently pulling this trick all over DFW).

The Bryan store is a leased location by the same company who owns Parkway Square. The College Station store (Rock Prairie) is the "home base" for the local stores, with a mezzanine level containing offices and a conference room. The Bryan office is much smaller. The Southwest Parkway store I'm not sure...I think the 2001 renovation did add a small office level above the old "greenhouse" area.

If the Kroger Marketplace really was on its way and was six months away from groundbreaking (very unlikely, since NOTHING has been filed in either city yet), I think it would be pretty shoddy to cut out Southwest Parkway and screw over the workers until the Marketplace was built. Kroger has resources to keep a loser store afloat until a replacement store is built, so either a) Kroger will screw over the employees before the Marketplace will ever be built, b) it was Kroger's intentions to keep the store open until the Marketplace opened, but the landlord wanted a longer lease and wouldn't accept a short-term, or c) there's no Kroger Marketplace coming and the two other stores stay in a holding pattern.

I elect (c) over (b) because while it's possible it is a lease issue, they've really been dragging their feet and have made no commitment or official announcement that a Kroger Marketplace was coming.

[architect]

Do you know if they own the real estate on the other two stores?

Slowly these holding pattern stores get capital but it seems to come in small ongoing doses. Tonight I found the Carson City, NV Smiths (an owned freestanding store) just got its parking lot reasphalted. First time in a long while.

I see a 2009 photo of the Bryan store (in Ralphs decor) and it has a tortilla department. Is that still there?

Looks like it was a really nice store in 2009...

I am not sure if the tortilla department is still there, but both the Bryan and remaining College Station stores are quite nice, and have been well-maintained. Based on a check of the tax records, the Bryan Kroger property is owned by the company itself, while the College Station location on Longmire is owned by Brixmor Management out of Frisco. In an ironic twist though, the recently-opened Kroger convenience store across from the Longmire location on Rock Prairie is actually owned by Kroger. No other "potential store" land holdings show up on the tax rolls, though Kroger could also be purchasing property under an anonymous holding company to prevent speculation (HEB is currently pulling this trick all over DFW).

The Bryan store is a leased location by the same company who owns Parkway Square. The College Station store (Rock Prairie) is the "home base" for the local stores, with a mezzanine level containing offices and a conference room. The Bryan office is much smaller. The Southwest Parkway store I'm not sure...I think the 2001 renovation did add a small office level above the old "greenhouse" area.

If the Kroger Marketplace really was on its way and was six months away from groundbreaking (very unlikely, since NOTHING has been filed in either city yet), I think it would be pretty shoddy to cut out Southwest Parkway and screw over the workers until the Marketplace was built. Kroger has resources to keep a loser store afloat until a replacement store is built, so either a) Kroger will screw over the employees before the Marketplace will ever be built, b) it was Kroger's intentions to keep the store open until the Marketplace opened, but the landlord wanted a longer lease and wouldn't accept a short-term, or c) there's no Kroger Marketplace coming and the two other stores stay in a holding pattern.

I elect (c) over (b) because while it's possible it is a lease issue, they've really been dragging their feet and have made no commitment or official announcement that a Kroger Marketplace was coming.

Actually, the Bryan store is owned directly by Kroger. The store itself, plus the parking immediately in front of the store are on one parcel. Adjacent parcels which include the surrounding retail and associated parking are owned by another developer. A tax map is available here: http://esearch.brazoscad.org/Property/View/303689. This is a fairly common arrangement with grocery-anchored centers, and is done to allow the grocer to develop the property, but then turn over the day-to-day leasing of the other retail spaces to an outside management company.

Also, my guess with the Marketplace store is that it is still in the analysis stage. With development patterns up in the air in Bryan-College Station, many retail chains are in a "wait and see" mode. Clearly, the southern end of College Station is continuing to expand, while the jury is out on the west side of Bryan (though with Blinn moving their new campus over there, there will likely be an uptick in students in the area). The Southwest Parkway store likely closed due to the landlord playing hardball. I don't foresee Kroger leaving the area anytime soon, unless if HEB was to build a couple of additional stores and completely shut them out of the market.